`Best worst-kept secret’: Golden Giant going public

It’s official. Noranda Inc has reached an agreement in principle with its two partners Golden Scepter Resources and Goliath Gold Mines to form a new company which would own the Golden Giant mine in the famed Hemlo gold camp.

It could happen as early as this January, Alfred Powis Noranda chairman tells The Northern Miner, dubbing the deal as one of the “best worst-kept secrets.” But though the cat is out of the bag, he stresses that negotiations to iron out the details are still under way.

But once formed, we could expect an issue of the new company when stock market conditions are “receptive” perhaps sometime in January or February of 1987, adds Lance Tigert, Noranda assistant treasurer.

Noranda holds a 50% interest and is operator of the Golden Giant while Goliath and Golden Sceptre hold the balance. The Golden Giant was the first mine in the Hemlo camp to produce gold, pouring its first bar in April 1985. Since that time the mine has produced at levels exceeding predictions.

In the second quarter of this year the mine produced 72,700 oz of gold at an operating cost of $103.30(US) per oz for mine operating income of $24.1 million.

The mine is expected to produce 260,000 oz of gold this year. When it reaches its peak in 1988, output is expected to be more than 350,000 oz. At that point the cash cost per oz of gold produced could be as low as $89(US) based on current gold prices, Tom Komlos vice- president of Dean Witter Reynolds (Canada) told The Northern Miner.

Noranda projects the market value of the new company would be between $1.4 billion to $1.5 billion. Mr Komlos puts it higher and says it could exceed $2 billion.

Noranda expects it would own between 63% to 68% of the new company and is contemplating retaining about 50%. By selling the difference — between 13% and 18% to the public — Noranda anticipates raising between $150 million to $200 million. The proceeds would go to help relieve Noranda’s debt load, says Mr Tigert.

It’s expected that a group of underwriters would handle the new issue, but at this stage the members of the group have not been named, says Mr Tigert.

Other details still be to settled include for lack of a better word, the logistics of the new company. At this point it’s envisaged that Golden Sceptre and Goliath would still exist as separate concerns, but without the asset of the Golden Giant mine, says Mr Tigert. It’s also anticipated that these two companies would pass the shares of the new company to their shareholders.

Mr Powis says that discussions are also under way with the Hemglo group, a private company set up by the property vendors which is entitled to a net smelter return on the Golden Giant mine. The Hemglo group has been offered an interest in the new company, says Mr Powis.

The Northern Miner has been speculating on the formation of such a company in its market page by this trio since late September. Discussions apparently have been going on between the three companies for the past few weeks, says Mr Tigert.

The Toronto market, where all three companies are listed, seems to have reacted favorably. Noranda closed today up 50 cents with some 500,300 shares changing hands to close just shy of its high at $21.63. Golden Sceptre advanced 88 cents to new high at $17.88 on a volume of 152,100, while Goliath hit a new high of $19.50 after a gain of $1.25 on a volume of 200,700.