Dayton Mining nixes merger with Pegasus Gold

Pegasus Gold (PGU-T) has been rebuffed following its US$390-million proposal to merge with Vancouver-based Dayton Mining (DAY-T).

Dayton management, which controls 20% of the company’s stock, supported the deal; however, Dayton’s shareholders rebelled.

Dayton’s stock price has doubled in the past year, while that of Pegasus has stagnated.

“Although we have great respect for Pegasus, it became obvious, following the final detailed review, that this transaction was not in the best interests of Dayton,” said Dayton Chairman Wayne McClay.

The cancelled merger would have created North America’s eighth-largest gold producer, with an estimated market capitalization of US$860 million.

The Andacollo mine, 400 km north of Santiago, Chile, is Dayton’s key asset.

In production since Jan. 1, the operation is expected to produce 100,000 oz.

gold this year and 145,000 oz. in 1997 at a cash cost of US$180 per oz.

Pegasus suffered a loss of US$1.7 million (or 4 cents per share) for the first half of 1996, compared with a loss of US$3 million (90 cents per share) for the same period last year. Gold production amounted to 213,000 oz., down from the 254,000 oz. cranked out in the first half of 1995.

For the first half of 1996, Dayton earned $504,000 (2 cents a share), compared with a loss of $1.9 million (6 cents a share) for the first six months of last year. The company has produced 43,725 oz. to date in 1996.