Dakota Mining and USMX announce merger proposal

Two Denver-based companies — Dakota Mining (DKT-X) and USMX (USMX-Q) — are expected to merge.

Under an agreement-in-principle, shareholders of USMX will receive one share of Dakota for every 1.1 shares of USMX. As a result, USMX will be a wholly owned subsidiary of Dakota.

The restructured Dakota would become a mid-size gold producer, with output for the current year projected at 140,000 oz., rising to 200,000 oz. in 1998.

Dakota is required, under the deal, to raise $40 million, which it will do by means of a private placement.

The merger has received the thumbs-up from USMX’s major shareholder, Pegasus Gold (PGU-X), which holds a 30% interest, but has yet to be approved by regulators.

In 1996, bad weather prevented USMX from achieving production at the Illinois Creek mine in central Alaska. Startup is now scheduled for May 1997.

Minable reserves there stand at 6.8 million tons grading 0.065 oz.

gold-equivalent, which translates into a contained resource of 442,000 oz.

gold-equivalent.

USMX also owns the Thunder Mountain gold project in central Idaho, and another 13,380 acres in the Ophir district, southeast of the Illinois Creek mine.

Foreign holdings include 600,000 acres in Mexico, as well as ground in Ecuador and Chile.

Dakota’s assets include the Stibnite gold mine in Idaho and the Gilt Edge gold mine in South Dakota.

Dakota has 35.5 million shares outstanding; USMX, 16.2 million. The new company will have a total of 50.2 million shares outstanding, and Pegasus’ interest in USMX will translate into 8% of the new company.

Alan Bell, currently the president of Dakota, believes an immediate increase in gold production will be the primary benefit of the merger. He is expected to remain as president of the newly formed company. Donald Bellum, currently president and chairman of USMX, will become the chairman of the new company.