Australian firm to buy 33% stake in Granges

Fully diluted, the transaction will give it a 33% interest, believed to be the largest corporate shareholding outside of Noranda-controlled Hemlo Gold Mines (TSE). Indeed, it has been suggested that Granges’ decision to place shares with MIM is a move to fend off Hemlo Gold which purchased 2.2 million shares late last year.

That purchase apparently broke a confidential agreement between the two companies, forcing Hemlo Gold to rectify the situation by giving voting control of its shares to Granges. Hemlo also has the option of selling its shares in co-operation with Granges.

Granges President Mike Muzylowski argued that “the association with MIM and the access which that association will provide to its operating, technical and financial resources, will assure a bright long term future for Granges, its shareholders and employees.”

Granges has two operating mines, Tartan Lake in Manitoba and the Hycroft property in Nevada and an interest in a base metal operation. Both gold mines have had their share of operational difficulties but Tartan has been responsible for most of the negative sentiment directed at Granges and probably its depressed stock price. Just recently Granges took a 1988 writedown of $17 million on producing and non-producing properties.

MIM is a major producer of copper, silver, lead, zinc and coal which in its last fiscal year reported a net profit of $172.9 million(A). The company is part of a consortium that controls Cominco Ltd. so it’s no stranger to the Canadian mining scene.

Granges is a middle tier gold producer with 68,500 oz of gold production in 1988 and 100,000 oz expected this year. It also has a 19.8% interest in the Trout Lake mine near Flin Flon, Man., a major zinc, copper and gold producer which it discovered.

Granges has a long, successful exploration history both in the base metals and gold sectors. Its most attractive exploration project at the moment is the Mishi Lake property in Ontario which hosts gold mineralization with open pit and underground potential.

The private placement is subject to due diligence on MIM’s part plus regulatory and shareholder approvals. Granges board will be increased t o 12 members and Colin Kaiser, executive general manager-exploration and gold for MIM, will become Chief Operating Officer of Granges.

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