Granges, Da Capo poised to merge

In hopes of creating a mid-tier gold producer, Granges (GXL-T) and Da Capo Resources (DCX-T) have decided to join forces.

An agreement in principle calls for each Granges shareholder to receive one share of the new company for each Granges share. Da Capo shareholders will be entitled to two shares of the new company for each Da Capo share.

Granges shareholders, who hold 66.6 million outstanding shares in that company, will control nearly two-thirds of the amalgamated company, which will have 100.5 million new shares. Da Capo shareholders, who hold nearly 17 million of that company’s outstanding shares, will control 33.9 million shares of the new entity.

As a result of the amalgamation, Granges’ largest shareholder, Atlas (AZ-N), will have its 27% interest reduced to about 13% of the new company.

The newly formed company will retain the Granges name.

Initially, annual production of the new company is expected to exceed 100,000 oz. gold, the source of which will be Granges ‘ Hycroft mine in northern Nevada. Over the next three years, the addition of Da Capo’s Bolivian development projects are expected to boost output to more than 300,000 oz.

Last year, the Hycroft mine produced 101,128 oz. at a cash cost of US$272 per oz. Plans call for an increase to 120,000 oz. per year.

Granges also brings to the merger its Guariche project in Venezuela, which contains a resource of 560,000 oz. and the potential for an additional 440,000 oz. In Nevada, the company is earning a half interest in the Gold Bar project on the Battle Mountain trend, where Atlas holds the remaining 50%.

Granges also owns 41% of Zamora Gold (ZMRA-C), which is conducting exploration in the Nambija area of southern Ecuador.

Da Capo’s offerings include the Amayapampa-Capa Circa project in central Bolivia, which will contribute a resource of more than 2 million oz. to the new company. Open-pit reserves at Amayapampa are expected to top 800,000 oz., while Capa Circa, an underground target, should clear the 500,000-oz. mark.

Two nearby properties, which are anticipated to begin production by mid-1998, are expected to contribute 100,000 oz. at a cash operating cost of US$143 per oz.

Da Capo is also involved in two joint ventures, and controls several other exploration plays within Bolivia.

The total resources of the new company could top 4.4 million oz., including proven and probable reserves of 1.5 million oz. from the Hycroft and Amayapampa-Capa Circa projects alone.

The new company would have current cash holdings of US$24.4 million and no debt.