Despite writing down its investment in North American Metals (TSE) by US$32.2 million last year, Homestake Mining (NYSE) recently provided the company about $2.3 million in additional financing. North American has a 50% interest in the troubled Golden Bear gold mine in northwestern British Columbia with joint-venture partner Chevron Resources. Homestake in turn owns a 73.3% equity interest in North American and is owed more than $40 million by the latter.
The recent financing involved two transactions. The first is the conversion of $1.4 million in debt to three million shares of North American at an average price of 46 cents per share. The debt represents advances made to the company by Homestake to cover cash calls at the mine.
The second transaction is a private placement to Homestake of 1.44 million shares at 60 cents each, including a two-year warrant to purchase an additional 1.44 million shares at the same price.
The $864,000 received by the company in the second transaction will be used to meet the 2,000-oz. gold loan payment due to Homestake on March 31.
North American owes Homestake 123,886 oz. of gold and must make quarterly payments of 2,000 oz. to Dec. 31, 1995, at which point the unpaid balance is due. The company was unable to meet the first two loan payments due Sept. 30 and Dec. 31, 1990, because of continuing operating problems at the mine. The payments were deferred to Dec. 31, 1995.
The joint venture recently put into place a revised operating plan which will operate only an open pit. The higher-cost underground mining operations have been suspended.
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