U.S. Gold looks to consolidate Cortez Trend

Vancouver — Robert McEwen’s U.S. Gold (USGL-O) has launched takeover offers for four TSX Venture-listed companies in an anticipated manoeuvre to fuse together a large, strategic land position around its Tonkin Springs project in Nevada’s Cortez Trend.

U.S. Gold is looking to acquire White Knight Resources (WKR-V, WITNF-O), Nevada Pacific Gold (NPG-V, NVPGF-O), Coral Gold Resources (CGR-V, CGREF-O) and Tone Resources (TNS-V, TONRF-O) in an all-share transaction worth a combined $290 million (based on March 3 closing prices).

U.S. Gold proposes to issue:

* 0.35 of a common share for each White Knight share;

* 0.23 of a common share for each Nevada Pacific share;

* 0.63 of a common share for each Coral Gold share; and

* 0.26 of a common share for each Tone Resources share.

McEwen, U.S. Gold chairman and CEO, happens to be a major shareholder in all of the target companies.

In mid-2005, the ex-chief of Goldcorp (G-T, GG-N) boosted his interest in White Knight to 10.5% through a private placement of almost 5.7 million shares at about 80 apiece. Shortly after, in late 2005, McEwen bought an 18.2% stake in Nevada Pacific (12.5 million units priced at 40, for proceeds of $5 million), an almost 20% interest in Coral Gold (1.5 million shares at $3.00 apiece), and an initial 12.2% position in Tone Resources (by way of a 1.77-million-unit private placement priced at 20 per unit).

Given his significant investments in the quartet of Nevada explorers, the market largely anticipated that McEwen would look to piece together a new gold venture. Upon acquiring the four target companies, the “new” U.S. Gold would emerge as one of three major landholders in the Cortez Trend, along with Barrick Gold (ABX-T, ABX-N), following its recent acquisition of Placer Dome, and Newmont Mining (NMC-T, NEM-N).

In a statement, McEwen said the company’s goal is “to build the premier exploration company in Nevada,” and that “the new combined company could provide the land package of a major, the balance sheet strength and market liquidity of an intermediate, and the upside price leverage to discovery of a junior.”

U.S. Gold’s Tonkin Springs deposit contains an estimated 26.5 million tonnes of mineralized material grading 1.2 grams gold per tonne (over 1 million contained ounces gold) and includes an existing 1,500-tonne-per-day mill. Tonkin Springs operated briefly in the mid-1980s and again in 1990. The 36-sq.-mile land package covers a prospective portion of the trend that has seen renewed interest.

Having recently closed a US$75-million private placement, U.S. Gold has earmarked US$30 million for exploration, including about 120,000 metres of drilling, on its Cortez Trend landholdings over the next two years.

In mid-2005, McEwen purchased a one-third interest in U.S. Gold through a private placement of 11.1 million shares at 36 apiece and took the helm of the company. Following the announcement of its acquisition plans, shares of U.S. Gold rose to around US$6.30, making McEwen’s initial US$4-million investment worth about US$70 million.

When trading resumed after the announcement of the proposed takeovers, shares of White Knight closed up 19% to around $2.15, Nevada Pacific was up almost 16% to $1.40 per share, Coral Gold rallied 27% to around $4.10, and Tone Resources notched upwards about 19% to close at $1.60.