Princeton plans merger with Imperial

L.Faced with a $2.7-million debt repayment and an empty till, Princeton Mining (PMC-T) has agreed to merge with Imperial Metals (IPM-T) by way of a plan of arrangement.

Princeton’s main asset is a 60% interest in the Huckleberry copper mine in west-central British Columbia. A consortium of Japanese companies owns the remaining 40% of the mine.

Under a proposed restructuring plan, three new classes of Princeton shares will be created: class B voting common shares, class C non-voting shares and non-voting preferred shares. All of the assets and liabilities of Princeton, including $9 million in debentures, will be transferred to a new company called New Princeton. The issued share capital of New Princeton will consist solely of class A voting common shares.

Princeton shareholders will exchange each of their shares for one new class B share plus one preferred share. Each preferred share will be exchangeable for one class A share of New Princeton.

Imperial Metals will acquire all of the class A common shares of New Princeton by issuing 0.073 of an Imperial share for every class A share held, while debenture holders will receive 486.16 shares of Imperial for every $1,000 of debentures held. The merger will see Imperial issue a total of 12.5 million common shares.

Imperial is the operator and 55% owner of the Mt. Polley copper-gold mine near Williams Lake, B.C.; Japanese metal-trading giant Sumitomo holds the other 45%.The mine was built for a cost of $123.5 million and officially opened in September 1997. Reserves total 82 million tonnes grading 0.3% copper and 0.42 gram gold per tonne at a stripping ratio averaging 1.16 to 1. Imperial uses a conventional rod mill, ball mill and combination re-grind at Mt. Polley; daily capacity is 18,000 tonnes.

Princeton’s Huckleberry mine was constructed at a cost of $141.5 million and began production last October. Minable reserves stand at 90.4 million tonnes grading 0.51% copper and 0.014% molybdenum, plus 0.06 gram gold and 2.81 grams silver, with a stripping ratio averaging 1-to-1. The mine employs a standard 16,500-tonne-per-day semi-autogenous grinding (SAG) and ball mill, with sufficient reserve capacity to take it to 18,000 tonnes per day.

The merger with Princeton will see Imperial produce 55 million lbs. copper and 57,000 oz. gold annually from the two newly built mines.

>From Princeton’s perspective, President William Myckatyn said the company had to find a deal to satisfy some of its debt considerations, and the merger with Imperial makes a lot of sense because both are B.C.-based and both operate new open-pit mines with Japanese partners.

“You’ve got two one-mine companies and there is obvious savings in overhead,” said Myckatyn. “The combined entity is stronger than both individual companies.

“The mix was right and [the deal] would ensure that Princeton’s shareholders would be able to have a viable enterprise to carry on,” he added.

Imperial Metals President Pierre Lebel said the companies’ assets are complimentary. “It made sense in a time of low metal prices for Imperial and Princeton to get together, to strengthen the operating company. You have to make these deals when the [metal price] cycle is low and then you have to be able to stay the course, which we think we can do, and then you get the benefits when the price turns around.”

Lebel told The Northern Miner that production rates, predicted grades and metallurgy are holding up well at both mines.

In addition to acquiring shares of Imperial, Princeton shareholders will also own a small part of a new real estate company that is being formed by Princeton as part of its reorganization. Princeton plans to acquire Vancouver area real estate properties from Madison Development and Vanac Development and spin them off into a newly created shell.

Myckatyn explains that the real estate transaction is a “monitization” of some assets that were previously not monitized within Princeton. This new real estate company will be controlled by the people bringing in these assets (who will receive a majority of the class B and C shares in return), with Princeton shareholders owning an estimated $2.8 million worth of class B voting shares, equivalent to 2.5cents per existing Princeton share.

The plan of arrangement is subject to shareholder, regulatory and creditor approval. Princeton has scheduled a shareholder’s meeting for April 9.

Myckatyn said the deal includes a commitment that Imperial will take care of the $2.7 million loan and also provide working capital going forward for the merged company.

Concurrent with the proposed merger, Imperial is considering a private placement of up to 5 million shares at $1 per share. The company currently has 60.3 million shares outstanding.

In the meantime, Imperial will continue to advance its Silvertip massive sulphide property in northern B.C. A $2 million exploration drilling program in 1997 led to a new resource estimate of 2.6 million tonnes grading 8.8% zinc, 6.4% lead, 0.63 gram gold and 325 grams silver.

The company is examining the feasibility of a starter open-pit operation, followed by underground mining, using major process equipment from its idle, 100%-owned Goldstream mill, situated near Revelstoke, B.C.

Permitting procedures have been initiated to allow for the extraction of a 10,000-tonne metallurgical sample in 1998. An environmental assessment will get under way this year as well, as part of Imperial’s effort to be in a position to make a production decision in 1999.