Financing deal clears way for Louvicourt development

Toronto-based Aur Resources (TSE) has set the stage for rapid development of the Louvicourt Twp. base metal deposit after cutting a financing deal with Vancouver majors Teck (TSE) and Cominco (TSE).

After negotiating for six months, Teck and Cominco have agreed to earn a 25% project interest by paying Aur $15 million in cash and contributing $55 million toward the first $100 million spent to develop a 5,000-tonne-per-day copper-zinc mine.

The agreement prevents Aur from having to put up any money until Teck and Cominco have earned the interest, after which Aur is responsible for 30% of mine financing while partner Societe Miniere Louvem (TSE) contributes 45%. As well as guaranteeing that Aur can fund its share of an estimated $326 million in capital costs, the agreement puts the onus on Louvem and its 52% owner, Noranda (TSE), to decide how to raise their share of funding. With shaft sinking scheduled to begin by late February, officials from Aur and Noranda flew to Vancouver recently for talks with Teck and Cominco on how best to co-ordinate their financing efforts.

In the first 48 hours after the agreement was announced, Aur shares advanced by 40 cents to $3 before slipping back to $2.70, while Louvem rose 25 cents to $3.20. St. Genevieve Resources, (TSE) which owns about 21% of Louvem, added 7 cents in the same period to close at 44 cents.

Having outlined diluted minable reserves of 22.8 million tonnes of grade 4.01% copper, 1.99% zinc, 1.3 grams gold and 31 grams silver per tonne, the joint venture expects the mine to be generating cash by early 1995. “This means we can go full speed ahead from here on,” said Aur Secretary Peter McCarter, who expects all bids for the shaft-sinking contracts to be in by the end of this month.

As the deal applies only to the portion of the Louvicourt property on which the deposit has been outlined, Aur will own 55% of anything found outside of the mining area. “It’s a good deal for Aur because it has been given $15 million to spend on further exploration,” said an analyst who asked not to be identified.

Under the agreement, Aur remains as operator of the Quebec project while decisions regarding development and operations are made jointly with Teck, Cominco and Noranda.

However, until the mine generates enough cash flow to allow the Vancouver companies to repay any bank debt incurred while earning the interest, they will have a deciding vote on technical matters submitted to a management committee.

Lance Tigert, senior vice-president and treasurer at Noranda, said his company waived its right of first refusal on the mine interest to allow the agreement to proceed.

Meanwhile, Aur has been given until Dec. 31, 1995, to repurchase up to 3.1 million of the 9.2 million Aur shares now held by Teck and Cominco, at a price equal to Teck’s average after-tax cost of the shares.

Until that date, the Vancouver companies have agreed to back existing management and not to increase their interest in Aur beyond the current level of 21%. Prior to the end of 1995, Teck and Cominco can nominate two representatives to the Aur board, one of which will be Norman Keevil, chairman of Teck.