St. Genevive to sell interests in affiliates

In order to reimburse three affiliated companies for some $21-million worth of “unauthorized borrowing,” St. Genevive Resources (DHB-Y) says it will sell its interests in at least four affiliates and merge with two others.

St. Genevive will sell its stakes in 20.6%-owned Ambrex Mining (AMBX-C), 15.4%-owned Spider Resources (SPA-Q), 30.8%-owned Strategic Exploration (SIQ.A-M) and 10.6%-owned Icelandic Gold (ICE-G). The company may also sell its 35.7% interest in Genoil (GNOL-C).

In addition, St. Genevive has unveiled plans to merge with 17%-owned KWG Resources (KWG-T) and Emerging Africa Gold (EAGI-C), which is 36.3% owned by KWG.

These restructuring moves will not be carried out by KWG Chairman Richard Faucher as originally envisioned; Faucher has resigned after just a few months on the job.

The announcements were included in St. Genevive’s first major statement since it and KWG sought protection from creditors on November 27 after it was revealed that St. Genevive had siphoned money from its affiliates to finance KWG’s Ametistovoe gold-silver project in Russia’s Far East. Those funds, St. Genevive admits, were taken from the affiliates’s treasuries without the authorization of their respective boards of directors.

St. Genevive says it owes $20.9 million: $5.2 million to Genoil; $15.3 million to Emerging Africa (EAG); and $400,000 to Icelandic Gold. KWG, in turn, owes St. Genevive $8.7 million.

St. Genevive says it is currently holding discussions with Genoil, EAG and Icelandic regarding the outstanding funds and will use proceeds from the sales of non-core assets to offer a settlement to its various trade creditors holding claims totalling about $8.9 million.

So far, St. Genevive has invested $29.8 million in Ametistovoe: $21 million from a special warrant financing carried out in January 1997; and $8.8 million from the initial capitalization of Far East Gold, the wholly owned KWG subsidiary that has an 80% interest in the Ametistovoe deposit (with Russians holding the remainder). In addition, KWG invested $72 million in the project through a share-exchange bid.

However, in March, St. Genevive and KWG determined that an additional US$18 million was required for the Ametistovoe project. The two companies then engaged agents who could assist them in raising capital.

In its latest release, St. Genevive attempts to justify its unauthorized borrowings by citing the falling gold price and the Busang scandal — two factors, it says, that made it more difficult to close the necessary financing deals.

Another factor, says the company, was KWG’s licence agreement at Ametistovoe. It required sufficient mining equipment for a

200,000-tonne-per-year operation to be on-site by the end of 1997, failing which the licence could be revoked.

During July and August of this year, three boatloads of equipment worth US$10 million were delivered to Russia. For this delivery, St. Genevive says US$4.5 million was taken from Genoil and US$3 million from EAG.

In October, the Russian government amended the terms of the Ametistovoe licence, extending to Dec. 31, 1998 the deadline by which production capacity was required to be in place.

On Dec. 4, St. Genevive and KWG were suspended from the Toronto Stock Exchange for failing to meet the exchange’s listing requirements.

The two companies are scheduled to submit a formal restructuring plan to their creditors by Jan. 23, 1998, and plan to hold a meeting with creditors by Feb. 26, 1998.

In related news, Peter Miller — who last month resigned all his posts within the St. Genevive Group — has been re-appointed chairman of Icelandic Gold. Icelandic has accepted the resignations of St. Genevive’s Alain Taillefer and Luce St. Pierre.

At Genoil, Walter Ziegler has resigned as interim president and Denis Cardinal has resigned as director.