Placer planning acquisition of Alligator Ridge operations

Following the purchase earlier this year of a block of ground next to its Bald Mountain property in Nevada, Placer Dome (TSE) plans to buy all the remaining Alligator Ridge assets owned by USMX (NASDAQ).

The proposed price is US$15 million and Placer expects to complete an ongoing due diligence review by June.

Alligator Ridge includes one operating mining area and three leaching operations, as well as 30,000 acres.

Proven and probable reserves in a number of areas at Alligator Ridge are estimated at 6.1 million tons grading 0.04 oz. gold per ton. Production in 1992 was 48,000 oz. at an average cash operating cost of US$258 per oz. Production this year is expected to decrease to about 35,000 oz. Including the US$5 million Placer previously paid for the nearby Top project area, USMX has about US$15.5 million in working capital and no long-term debt. In addition to exploration projects in the U.S. and Mexico, USMX owns the Goldstrike mine near St. George, Utah, and has a net profits interest in the Montana Tunnels mine of Pegasus Gold (TSE).

USMX is entitled to the greater of US$60,000 per month or a 5% net profits royalty interest in the Montana mine until Pegasus has recovered development costs. After recovery, the net profits interest increases to 50%. (USMX received US$720,000 in 1992 in advanced royalties from the mine.) John Haige, a spokesman for USMX, said the recently acquired Goldstrike should produce about 35,000 oz. this year at about US$228 per oz. The Goldstrike assets were bought earlier this year from Tenneco Minerals for US$680,000.

Proven and probable reserves at Goldstrike are estimated at three million tons grading 0.046 oz. gold. Haige said there is good potential to increase reserves and two rigs are drilling on the property.

At least half of the company’s US$2.5-million exploration budget will be spent in Mexico, where it controls more than 30,000 acres in five concession areas, he added.

With a strong financial position and a potentially large cash infusion from the Alligator Ridge sale, USMX is considering further acquisitions. The company has about 15 million shares outstanding.