Teck buys stake in Prime, picks up property options

Following the collapse of an estimated $5-million financing deal earlier this year with a “major mining company” widely believed to be Kennecott, Prime Equities (VSE) has negotiated a funding deal with Teck (TSE). Teck has agreed to purchase four million shares of Prime Equities at $1.25 each. The issue includes six million warrants allowing Teck to purchase an additional six million shares at $1.25 to Dec. 31, increasing to $2.25 to Dec. 31, 1992, and $3.25 to Dec. 31, 1993.

The agreement also allows Teck to acquire 50% of any property interest held by Prime Equities in return for funding the property to production.

Prime Equities will remain operator to the preliminary feasibility stage, at which point Teck can elect to fund the project to production and take over operatorship.

When a property is brought into production, net proceeds will be split between Prime and Teck in proportion to their respective property expenditures including interest, until costs are recouped. At that point, net proceeds will be split on a 50-50 basis.

John Kaiser, mining analyst at Pacific International Securities, sees the deal as being good for both parties. Prime Equities receives a cash infusion for the coming exploration season and Teck gets a “foot in the door” allowing it to participate in potential discoveries.

Murray Pezim, chairman of Prime Equities, said he thinks the deal is great and that he has tremendous regard for Teck and its President Norman Keevil.

On completion of the deal, Teck will own about 10% of Prime Equities, increasing to about 18.5% on a fully diluted basis if it exercises its warrants.

Prime Equities was formed earlier this year from the holdings of Prime Resources Group (VSE).

As a result, Prime Resources Group and its major shareholder, Corona, (TSE) held over 50% of Prime Equities stock making a deal with another major mining company tricky.

However, a number of Prime companies recently exchanged their holdings in Prime Resources Group for shares of Prime Equities which were held by Prime Resources.

The effect of the transaction was to reduce Prime Resources and Corona’s holdings in the company from over 26 million shares to about 18.3 million. Prime Equities has about 44 million outstanding after the Teck issue. There are options on an additional four million shares exercisable to May 31, 1995, as well as the six million warrants held by Teck.

In conjunction with the deal with Prime Equities, Teck concluded deals with a number of other Prime companies allowing it the right to acquire a 50% interest in various property holdings under the same terms.

Teck can earn a 50% interest in the half interest Adrian Resources (VSE) holds in the Phiz property in the Iskut River area of northwestern British Columbia. The remaining 50% interest in the property is jointly owned by Crest Resources (VSE) and Magenta Development (VSE).

Teck also completed a deal with Eurus Resource (VSE) and Thios Resources (VSE) on their jointly owned Rock & Roll project in the Iskut River area.

Other Prime companies that have agreed to allow Teck to earn a 50% interest in their holdings include Consolidated Bel-Air Resources (VSE) in the company’s 25% interest in the Bornagain property, adjacent to the Rock & Roll property.

Consolidate Rhodes Resources (VSE) has entered into an agreement with Teck on its right to earn a 50% interest in the Copper Canyon project in the Galore Creek area in northwestern British Columbia.

Teck has an agreement with Gigi Resources (VSE). Gigi can earn a 55% interest in the Trophy gold project in the Galore Creek area from Goldbelt Mines.

Other companies that have made earn-in agreements with Teck include Goodgold Resources (VSE) on the Max and Del Norte Creek projects in northwestern British Columbia, Tantalus Resources (VSE) at the Treaty Creek property in the Stewart area and Tymar Resources (VSE) at the Lakewater project, also in northwestern British Columbia.