U.S. REPORT Galatic, Cornucopia agree on new share exchange ration

Following lengthy negotiations, Galactic Resources (TSE) and Cornucopia Resources (TSE) have agreed to a new share ratio for a merger proposal made last year. The new ratio will give Cornucopia shareholders 0.7 Galactic shares for each share held. The original proposal, made in May, 1990, called for a ratio of 0.5 Galactic shares per share and was later increased to 0.55.

The merger will allow for the rationalization of the companies’ joint ownership of the Ivanhoe open pit, heap leach gold operation in Nevada.

In March, 1991, Galactic announced it planned to proceed with the merger, but would renegotiate the exchange ratio after releasing a number of material changes.

Galactic took writedowns totalling US$39.7 million for the year ended Dec. 31. The financial charges were related to its Summitville heap leach gold mine in Colorado, the Ivanhoe joint venture, and a number of non-producing properties.

Earlier this year, the company announced it would not proceed with the final year of production at Summitville due to high operating costs.

Galactic hopes to complete the merger by the end of the 1991 third quarter, subject to shareholder and regulatory approvals.

Before the deal can go ahead, however, a number of other conditions must be met. The merger is contingent on Galactic completing certain financings totaling US$9.1 million, of which at least US$4.5 million must be received before May 31.

Galactic plans to offer, through a private placement, 7.6 million special warrants at 80 cents each. Each warrant will be exchangeable for one unit consisting of one share plus half a warrant. Two warrants will allow the holder to purchase an additional share at $1 for two years.

In addition, the company has received regulatory and board approval to decrease the exercise price of all the company’s 7.2 million outstanding warrants to 95 cents per share until May 7.

The stated exercise price on the warrants varies from a high of $9 7/8 per share expiring Sept. 19, to a low of $3.90 expiring Oct. 17.

Galactic currently has about 45.8 million shares outstanding and last traded at the $1 level.