Joseph Gutnick, the Australian mining entrepreneur who recently assumed control of
Subject to regulatory approval,
Bay retains the right to buy back its shares at any time, whereas St Andrew retains a put option on those shares. In either case, St Andrew is ensured $4 million in proceeds.
The deal is conditional upon St Andrew’s completing two private placements, expected to close on or about Jan. 31, 2001. The first consists of 26.7 million units priced at 15 apiece and is equivalent to those granted to Bay, which has agreed to subscribe for a minimum of 6.7 million units.
The second placement involves $4 million in secured debentures. The debentures carry interest of 10% (payable in shares or cash) and can be converted into units, also priced at 15 apiece. Here, a unit consists of a share and a half-warrant, with a full warrant entitling the holder to buy an additional share at 20 within three years.
St Andrew has retained Griffiths McBurney & Partners to manage the private placements on a best-efforts basis.
The proposed transaction is essentially a reworking of a previously announced term sheet to reflect St Andrew’s subsequent fall in market value. Says St Andrew President Charles Gryba: “Many junior mining companies are going out of business, and we feel it’s better to finance than to join them.”
Upon the deal’s closing, Bay would own 41% of St Andrew’s outstanding shares, assuming the equity placement is fully subscribed. (St Andrew currently has 27.2 million shares outstanding.) This excludes any shares arising from the debentures or warrants, which could see as many as 93.4 million printed for as much as $17.3 million in proceeds.
St Andrew’s board would be reconstituted to include four appointees from Bay, including Gutnick as executive chairman. The other three members would be appointed by St Andrew.
Proceeds from the deal are earmarked for working capital, debt repayment and the Taylor underground gold project in Timmins, Ont. Development is expected to cost $25 million and take 18 months to complete.
“[Without the deal], we may have to wait 2-4 years for financing,” says Gyrba. “With Gutnick, we break that financing chicken-and-egg problem.”
Taylor hosts indicated resources of 1.9 million tonnes grading 7.58 grams gold per tonne and inferred resources of 582,797 million tonnes grading 7.92 grams. The material would be mined at the rate of 1,000 tonnes per day and trucked to the nearby Stock mill for processing. Operations at the mill were recently suspended, owing to a lack of supplementary custom feed.
Gryba adds that over the past 15 years, Gutnick has pumped US$15-20 million annually into Australian exploration. Any spillover on to St Andrew’s properties may result in another discovery and thus possibly offset the deal’s diluting effect on the company’s stock, which could exceed 600%.
St Andrew holds some 129 sq. km of ground along the Porcupine-Destor fault. Recent efforts have been focused in and around the Taylor, Stock and Hislop properties.
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