U.S. REPORT Bema proposes takeover of Norgold

A takeover of Norgold Resources (VSE) has been proposed by Bema Gold Mines (TSE) on the basis of one Bema share for 2.5 shares of Norgold. Certain insiders at Norgold have entered a lockup agreement with Bema, agreeing to tender their stock to the offer.

The insider stock represents about 37% of Norgold’s 4,782,766 outstanding shares. Bema’s offer is conditional on the tender of a minimum of 75% of Bema’s capital. Other conditions include completion of a due diligence study, and the cancellation of all share purchase options and rights with the stipulation that Bema will issue a maximum of up to 2,200,153 shares with respect to the offer.

Under the agreement, Bema will mail its bid circular on or before Feb. 26. The offer will not be made in the U.S. or to U.S. shareholders. Norgold’s major asset is the Yarnell property, 72 miles northwest of Phoenix, Ariz. The project has an estimated preliminary reserve of 7.6 million tons grading 0.036 oz. gold perton at a 0.01 oz.-per-ton cutoff grade.

Asarco Minerals dropped an option to earn a 51% interest in the property last fall after conducting about 24,000 ft. of reverse circulation drilling and 1,200 ft. of diamond drilling. The work outlined an oxide deposit measuring 1,800 ft. in length and 500 ft. in width, with an average depth of about 140 ft. The deposit remains open to the southwest and the northeast.

Michael Philpot, president of Norgold, said after Asarco dropped the option, several companies approached Norgold with proposals for the project. Norgold’s primary concern was dilution to shareholders. Because of poor market conditions, it was determined that financing the project would not be attractive.

Philpot said the offer from Bema wasviewed as the best in light of the company’s proven management and operating experience as well as its upside potential.

Bema successfully brought the Champagne open pit, heap leach mine in Idaho into production in 1989. It is currently in the process of preconstruction work on the Buffalo Gulch project, also in Idaho, which is scheduled to begin production in late 1991. Bema is also completing a final feasibility study on the company’s 50% owned Refugio project in Chile.

The preliminary feasibility projects an annual gold production of 225,000 oz. over a mine life of 9.4 years.