Sandhurst closes deal to buy Queenstake block

An Australian placer gold mining concern, Sandhurst Mining has closed earlier plans to acquire approximately 20% each in two Vancouver-based companies, Queenstake Resources and Canadian United Minerals.

Sandhurst, which was previously called Balmoral Resources (N.M., Oct 26/87), ended up restructuring the original agreements to reflect current market conditions. But the share purchases were still made at a premium to market which Sandhurst President C. Richard Tinsley says reflects the companies’ impressive portfolio of properties.

Queenstake, for one, recently completed its best year ever. Placer gold production from its Yukon and British Columbia holdings yielded over 13,150 oz gold. And it has several advanced stage hardrock properties which could augment existing production in the years ahead.

Canadian United has an 18.5% carried interest in the Dome Mountain gold property near Smithers, B.C., which could be producing late next year. The company also has a number of other good properties including a platinum/gold prospect in the Labrador Trough.

Sandhurst’s position in Queenstake was previously held by Canada Tungsten Mining which had been trying to sell it for a few years. The 1,755,948 shares were sold for approximately $3.1 million or about $1.76 each, which compares to a purchase price of $7.75 in 1980.

Queenstake President Gordon Gutrath concedes this overhang on the market “has been a problem for the company” and also its share price which lately has been around $1.10 on the Toronto Stock Exchange. The 1987 high was $2.90 and $2.35 the previous year.

Gutrath feels there are “benefits that can be gained between the two companies from our own special areas of expertise.” In particular, he believes Tinsley’s “strong financial background” will be a major benefit. Sandhurst has also been doing a lot of work in Australia on fine gold recovery which Gutrath says may be applicable to placer operations here.

Queenstake’s board has been revamped and will now include Tinsley and L. Furlong, who was previously with London’s ebc Amro Bank in Sydney, Australia. “Although the position Sandhurst has doesn’t give it strong control they are going to have a positive influence on the company,” Gutrath concludes.

In Canadian United’s case, Sandhurst has agreed to purchase 1.2 million units at a price of $1.60 per unit; the warrant included with each share will enable Sandhurst to buy an additional share for $2.10; so the total value of the deal is about $4.4 million. Recently Canadian United’s common share price was $1.11 versus a year high of $1.75. Private placement

Separately, some investors have agreed to subscribe to a private placement of 500,000 shares at $2.10 each. President Michael Callahan says the $1-million financing will, in part, be committed to a drill program on its Firewood property near Granisle, B.C. A portion of the funds will also help finance work on the company’s platinum property in the Labrador Trough area of Quebec.

Richard Tinsley, managing director of Sandhurst is the new chairman of Canadian United and Callahan, formerly corporate secretary, has taken over as president. Leif Ostensoe has resigned as president but he will remain active on the promotional side and in directing the company’s exploration programs.