The directors of Australian junior
Under the deal, Dalrymple shareholders would receive one LionOre share for every 2.92 Dalrymple shares tendered. Before that can happen, Toronto-based LionOre needs to list its shares on the Australian Stock Exchange (ASX), a move the company expects to accomplish by July.
The exchange ratio values Dalrymple at around A$150 million, or an 18% premium over the company’s closing price on the ASX on June 2, the day before the deal’s announcement.
With about 71 million Dalrymple shares issued, LionOre will need to mint about 25 million new shares, bringing its issued share number to 193 million.
Also, one Dalrymple board member would join LionOre’s board.
The deal is subject to regulatory approval, including that of the Australian Foreign Investment Review Board, and LionOre needs the blessings of Dalrymple shareholders and the Supreme Court of Western Australia.
The plan will be put to Dalrymple shareholders in September, and if approved, the merger would wrap up shortly thereafter, leaving Dalrymple shareholders with a 13% stake in LionOre.
Dalrymple (40%) and LionOre (60%) are currently teamed up under the Wildara joint venture, which owns nickel and gold assets in Australia’s Northeastern Goldfields, including the Thunderbox gold project and the nearby Waterloo and Amorac nickel deposits.
After pouring its first gold bar in November, the Thunderbox open-pit gold mine recently completed its first full quarter of production, pumping out 62,878 oz. gold at a cash cost of US$106 per oz.; gold sales hit US$13.2 million.
LionOre now has a 20-hole drilling program underway immediately below the planned base of the mine’s C zone, where holes are testing the continuity of high-grade areas.
Drilling is also testing zone A, situated some 95 metres down-dip of previous drilling, and holes are also planned along strike from Thunderbox, including zone D situated immediately north of zone C and on the Madras prospect to the south.
The A$65-million Thunderbox mine is expected to produce 220,000 oz. gold at a cash cost of US$112 per oz. during its first year. Over the subsequent seven years, annual production should average 150,000 oz. at US$157 apiece as mining targets primary ore.
About half the mine’s production is hedged at US$293 per oz.
Reserves total 10.9 million tonnes averaging 2.43 grams gold, based on a gold price of US$254 per oz. and a cutoff grade of 0.7 gram for oxidized material and 1.1 grams for primary material.
About 6 km away at the Waterloo nickel-platinum-group-metals project, the partners have an economic screening study underway. Last year, drilling extended the length of the deposit by 250 metres to 750 metres. The holes returned up to 2.25% nickel over 7 metres. Combined platinum-group-element (PGE) values ran between 0.4 and 1.7 grams with copper grades generally less than 0.5%.
Drilling on the nearby Amorac deposit has so far outlined nickel mineralization over a strike length of 500 metres. Last year, drilling was highlighted by a 6-metre section (from 172 metres below surface) averaging 3% nickel and 1.5 metres (from 210 metres) of 1.12% nickel. Total PGE values have generally run less than 0.5 gram per tonne.
The zone remains open along strike to the north and south, coincident with an electromagnetic anomaly, though LionOre believes Amorac is not directly associated with the Waterloo deposit.
Earlier this year, LionOre struck a life-of-mine off-take agreement with
Maggie Hay’s indicated resource is pegged at 633,000 tonnes grading 3.55% nickel, and the mine is expected to begin operating in 2004.
Concentrate from the two mines will be processed at Inco’s operations in Thompson, Man.
For its part during 2002, Emily Ann churned out 5,301 tonnes of nickel at a cost of US$1.93 per lb.
In Botswana, LionOre has an 85% stake in the Tati Nickel operations, which comprise two mines near Francistown: Selkirk, an underground operation, and Phoenix, an open pit. During the recent first quarter, the operation produced 1,577 tonnes nickel at a cash cost of US$2.67 per lb.
Dalrymple’s portfolio of wholly owned nickel prospects include the Lake Goongarrie prospect, where earlier this year, a 3-hole drilling program in the St. Andrews area yielded, in one hole, 1.1 metres grading 3.86% nickel and 0.38% copper, 6.5 metres of 0.92% nickel and 1 metre of 1.1% nickel.
At least two holes are proposed for the Scotia project to test some transient electromagnetic conductors. The Scotia project includes the abandoned Scotia nickel mine.
Limited drilling on the Mt. Newman prospect, part of the Mt. Clifford project, encountered 27 metres grading 1.7% nickel, including 3 metres of 3.8% nickel. The 120-sq.-km property is home to several other nickel prospects, including the Jimbos and Bakers prospects, which are defined by anomalous nickel, copper, chrome and PGE values in both surface ironstones and shallow holes drilled to bedrock. The prospects lie along the sheared basal contact of a major cumulate ultramafic unit with several remobilized nickel-sulphide lenses.
Dalrymple shares ended the June 3 trading session A32, or 17%, higher at A$2.20 on the ASX. The shares’ 52-week range is A$1.30-A$2.20. LionOre shares jumped 29 to $5.85 on June 2 in Toronto; the shares have traded in a 52-week range of $3.11-$6.
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