Independent committee studies Dickenson-Wharf amalgamation

No new details on the proposed almalgamation of Dickenson Mines (TSE) and Wharf Resources (TSE) were revealed at the latter’s annual meeting in Toronto other than that an independent committee will investigate the matter.

Wharf, which operates a heap leach gold mine in South Dakota, is 33% owned by Dickenson, its equity position in the company arrived at through purchase of shares via the stock markets. Dickenson has spent about $45 million to date acquiring its Wharf holdings.

J. O. Kachmar, president of both Dickenson and Wharf, told shareholders at Dickenson’s recent annual meeting that an amalgamation was under consideration. He said a combination of the companies would create a corporate entity with annual gold output of 135,000 oz.

During 1987, Wharf boosted its gold production by 76% to 46,000 oz. Its proven and probable reserves also rose, by 37%, to a gold equivalent of 971,000 oz. For the year, Wharf recorded net income of $4 million(US) (23 cents per share) on revenues of $21.6 million, compared with net income of $1.8 million (18 cents per share) on revenues of $9.9 million for 1986.

During the first quarter of this year, the company produced 9,000 oz gold and had net income of $1.2 million compared with a loss of $686,000 for the same period in 1987. Production cost

Average direct cost per oz of gold in 1987 was $189(US), compared with $176 the year before. Ore production during the year totalled 1.5 million tons grading 0.048 oz gold per ton

Wharf, with 16.8 million shares outstanding, was operated out of Calgary but will now be run from Dickenson’s Toronto offices.

While Wharf has proven and probable reserves of about 24 million tons, Kachmar said the company continues to acquire new property adjacent to the South Dakota mine site.

Planned gold production for 1988 is 53,000 oz, with projected output of 70,000-75,000 oz in 1989. Kachmar said regulatory approval has been received to expand the mine and its ore processing facilities to handle 2.3 million tons per year.

Capital expenditures totalling about $10 million are planned for mining equipment additions and a new crushing plant, leaching pad and gold treatment and recovery plant. The expansion work is to be completed by the end of this year.

Financial information in Wharf’s 1987 annual report is reported in U.S. dollars, a convenience for American shareholders who own about 60% of the company’s issued shares, Kachmar said.