Newexco buying Petromet’s stake in Newfoundland project

Petromet Resources (TSE) has signed a letter of intent to sell a 50% interest in the Rambler base metal property at Baie Verte, Nfld., to Newfoundland Exploration (Newexco) in exchange for common shares of Newexco.

If a formal agreement is reached, Petromet will own 41% of Newexco which in turn will be the property’s sole owner plus the 1,500-ton-per-day mill and other buildings at the project site.

After spending $3.8 million on a phase-one program, the two companies have outlined 1.3 million tons of gold tailings grading 0.049 oz. per ton and preliminary reserves in the Ming West deposit of 110,000 tons grading 5.6% copper and 0.069 oz. gold.

Newexco says it intends to develop those reserves as soon as it gets the go-ahead from regulatory authorities.

In addition, Petromet says it has agreed to issue Ausnoram Holdings, a private company controlled by financier Charles Howard, a unit consisting of a debenture and a warrant. The debenture will have a 10% second floating charge with a principal amount of $500,000 and a 2-year term, unless under certain circumstances, including the exercise of the warrants, it is redeemed earlier.

The warrants will entitle the holder to acquire an amount of Petromet shares to be determined by dividing the 6-month average closing price of the shares (35-45 cents) into $500,000.

Alternatively, warrant holders may opt for 555,555 shares of non-pneumatic tire company IATCO Industries held by Petromet at 90 cents per share. Howard is the former vice-chairman of Toronto brokerage firm Nesbitt Thomson.