Skyline reorganization planned

On April 22, shareholders of Skyline Gold (TSE) will be asked to approve a plan to create a debt-free subsidiary to hold all mining equipment and properties.

If approved, Skyline’s assets would be transferred to a wholly-owned subsidiary in exchange for a net smelter royalty from the Johnny Mountain gold mine, plus common shares of the company.

Shareholders would receive one additional share of the new company (to be known as Skyline Gold) for each Skyline share currently held. The present company will be renamed Skycreek Minerals and will hold residual assets, benefits and indebtedness (including tax loss carry-forwards of $64 million). Skycreek would then pursue opportunities for mergers or acquisitions.

Most of Skyline’s properties, including former producer Johnny Mountain, are in the Iskut River region of northwestern British Columbia. The company has entered into an option agreement granting the Cominco (TSE) and Prime Resources Group (VSE) joint venture a 10-year mining lease on an area adjoining the south boundary of the Snip gold mine. Cominco operates Snip and has a 60% interest, with the remainder held by Prime Resources Group. The term of the lease would begin with Cominco’s notice of production, and be renewable for a second 10-year period with a cash payment of $500,000. To exercise the option, Cominco must spend $250,000 by the end of 1993. To maintain the option, it must spend $750,000 in 1994, $1.25 million in 1995, and $2 million in 1996.

Skyline will be entitled to a scaled net smelter return royalty on all mineral production, tied to the price of gold. The company will retain Johnny Mountain as well as the Craig River and Bronson Creek properties. Exploration is planned for both the minesite property (to prove up minable reserves) and the Bronson Creek porphyry system (gold-copper-molybdenum-silver). The company is also exploring a porphyry discovery in Mexico. The polymetallic base and precious metal deposit (copper, silver, zinc, lead) is characterized by intrusives, oxidized brecciated cappings derived from copper sulphides, intense silicification and sericite alteration, a pyritic halo and peripheral skarn-type mineralization.

Mapping and geochemical and geophysical exploration will begin shortly. Skyline recently settled its remaining debt of $27.5 million owed to a company controlled by President Ronald Shon. Debt of about $5 million was restructured, and $22.5 million was retired through the issue of shares to Shon. These 3.2 million shares have a 12-month hold period.