Glencairn, Black Hawk ink merger deal

Vancouver — Glencairn Gold (GLJ-V) and Black Hawk Mining (BHK-T) have signed a merger agreement.

Black Hawk’s shareholders will vote on the deal at a meeting scheduled for early October. The company’s principal shareholders, representing an aggregate of 31.1% of its outstanding common shares, have agreed to vote in favour of the transaction. If a majority of shareholders approve, the transaction would close shortly thereafter.

Glencairn will issue one share of Glencairn for every three shares of Black Hawk, or 47,294,396 common shares, to Black Hawk shareholders. Glencairn has 21,084,167 common shares issued and outstanding. The combined company will operate under the name Glencairn Gold and trade on the Toronto Stock Exchange. The current officers of Glencairn will manage the combined entity.

Gross proceeds from a recently announced $7-million financing by Glencairn will be held in escrow until the merger is completed. The financing was expected to close Sept. 17.

The private placement will consist of up to 15.6 million special warrants priced at 45 each. A special warrant is exercisable into one share and half a share purchase warrant. Each whole share purchase warrant entitles the holder to buy one share at 65 for 18 months after closing.

The agents, Canaccord Capital, First Associates Investments and Desjardins Securities, will receive a 6% commission and compensation options to buy up to 1.5 million units at the offering price for 18 months after closing.

Glencairn also announced a flow-through-share financing to raise an additional $1.6 million. The financing consists of 3.6 million flow-through warrants priced at 45 each. Each special warrant is exercisable, at no cost, into one flow-through share and half a warrant. A full warrant allows the holder to buy a share at 65 for 18 months.

Endeavour Flow Through Fund 2003 will buy 2.2 million of the warrants, whereas insiders will pick up 1.3 million. Some 178,000 warrants will be issued to Strand Securities as a commission on the deal. The private placement was expected to close Sept. 5.

The funds will be kept in escrow pending the closing of Glencairn’s merger with Black Hawk. The money will be used to explore Black Hawk’s Vogel gold property in Timmins, Ont.

Subsequent to the merger, Glencairn intends to begin a US$2-million exploration program on the Limon property, in Nicaragua, as well as a scoping study on the Hoyle Pond property, in Timmins.

Limon is producing about 55,000 oz. gold per year. Proven and probable reserves stand at 886,700 tonnes averaging 6 grams gold per tonne, for 170,900 contained ounces. This is based on a gold price of US$325 per oz. and a cutoff grade of 3.65 grams gold per tonne. Indicated and inferred resources are estimated to be 37,000 tonnes grading 7.3 grams gold and 290,300 tonnes grading 7.9 grams gold, respectively. The resources are based on a cutoff grade of 4.5 grams gold per tonne and are undiluted.

Subject to financing, construction of the 60,000-oz.-per-year Bellavista project in Costa Rica is to begin in early 2004. Reserves there are expected to last seven years.

In early 2002, Glencairn inked a deal with Wheaton River Minerals (WRM-T) to acquire the property for US$250,000 and 750,000 shares. Glencairn aims to build an open-pit, grind-agglomeration, heap-leach mine to exploit an epithermal reserve of 11.2 million tonnes grading 1.54 grams gold per tonne. The proposal is essentially the one tabled by Wheaton in 1999. That study, which was based on a gold price of US$325 per oz., generated US$62 million in net cash flow, excluding preproduction and financing costs. Assuming a gold price of US$350 per oz., Bellavista generates a healthy 33.2% internal rate of return and has a payback period of 3.7 years. The net present value varies from US$41 million, using no discount rate, to US$11.3 million, using a 15% rate.

Cash operating costs are expected to average US$163 per oz.