Dumagami shareholders urged to reject Agnico-Eagle merger plan

Forget, who holds a 16% stake in Dumagami through his investment firm Invesfor, says an amalgamation, based on a 1.70 Agnico for one Dumagami share exchange ratio is an unfair arrangement.

“We will be telling Dumagami shareholders that they would be very foolish to sell their shares for less than two shares of Agnico- Eagle,” said Forget. He has hired a proxy solicitation company in Toronto to solicit votes from Dumagami’s U.S. shareholders as part of a bid to fight the merger plan.

The plan was tabled after months of discussions between the directors of Toronto-based Agnico and its 43%-owned affiliate Dumagami Mines. The two Toronto companies share the same management.

Forget says his opposition to the terms of the proposed merger are based on the relative performance of the two companies.

Last year, Agnico-Eagle reported a net income loss of $5.1 million or 36 cents per share after producing 60,371 oz gold from its Telbel mine in Joutel, Que. The Telbel operation was affected by ore dilution and shaft renovations resulting in a 28% drop in income compared to 1987.

First-quarter losses, which don’t include a $7 million profit from the sale of Agnico’s real estate division, totalled $1.9 million or 13 cents per share.

Agnico also produced 1.34 million oz silver from its Cobalt, Ont., mines which were shut down recently due to low silver prices.

By contrast, Dumagami produced 25,792 oz gold, and 39,868 oz silver at the Donald LaRonde mine at Cadillac, Que., where commercial operations began last October.

Although Dumagami reported a operating profit of $2 million during the second quarter, losses for the six months ended March 31 totalled $67,255 or 1 cents per share. According to Forget, Dumagami would have recorded a profit if it hadn’t included a $4.6 million exploration program in its results.

However, Agnico secretary treasurer Barry Landen said he expects to win shareholder approval for the merger which would create a company capable of producing 200,000 oz gold by 1992.

“Everyone is entitled to their opinion,” he said about Forget’s comments.

While the transaction is still subject to Toronto and Montreal stock exchange approval, news of the proposed merger sent Dumagami’s share price up to $14.5 from around $12 during trading. Agnico dropped slightly to $9.25 from $9.75.

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