Pioneer prepares to fend off takeover

Although he has heard “rumors of several companies sniffing around,” Pioneer Metals President Robert Willis doesn’t believe his company is a takeover target. But he concedes that if “somebody wants you bad enough, they’re going to get you, no matter what the price is.”

Willis confirms that Pioneer has entered into employment contracts (subject to regulatory approval) with certain directors and key employees, entitling them to lump-sum payments in the event of a control change. Announcement of the plan suggested that someone was preparing to take a run at Pioneer.

Any suitor “will have to get control of our stock,” Willis says, adding that he knows who the company’s major shareholders are. He also claims that Pioneer purchased about 100,000 shares of its own stock a few weeks ago. Board approval has been obtained for the purchase of up to 700,000 common shares or 5% of its issued capital.

The open market purchases will be funded out of working capital and about $5 million has been allocated for this purpose. The earlier stock purchase will have to be included in the over-all total because of Toronto Stock Exchange regulations, he adds. The company’s after-tax net income for the nine months ended Sept 30 was $2.8 million compared to $2.2 million the year before. This works out to 22 cents per share.

Willis says the final feasibility study for the Silbak/Big Missouri project in the Stewart area of B.C. is expected from Westmin Resources by mid-month. He says Pioneer has been negotiating with Westmin for three months and that they are “getting very close to a deal.”

Pioneer owns half the Silbak orebody through its control position in Silbak Premier Mines, but it has no interest in Westmin’s Big Missouri property, which is to be integrated into the project. Willis believes joint ownership of the properties will offer both Pioneer and Westmin a better rate of return. They would have about 10 million tons of mineable reserves between the two properties, he says.

In the meantime, site work has continued and about $4 million has been spent on the project in the past three months. Pioneer has put up most of the money because of its agreement with Westmin. Gold production is slated for late 1988.

At Pioneer’s Puffy Lake project, in northern Manitoba, ore is being run through the mill and the first gold pour will probably occur Dec 15. Willis says there have been a few surprises underground, “but they have all been on the upside.” The grade appears to be a bit higher, as well as some of the mining widths, he says.

The company is utilizing a modified room-and-pillar mining method where stopes are 200 ft long and 75 ft wide. There are 10 ft rib pillars between the stopes and “ground stability has been excellent,” he says. The project is slightly under its $18.1-million budget, but this doesn’t include housing, which cost the company another $1 million.

Three drills are operating on the property, two of which are blocking out reserves in the main area; a third drill is testing three geophysical anomalies discovered a month ago. Willis says about $4 million will have been spent on drilling between May, 1987, and February, 1988. “We want to double our reserves by February,” he says, “and are well on our way to doing that.”

Gold production from Pioneer’s Stibnite mine property, in Idaho, totaled 36,500 oz in 1987 — a 2,500-oz increase from last year. Cost per oz was about $200(US) and 80% of their production was sold for $470 per oz, Willis says. The company is negotiating an agreement with Hecla Mining which would see it process Hecla ore on a toll basis and receive an incentive fee b ased on gold recoveries.

Hecla has about 20 claims in the area which are surrounded by the Stibnite property. These claims contain about 1.6 million tons of oxide material which would be processed by Pioneer over the next four years under the agreement. Besides reducing production costs, the over- all strip ratio for the two operations would drop. Without the feed, mine life at Stibnite is about two years, Willis says.