1996: A LOOK BACK — Inco, Barrick swallow juniors, line investors’ pockets

Huge mineral discoveries fueled a wave of mergers, takeovers and deals in the mining industry in 1996. The year’s biggest story was Inco’s (N-T) Aug.

21 swallowing up of Diamond Fields Resources (DFR), the Vancouver-based junior that went to Labrador looking for diamonds, only to find one of the largest nickel deposits in the world.

Falconbridge (FL-T) was the jilted suitor in the affair. After a prolonged courting dance, Inco and Diamond Fields settled on a merger worth about $4.5 billion, or $43.50 per DFR share.

The massive deposit at Voisey’s Bay is estimated at 150 million tonnes, including a preliminary figure of 50 million tonnes grading 1.36% nickel, 0.6% copper and 0.09% cobalt in the Eastern Deeps zone. The reserve at the Ovoid zone, where the initial open-pit mine will be located, is 31.7 million tonnes grading 2.83% nickel, 1.68% copper and 0.12% cobalt.

Inco plans to build a US$1-billion smelting and refining complex to process nickel-cobalt concentrate. The complex will be near the town of Placentia, 130 km west of St. John’s, on the island of Newfoundland.

Moving from the coast of Labrador to the mountains of Peru, one of the world’s biggest gold companies grew larger when Barrick Gold (ABX-T) scooped up Arequipa Resources.

Barrick spent $512 million in cash and 13.4 million shares to get Arequipa’s main asset, the Pierina gold property in northern Peru. The Toronto-based major snapped up the company on the basis of nine drill holes; no reserve has been established for the property.

Barrick is believed to also be on the verge of a deal with Bre-X Minerals (BXM-T), a junior that controls the massive Busang gold find on the island of Kalimantan. The deposit contains up to 57 million oz. gold, or a measured and indicated resource of 316 million tonnes grading 2.3 grams per tonne.

The merger in July of Battle Mountain Gold (BMG-N) and Hemlo Gold Mines (HEM-T) created North America’s fifth-largest gold producer. The new Battle Mountain is expected to produce 1 million oz. gold in 1996 from eight mines on three continents.

Reserves of the new company total 13.3 million oz.

Homestake Mining (HM-N) of San Francisco will become North America’s second-largest gold producer (after Barrick) if its US$2.3-billion merger with Santa Fe Pacific Gold (GLD-N) goes through. An earlier offer from Newmont Mining was valued at US$2 billion, or US$15.68 per share. The Denver company is still in the picture and could make another bid, but faces a number of obstacles if it makes a hostile takeover attempt. Those include a “poison-pill” shareholders’ rights agreement, and a staggered board that would not allow for a wholesale swap of directors.

Santa Fe operates six mines with a total of 17.9 million oz. of proven and probable gold reserves. When gold resources are included, the figure becomes 29.2 million oz. gold. If the merger is successful, the new Homestake will have proven and probable reserves of 39.4 million oz.

In July Consolidated Nevada Goldfields (KNV-T) announced plans to merge with Mexican miner Grupo Real del Monte, whose main asset is the Pachuca silver mine in central Mexico. Grupo Real del Monte’s four mines will augment production from Consolidated Nevada’s two U.S. gold mines.

Closer to home, Westmin Resources (WMI-T) acquired 100% of Gibraltar Mines in a deal worth an estimated $307 million. Westmin stepped in after Placer Dome (PDG-T) announced it would sell its 30.8% stake in the copper miner, whose assets include the Lomas Bayas and Fortuna de Cobre oxide copper deposits in Chile, as well as the McLeese Lake copper mine near Williams Lake.

Shareholders of Vancouver-based Da Capo Resources and Granges of Denver decided in October to tie the knot. The assets of the new Vista Gold (VGX-T) include Granges’ Hycroft mine in northern Nevada (with reserves of 58.8 million tons grading 0.019 oz. gold and estimated 1996 production of 120,000 oz.) and the Guariche development project in Venezuela, as well as Da Capo’s Amayapampa-Capa Circa, Copacabana, San Gerardo and India properties in Bolivia. Vista plans to focus on Latin America.

In a 3-way merger, Viceroy Resources (VOY-T), Baja Gold and Loki Gold joined in May under the Viceroy name. The new company has reserves of 2 million oz.

gold, owns 75% of the Castle Mountain mine in California, 40% of the Paredones Amarillos project in Baja California Sur, Mexico, and 100% of Brewery Creek, the largest lode gold mine ever built in the Yukon.

In November, Brewery Creek, 58 km east of Dawson, poured its first dore bar.

In June Rea Gold (REO-T) completed its merger with American Resource, creating a new mid-tier gold producer. The new Rea Gold operates the Mt.

Hamilton mine in Nevada, and is developing the Bissett gold mine in Manitoba, as well as the San Gregorio gold project in Uruguay. The company expects to be producing 200,000 oz. gold per year by the end of 1997.

In December, Laramide Resources (LAM-T) launched a $5.3-million hostile takeover bid for Aquiline Resources (AQI-V). The target is control of two promising Mexican properties: the Jojoba gold prospect in Sonora, and the Cieneguita heap-leach gold project in Chihuahua (in which Laramide already holds 30%).

Laramide is offering $1.50 for each outstanding Aquiline share, in exchange for cash or 0.9 of a Laramide share. Aquiline has accused Laramide of breaching a confidentiality agreement for information on Jojoba, saying the company purchased the Glamis shares after evaluating these data. Laramide rejects the charge.

In October, McWatters Mining (MCW.A-M) absorbed Canadian-listed Maude Lake Gold Mines, whose key asset was a gold property near Matheson, Ont. with reserves of 813,400 tons grading 0.24 oz per ton.

And in November, shareholders approved Imperial Metal’s (IPM-T) acquisition of Regional Resources, whose principal asset is an 82.15% interest in an advanced silver-lead-zinc property in northern British Columbia. Imperial is currently constructing the 55%-owned Mount Polley gold-copper mine near Williams Lake, B.C.