Pioneer Metals seeks control of Silbak mining division

VANCOUVER — Being “first in the door” has its advantages, according to the president of Pioneer Metals, Robert D Willis. Nine months ago his company approached British Silbak Premier Mines about participating in Silbak’s gold properties at Stewart, B.C. The offspring of these discussions is that Pioneer will probably end up with control of Silbak and obtain another 40,000 oz of annual gold production, beating out several major mining companies in the process. This will certainly be a welcome boost to consolidated production from Stibnite in Idaho and Puffy Lake in Manitoba which is scheduled to come on-stream in early 1988.

Pioneer has offered to purchase 1,049,209 Class A Silbak voting shares from John Block and his associates for $5 per share. Mr Block’s acceptance of the offer, which is subject to shareholder approval, will pave the way for a large private placement involving 4.5 million Silbak units at $3.75 each. There is one non-transferable warrant attached to each unit which is exercisable over two years at $4 and $4.25 respectively. With the control change, Silbak’s B class shares will become A shares.

In the past, Silbak officials had expressed some reservations about being involved in a mining project because they were essentially a real estate company. Recently, the company split up its real estate and mining assets into separate entities which obviously tidied things up for Pioneer. Silbak Premier Mines will now be the mining arm of the group. Silbak’s board will be restructured to include four nominees from Pioneer and three from the Block group. Mr Willis expects to be president of Silbak.

He tells The Northern Miner that funding for the transaction has been secured and describes the arrangement as a “bought deal at current market prices.” Westmin Resources is expected to make a production decision for the Silbak and Big Missouri properties soon and he compares the development to the Mascot Gold project at Hedley, B.C. Pioneer’s philosophy is to develop gold projects where the cost of production is less than $200 per oz, which Silbak qualifies for easily.

“We like the property and the joint venture with Westmin,” he says, arguing the reserve potential is considerably higher than suggested at present. Probable and possible reserves are 6.4 million tons grading 0.11 oz per ton gold equivalent which is about 30% less grade than Mascot but the stripping ratio is much lower.

He anticipates full shareholder approval for the deal because the takeover will enable British Silbak to fund its participation in the project. About four weeks will be required to close the deal, he said.