Hillsborough-Brinco merger on

The proposed merger between Hillsborough Resources (TSE) and Consolidated Brinco (TSE) was recently approved by shareholders and the Alberta courts.

Under the merger arrangement, Consolidated Brinco shareholders will receive one common share of Hillsborough for every 1.625 common shares of Brinco held. Following completion of the merger, Hillsborough will have about 9.7 million shares outstanding, $9.5 million in working capital and about $9.3 million in long-term debt.

Hillsborough provides contracting and engineering services to the mining industry and owns a 20% interest in the Sa Dena Hes lead-zinc mine in the Yukon. The remaining 80% interest in the mine is held by Curragh Resources. The Sa Dena Hes opened last year with preliminary reserves of about 4.8 million tonnes grading 4% lead and 12.7% zinc plus 59 grams silver per tonne. Consolidated Brinco’s primary asset is its Quinsam Coal mine near Campbell River, B.C.

The mine operates as both an open pit and underground operation and the construction of a 700,000-tonne-per-year washing and screening plant was completed in 1991.

The primary market for the mine’s coal is in the Pacific Rim. The high Canadian dollar coupled with soft prices have hurt the company’s finances. For the six months ended Sept. 30, 1991, Consolidated Brinco reported a loss of $1.7 million on coal shipments of 101,000 tonnes.

George Vooro, president of Hillsborough, said the merged company’s main focus will be to bring the mine back into a profitable position.

Under the mine’s current arrangement, clean coal is trucked from the mine to a barge loading facility at Middle Point, north of Campbell River, and shipped south to a deep water facility on Texada Island. The Texada Island facility is capable of handling Panamax-sized vessels up to 70,000 tonnes. Vooro noted that the reduction in handling costs as a result of a new deep water port would lower transport cost by about $6 per tonne. Vooro sees further cost savings in concentrating company efforts on the underground room-and-pillar operations as opposed to the open pit where he said costs are too high. He added that by year-end, the open pit operations will likely have been wound down.

Production for the year ended Dec. 31, 1992, is projected at over 500,000 tonnes. Vooro hopes to increase production to 750,000 tonnes in 1993 with a further expansion in 1994 to one million tonnes.