Boliden blocked from Wolverine deal

The British Columbia Supreme Court has granted Atna Resources (ATN-T) a temporary injunction preventing Boliden (BOL-T) subsidiary Boliden Westmin from selling its 60% interest in the Wolverine joint venture to Expatriate Resources (EXR-V) pending a court review of that agreement. Atna contends it holds a right of first refusal.

In granting the injunction, the court ruled that Atna had demonstrated that there is a “serious question to be tried” and that Atna would suffer irreparable harm if the application were denied. Expatriate shareholders were scheduled to vote on the proposed deal at the company’s annual meeting on July 9.

Atna, which owns a 40% interest in the polymetallic project, has stated that the Wolverine joint-venture agreement includes a comprehensive right-of-first-refusal clause that addresses the responsibilities of a partner should it receive an offer from a third party. One exception to this clause is the disposition to an associated company, which Atna says is defined as one in which ownership is 30% or greater. Boliden currently holds 17% of Expatriate’s 8.5 million outstanding shares.

Boliden has structured the transaction as a two-tiered arrangement, the first part of which involves the transfer of its interest in certain hydrometallurgical technology to Expatriate in return for 1.7 million of its shares, thereby giving it a 30.7% interest in Expatriate.

The second part of the deal involves Boliden’s mineral interests in the Finlayson Lake district of southeastern Yukon, including its 60% interest in the Wolverine joint-venture, the wholly owned, 676-claim Tuchitua block and a 50% interest in the TY property, a joint venture with Pacific Bay Minerals (PBM-V).

The assignment of Boliden’s interest in the TY joint venture is subject to a right of first refusal by Pacific Bay.

In consideration for transferring its Finlayson Lake assets to Expatriate, Boliden will receive a total of 5 million Expatriate shares (4.8 million shares for Wolverine and 100,000 shares each for Tuchitua and TY), boosting its interest in the company to 53.5%. In addition, as long as Boliden has at least a 20% interest in Expatriate, it will hold a right of first refusal on any significant base metal property in which Expatriate decides to sell all or part.

Atna views this sale as an attempt to circumvent the right of first refusal and is challenging it in court. While no court date has been set, Michael Williams, investor relations for Atna, expects the trial will begin in late August or early September. Atna is seeking a declaration that Boliden’s deal with Expatriate constitutes an offer to sell under the

right-of-first-refusal clause of the Wolverine agreement. In addition, Atna is seeking a court order requiring Boliden to provide it with an estimate of the cash equivalent of Expatriate’s 4.8 million shares so that it can exercise its right of first refusal.

The court’s review and interpretation of that agreement will take place in the form of a summary trial, which will allow for a quick hearing on the issue.

Expatriate President Harlan Meade says the interim injunction does not prevent the sale of the hydrometallurgical technology. “We expect that on, or before, July 15, we will have closed that transaction.”

Expatriate holds agreements in principle to acquire all of Boliden’s interest in hydrometallurgical technology developed by two private B.C.

companies, Nitrox Metals and Catalytic Sulphur, with funding from Boliden.

Nitrox and Catalytic Sulphur own the technology and four U.S. patents, plus related international patent registrations.

Boliden holds a 50% interest in both companies, as well as the right to increase its interest to 90% by making payments of $250,000 and $150,000, respectively, to Robert O’Brien, who would then own the remaining 10% of each company. O’Brien is a retired professor from the University of Victoria’s chemistry department who approached Westmin Resources in 1992 with a proposal to fund a hydrometallurgical process for leaching copper concentrates.

Westmin has incurred more than $900,000 in expenditures to date. Meade oversaw the hydrometallurgical research in his former capacity as Westmin’s vice-president of exploration.

Two of the patents may provide a new way of leaching base metal concentrates by producing sulphates from which cathode zinc and copper can be recovered by electrolysis. Expatriate says this technology may provide an excellent opportunity for overcoming the unusually high levels of selenium that plague the Wolverine deposit, estimated at 6.2 million tonnes grading 12.66% zinc, 1.55% lead and 1.33% copper, plus 1.76 grams gold and 370.9 grams silver per tonne.

The other two patents cover processes for the recovery of elemental sulphur from hydrogen sulphide gas and the recovery of sulphuric acid from sulphur dioxide gas. These are directly linked to the leach technology in the recovery and regeneration of leach reagents. Expatriate says there may also be important applications in the chemical, pulp and paper and fertilizer industries.

Boliden also released results of a drill program on the Einarsson zone, a mineralized body it is now evaluating at its Kristineberg mine near Skelleftea, Sweden. Boliden drilled 46 holes in 11 fan patterns, plus five other holes, from an exploration drift on Kristineberg’s 1,015-metre level.

The holes encountered mineralization along core lengths of 4.7 to 27.8 metres. In the middle of what appears to be a lens-shaped mineralized zone, typical drill intersections were 10 to 25 metres long.

Copper grades ranged from 0.26% to 4%, with gold grades of 1.2 to 39 grams per tonne. Silver values, though quite variable, ranged up to 54 grams, and all but six samples topped 1 gram silver. Four intersections also showed some zinc mineralization.

The zone is open in both dip directions and both strike directions. Drilling is continuing, and Boliden expects to have a resource calculation to incorporate into its feasibility study by the end of 1998.

Exploration drifts from the underground workings at Kristineberg reached the Einarsson zone recently, at which time miners took out a 25,000-tonne bulk sample. The sample will be test-milled in August, and the results are expected to be incorporated into the feasibility study.

Also in the Skelleftea camp, North Atlantic Natural Resources, a Swedish company in which Boliden and South Atlantic Resources (SCQ-V) each own 38%, has a drill program under way on its Storliden massive-sulphide prospect. A recent drill hole, STOB98-020, intersected a 6.6-metre zone of sulphide mineralization grading 24% zinc and 5% copper, plus 21 grams silver and 0.2 gram gold.

Another hole, collared southwest of the above hole and drilled vertically, encountered a 20.7-metre interval of similar mineralization, though core from the hole has not yet been assayed.

Boliden is also planning to bring the capacity of its copper smelter at Ronnskar, Sweden, to 240,000 tonnes from 140,000 tonnes. The project should be complete by the middle of 2000.

Swedish environmental authorities approved the expansion last month and the appeal period expires on July 17, after which a licence can be issued. The US$245-million project includes a new flash furnace and anode casting plant, as well as upgrades to the sulphuric acid plant, tank house and port facilities.

Boliden has secured a US$230-million revolving credit facility with Commerzbank and Handelsbanken Markets, both of Germany, and the Bank of Nova Scotia. The line of credit, a large part of which will cover refinancing of debts carried by Boliden’s Westmin unit, bears interest at 0.25 to 0.3% over the London Interbank Offer Rate.