Teck setting stage for possible Aur takeover

But while Aur appears to have secured time and money to continue exploring and developing the Louvicourt Twp. property, some analysts predict that Teck may be setting the stage for further acquisitions of Aur. Teck’s opportunistic character is almost legendary and some feel it will be tough to suppress if the deposit proves to be of major economic significance.

“After all, that’s how Teck became Teck,” said Graeme Currie, an analyst with Canarim Investment in Vancouver.

Currie said the investment community appears to be viewing the Teck/Cominco investment in Aur as a confirmation of the potential of the new discovery.

“Teck and Cominco are not going to put up $35 million unless their understanding of the geology, of the geologic model and of results to date indicates the potential for this to be of world-class size,” he said.

In return for selling 3.3 million of its common shares at $10.75 each, Aur received assurance that Cominco and Teck will support its current management team for at least three years.

Teck and Cominco also agreed to buy up to 600,000 common shares held by undisclosed shareholders of Aur. The agreements give the two major mining companies preferential rights to collectively acquire up to 40% of future equity issuances by Aur and also entitle Cominco to have one nominee on Aur’s board.

But until the private placement is completed, Aur has protected itself against other takeover attempts by adopting a shareholders rights protection plan.

Currie said that some might argue the price for the entry-level acquisition was high in view of the limited drilling to date. But he added the investment provides increased exposure in eastern Canada for Teck and Cominco. The two majors will also end up with a stake in an unusually cash-rich junior, one positioned to not only further explore and develop the Louvicourt find and its other properties, but to also possibly become an acquisitor of promising projects held by less financially fortunate junior companies.

News of the agreement caught the investment community off guard, as many expected the most likely contender to emerge with a sizeable stake in Aur would be a major company such as Noranda Inc. with a strong presence in Eastern Canada.

Owen Owens, Cominco’s vice- president exploration, told The Northern Miner the agreements reflect “a mutual interest” by both Teck and Cominco in Aur Resources and in the new copper-zinc- silver-gold discovery.

But with typical Cominco conservatism, Owens said it would be “pure speculation” at this point to comment on the potential size of the massive sulphide find.

“This project is still in the exploration stage and there is a risk in all exploration stage activity,” Owens said of the multi-million dollar investment shared by Teck and Cominco. (Teck currently owns about 20% of Cominco, having led a consortium to acquire control of the company in October, 1986.)

“Obviously we are enthused by the results achieved to date or we wouldn’t have made this kind of a move,” Owens added. “We are going to have to wait with interest to see how the ongoing development work turns out. But we are confident of the activities of current management and intend to support them.”

Owens said Cominco made the initial approach to Aur, although a site visit was not made before the deal was put together. Cominco currently has no significant presence in Quebec, in contrast to Teck which is historically familiar with the province, having operated the Lamaque gold mine in Val d’Or for more than fifty years.

The two majors will no doubt be hopeful of a successful resolution of a property ownership dispute between Aur and Societe Miniere Louvem (TSE), the outcome of which will determine if Aur has a 75% or a 50% interest in the Louvicourt property where the discovery was made.

After all regulatory approvals have been obtained, Aur will issue a total of 2.05 million shares to Teck and Cominco on closing of the transaction, with the remainder to be subscribed for within six months.

Because a portion of the shares will be flow-through, Teck and Cominco will be entitled to one- half of CEIP grants payable with respect to those shares, which should offset the cost of their total investment in Aur.

Aur President James Gill said “a significant portion” of the funds provided by Teck and Cominco will be used for ongoing development of the Louvicourt property. The company now has about $50 million in its treasury.

“We will be in a very strong position when it comes to being able to pay the costs of getting a mine into production,” he added.

Gill also said the deal negotiated with Cominco is an excellent one for Aur as it sets the stage for the company to draw on the expertise of Cominco and Teck with respect to further work on the new massive sulphide deposit.

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