Homestake sells 60% of B.C. land package to American Reserve

A Canadian unit of Homestake Mining (NYSE) has reached an agreement for the sale of a 60% interest in the Kutcho Creek property, 100 km east of Dease Lake, B.C., to American Reserve Mining (ME). The property, covering 13,964 hectares, hosts a copper-zinc deposit containing an open pit minable reserve of 13.9 million tonnes grading 1.75% copper, 4.47% zinc, 28 grams per tonne silver, and 0.34 grams gold. A small part of the property and reserve is owned by Sumitomo Corp., a major Japanese mining and smelting company.

Payment will total $7.65 million which includes the issuance of 870,000 common shares of American Reserve at a stated value of $1.15 per share plus $6.5 million in convertible preferred shares due Feb. 28, 1997. In addition, American Reserve will make cash payments of $100,000 on closing and $50,000 by Dec. 31.

American Reserve has also agreed to make exploration expenditures of $3 million in order to earn a further 20% in the property.

The preferred shares are redeemable after the company has expended the $3 million in exchange for a quit-claim of its interest in the property.

The shares are retractable for 180 days following a production decision and for one month prior to maturity for a 30% interest in the property. Homestake can, therefore, back in for 30% which would result in a 50/50 joint venture.

The shares are also convertible for 180 days following a production decision and for one month prior to maturity into common shares of American Reserve at the average market price during the previous six months. The conversion price will be subject to minimums of $3.25, $3.50, $4.00, and $4.50 per share in each of the last four years of the issue’s term.

Homestake plans an exploration program including diamond drilling, geological, geophysical and geochemical work. Additional engineering, metallurgical and environmental impact studies are also proposed for 1990.