Curragh to sell subordinate shares

Privately owned Curragh Resources — the western world’s sixth largest producer of zinc and lead concentrates — has filed a preliminary prospectus for its first public offering of nine million shares. The prospectus for offering nine million subordinate voting shares was filed recently with the U.S. Securities and Exchange Commission and the Ontario Securities Commission.

Toronto-based Curragh, whose founder and chairman is mining engineer Clifford Frame, owns and operates the Faro open pit zinc mine in the Yukon. The company also owns the promising Mt. Hundere and Cirque lead-zinc-silver deposits in western Canada.

The international stock sale includes 6.25 million shares being offered from treasury, and 2.75 million offered by Giant Resources of Australia — one of Curragh’s major shareholders. Giant’s stake in Curragh will drop to 21% from its current 46% as a result of the sale. The Australian company is in the process of divesting its Canadian mining assets.

Acting as global co-ordinator for the underwriting is New York-based Morgan Stanley & Co., while Toronto-based Gordon Capital Corp. is managing the Canadian underwriting syndicate. Nesbitt Thomson Deacon and ScotiaMcLeod will co-lead the Canadian offering and participate in the international offering, also.

The worldwide sale includes leading investment banks in the U.S., the United Kingdom, Europe and the Far East.

Curragh has two classes of shares — the subordinate voting shares being offered and multiple voting shares. The rights of the two classes of shares are essentially the same, except holders of the subordinate voting shares get one vote per share, while the multiple shares carry 10 votes each.

After the offering, Frame Mining Corp. and other companies controlled by Frame will hold all the multiple voting shares.

A previous equity issue and bond issue worth US$200 million, led by Wall Street’s Drexel Burnham Lambert Inc., fell through when the U.S. broker went bankrupt earlier this year.

The shares are expected to be priced about US$11-13 each, and will be sold in May following a promotional campaign to help sell the stock.

Curragh will earn about $80 million from the sale, assuming the shares are sold for a price of about US$12 each. The company said the proceeds will be used to retire long- term debt. Curragh is also planning a major debt offering which has been delayed until the equity offering is completed.

The company needs capital to fund the development of its Mt. Hundere and Cirque lead-zinc- silver deposits in Western Canada. Situated in northeastern British Columbia, the Cirque deposit contains geological reserves of about 13 million tonnes in its central core, with a combined lead- zinc grade of 14%, along with 70 grams of silver per tonne. Additional reserves of at least 25 million tonnes have been outlined at lower grades in the Cirque deposit. A second deposit with 20 million tonnes is situated about one kilometre from the main core. At last report, a capital cost of nearly $130 million would be required to develop the Cirque deposit.

The Cirque deposit has been extensively delineated in the past with about $21 million spent on 62,000 metres of diamond drilling, as well as completion of a 1,600- metre airstrip and construction of 87 km of an all-weather road.

Meanwhile, the smaller Mt. Hundere deposit, held 80% by Curragh and 20% by Toronto-based Hillsborough Resources (TSE), hosts reserves of at least 5.2 million tonnes grading 18.5% combined lead-zinc.

Last year, Curragh bought a 20% interest in Spain’s Asturiana de Zinc, one of the largest zinc smelter operators in the world and is developing the new mines to provide feed for the Spanish smelter. The deal was part of the company’s plan to build a fully integrated international zinc mining company.

Elsewhere, in Nova Scotia, Curragh has been working on the Westray coal project where the company has spent about $17 million on the venture.