Flanagan group to reduce debt by 3-way amalgamation

Three affiliated companies — Muscocho Explorations (TSE), Flanagan McAdam Resources (CDN) and McNellen Resources (TSE) — have reached an agreement with their principal creditor to restructure their debt and create a new entity.

Collectively, the companies owe $8.9 million to Canadian Imperial Bank of Commerce. The bank will receive proceeds from the sale of the Magnacon mill near Wawa, Ont., as well as payment of $500,000 from the companies in relation to the nearby Magino mill.

The bank will then convert its remaining debt to a 10% equity interest in a new company, to be formed from the amalgamation of the three juniors.

The companies’ other major secured creditor, Echo Bay Mines (TSE), has agreed to convert $4.5 million owed by Flanagan and McNellen, on similar terms. The companies are also negotiating with their remaining creditor, which is owed $1 million.

As a result, the amalgamated company would have no significant debts upon its formation. It would hold a 100% interest in the Magino gold property (including the mill and related infrastructure), as well as a 75% interest in the Magnacon gold property and the right to process up to 112,000 tonnes annually at the newly refurbished Magnacon mill.

The new company would also hold various exploration properties in Ontario, Quebec and British Columbia.

Terms of the proposed restructuring and amalgamation will be presented to shareholders of the three companies at upcoming meetings.