Shareholders urged to reject Barrick — Argentina Gold pins hopes on ‘novel type of gold deposit’ (January 11, 1999)

The directors of Argentina Gold (ARP-V) have told the company’s shareholders not to tender their shares to Barrick Gold (ABX-T), stating that the major’s takeover bid is “inadequate, opportunistic and coercive.”Barrick is zeroing in on Argentina Gold’s prime asset, the Veladero gold-silver property in northwestern Argentina. Situated 390 km northwest of the capital city of San Juan, the project is currently a 60-40 joint venture between operator Argentina Gold (AG) and Barrick.Barrick holds about 9.9% of the junior’s shares and wants to consolidate its land position in the El Indio gold belt by absorbing the company.The major owns 100% of the Pascua property, about 6 km northwest of Veladero, in neighboring Chile. As of Dec. 31, 1997, Pascua contained a proven and probable reserve of 194 million tons averaging 0.058 oz. gold per ton, or 11.2 million contained ounces. Ongoing drilling is aimed at expanding reserves. Barrick is also exploring the Lama property, which is adjacent to Pascua on the Argentine side of the border. A 14,000-metre drill program is under way at present.The gold mining giant believes the economics of Veladero could be improved by taking advantage of the infrastructure that will eventually be in place at Pascua.William Rand, chairman of a special committee set up by AG to evaluate the takeover bid, says the junior’s directors have determined that the Barrick offer is “inadequate, opportunistic, coercive and not in the best interests of the company and all of its shareholders.” He adds that the market sees the Barrick offer as inadequate.Barrick had set a Jan. 9 deadline for AG shareholders to decide upon the offer. The junior had hoped to receive a counter-offer from Denver-based Newmont Mining (NEM-N) before that date. Newmont purchased 2.5 million shares of AG in November 1998.AG listed three main reasons for its rejection recommendation.The first pertains to the closing price of the company’s shares on the Vancouver Stock Exchange. The junior’s issue reached a high of $5.75 after Barrick made its $4-per-share offer. The company views Barrick’s offer as a 44% discount on its shares. AG states that in private negotiations last December, Barrick indicated that it was prepared to offer $5.50 per share in order to obtain the support of AG and certain shareholders.The second reason is based on a letter from the financial firm Loewen, Ondaatje, McCutcheon. The letter states that, from a financial point of view, the “offer is inadequate and significantly undervalues the shares [of AG].”The third reason is based on AG’s belief that Barrick’s offer fails to give recognition to the underlying fundamental value of the company. The junior holds a dominating position along the Andean crest of Argentina, comparable to that held by Barrick across the border in Chile. AG’s land position exceeds 560,000 ha and includes four projects: Veladero, on which the Amable and Filo Federico targets have been identified; Del Carmen; Rio Frio; and Pancho Aras, also known as Santa Rosa, which is held in a joint venture with Mansfield Minerals (MDR-V). To date, AG has spent US$11 million on the Veladero project. The company acquired the property in September 1994 and joint-ventured it to Lac Minerals, which was subsequently absorbed by Barrick Gold.A preliminary inferred resource estimate of the Amable target is 31.8 million tonnes grading 2.02 grams gold and 43.1 grams silver, equivalent to a contained resource of 2.1 million oz. gold and 43.9 million oz. silver. Included in the estimate is a high-grade resource of 900,000 tonnes grading 17.36 grams gold and 71.7 grams silver, equivalent to a contained resource of 502,468 oz. gold and 2.1 million oz. silver; this represents about 25% the contained gold in the total resource. The remaining 1.5 million oz. gold, hosted within 30.9 million tonnes of material, is lower in grade, averaging 1.5 grams per tonne.The resource calculation, performed by Dr. James Stewart, does not include recent results from drill hole 96.AG estimates that the preliminary resource estimate, when combined with the previously announced resource estimate at the Filo Federico target, totals 4.46 million oz. gold and 118.9 million oz. silver at the Veladero project.In a report to AG, Dr. Stewart states: “There is an exciting possibility that the Amable target represents a novel type of gold deposit. The high-grade gold intercepts are of a distinctive and unusual kind.”Recent drill results from hole 96 returned 202 metres averaging 2.61 grams gold and 21.43 grams silver starting at a down-hole depth of 57 metres. Included in this result is a 107-metre interval that averaged 3.95 grams gold and 28.45 grams silver starting 152 metres down-hole. Hole 96 was drilled due west at minus-70 and collared 60 metres southwest of previously reported hole 90 (255 metres averaging 6.15 grams gold and 24.5 grams silver). The hole was drilled within the 10,000-to-20,000 ohms-m resistivity anomaly at the southeastern portion of the Amable target. The area tested by hole 96 represents a structural intersection between northeasterly and northwesterly trending fault or fracture systems.Hole 95 intersected 50 metres averaging 0.35 gram gold and 14.4 grams silver starting at a down-hole depth of 168 metres. Another intersection was cut at a depth of 287 metres down-hole. This 12-metre interval averaged 0.18 gram gold and 15.83 grams silver. Hole 95 was drilled at the northernmost extension of the Amable target.Hole 94 cut four intervals of gold and silver starting at a depth of 69 metres. The first intercept averaged 1.8 grams gold and 5.3 grams silver over 5 metres. The next intercept cut 7 metres averaging 1.02 grams gold and 9.85 grams silver, starting at a down-hole depth of 105 metres, and this was followed by a 13-metre interval grading 0.66 gram gold and 21.85 grams silver starting 113 metres down-hole. The last 8-metre interval averaged 1.55 grams gold and 17.4 grams silver starting at a depth of 284 metres. Hole 94 was drilled at the easternmost extension of the Amable target.AG has completed an infill geophysical controlled source audio frequency magnetotelluric survey, with emphasis on the Amable target and other possible Amable-like anomalies that lie along the eastern flank of the Veladero project.About 15 line km of ground geophysics have been surveyed using 25-metre dipole spacing. AG has used the Amable target as an example to extrapolate resistivity, as opposed to conductivity, zones. To date, mineralization has been identified in zones of lower resistivity that range from 5,000 to 20,000 ohms-m. Previous targets were outlined by a 50,000-ohms-m resistivity anomaly.Drilling is continuing on hole 99, which is 85 metres west of previously reported hole 85 (220 metres grading 1.7 grams gold and 69.81 grams silver).Holes 97 and 98 have been completed, and assays are pending. Hole 100 is also under way, using a second reverse-circulation rig. It has been collared on a new target area, dubbed Amable North, which lies between Amable and Filo Federico.The first diamond drill hole, DDA1, has reached a depth of 68 metres. It was collared northeast of hole 90 (255 metres grading 6.15 grams gold and 24.50 grams silver).