Triton to fall under Black Hawk’s wing — Merged company would boast minable gold reserves of 737,000 oz.

Vancouver-based junior Triton Mining (TTM-T) is set to become a wholly owned subsidiary of Black Hawk Mining (BHK-T) of Toronto.

The amalgamation, which would be carried out on a share-for-share basis, still requires a green light from the Toronto Stock Exchange and the directors of both companies. If approved, the combined minable reserves of the two companies would approach 737,000 oz. gold, plus about 3 million oz.

gold-equivalent in the inferred category.

“We view this as a very positive move for both companies,” says Triton’s recently appointed president, Thomas Ogryzlo. “Up to now, we’ve had only limited financial ability to develop our El Limon gold mine [in Nicaragua], but Black Hawk is a company with some cash in it, and that, combined with Triton’s gold reserve picture, should bode well for Limon and our other projects.”

He adds: “We’re hopeful that shareholders on both sides will welcome this as a positive step.”

The merger is expected to be completed by the end of June, after which the board of directors of the amalgamated company will comprise four Black Hawk directors (including Chairman Gordon Bub), one director from Triton and one independent member.

Situated north of Managua, El Limon is Triton’s chief asset. Output for the current year is expected to rise to 55,000 oz. gold, compared with the 1997 total of 48,000 oz. Gold reserves stand at about 856,000 oz., including 415,000 oz. in the minable category and 441,000 oz. inferred.

A 5-year production plan at the Limon complex calls for a significant increase in underground production from the Ligia vein, within the Santa Emilia complex, and continued development of the Tigra and Veta Nueva veins.

Miners at the site recently signed a 2-year collective agreement that reportedly ensures work will not be interrupted over the next two years.

Ogryzlo says the negotiation process has significantly improved relations among the company, the workers and Nicaragua’s labor ministry.

On the down side, the company recently took a US$15.5-million writedown on the mine for the year ended Jan 31, 1997. The writedown, a reflection of the projected long-term gold price, is a non-cash charge that has the effect of reducing production costs by an estimated US$21 per oz. over the estimated life of the mine.

Triton holds a 3,400-sq.-km concession in the vicinity of Limon. Primary targets include Rincon de Garcia, Cerro Quernado and San Juan de Limar, all of which exhibit prospective geology for large-tonnage gold deposits.

Farther afield, in southern Argentina’s Santa Cruz province, the junior holds an option with a subsidiary of Barrick Gold (ABX-T) to buy the Manantial Espejo gold-silver property.

A recently tabled prefeasibility study concluded that the advanced-stage project contains proven and probable reserves, minable by open-pit methods, of about 3.9 million tonnes grading 3.1 grams gold and 1.33 grams silver per tonne, equivalent to 391,509 contained ounces of gold and 16.8 million contained ounces of silver. When measured and indicated estimates are taken into account, the reserve at Manantial Espejo is projected to be 1.5 million oz. gold-equivalent.

The prefeasibility study was based on a 1,500-tonne-per-day operation, with gold and silver recovery estimated at 95% and 85%, respectively. Triton continues to seek financing and partners for the project, which is expected to crank out 85,000 oz. gold-equivalent per year at a life-of-mine cash cost of US$188 per oz. A full feasibility study is under way.

The proposed merger of Triton and Black Hawk is conditional on the renegotiation of a royalty agreement between the former and Repadre Capital (RPD-T). The agreement-in-principle calls for a reduction to 3% from 5% in the Nicaraguan royalty and a potential 2% royalty on Manantial Espejo.

As of early January, Triton had 24.4 million shares outstanding and no debt.

Black Hawk’s chief asset is its Keystone gold mine in northern Manitoba, which yielded 67,000 oz. in 1997 at an average cash operating cost of about US$190 per oz. Output for the current year is pegged at 63,000 oz., with minable reserves estimated at 142,000 oz. gold.

Black Hawk also owns the Bald Mountain gold project in northern Maine, which has a mining permit application under review. Minable reserves there are estimated to exceed 180,000 oz. gold-equivalent, with annual production expected to average 39,000 oz. per year over four years.

Meanwhile, at the Hoyle Pond mine in Timmins, Ont., the company is considering entering into a joint development arrangement with Kinross Gold (K-T). Geological resources stand at 230,000 oz. gold.

Among Black Hawk’s other holdings is a 40% interest in the Sulphurets gold project in northern British Columbia, where estimated geological resources are in the range of 250,000 oz. gold-equivalent.

As of Nov. 30, 1997, Black Hawk had $6.6 million in cash and long-term debt of $4 million.