International flavor to Echo Bay new issue offering

A common share offering, with an international flavor, has been announced by Edmonton-based Echo Bay Mines, the proceeds of which will go to help finance its acquisition of Tennaco’s North American gold mining properties.

Some 3.6 million newly-issued shares are being sold in Canada, the U.S. and in Europe. Of this amount, 1 million are being offered in Canada at $29 per share by Canadian underwriters led by Burns Fry Ltd. and Wood Gundy.

In the U.S., 2 million shares are being offered at $20.88(US) by U.S. underwriters Salomon Brothers Inc., Goldman, Sachs & Co. and affiliates of the two Canadian underwriters. In Europe, 600,000 shares are being offered also at $20.88 (US) per share, by affiliates of the four underwriters who will co-lead the European portion of the offering.

Echo Bay has acquired Tenneco’s American gold mining properties for $130 million(US). The sale of this issue of common shares will finance about half the purchase cost.

In addition to the purchase cost, Tenneco will retain a 1.5% net smelter royalty interest in the properties sold. Also Echo Bay has taken over Tenneco’s gold forward sales position which amounts to 156,000 troy oz sold forward at an average of $378(US) per oz.

The closing of the acquisition is expected later this month.

The balance of the cost to acquire the Tenneco gold properties was raised in October through a Swiss issue of 110 million Swiss franc (equivalent $67 million(US)) ten- year, 3.88% bonds with gold purchase warrants attached. Each 5,000 Swiss franc bond carries a five-year right to buy six troy oz of gold at $560(US) per troy oz from Echo Bay.

The assets acquired from Tenneco include three gold mines in Nevada and two development properties, one in Nevada and the other in California, which in total contain proven and probable ore reserves of 1,044,600 troy oz of gold and a mineral inventory of 460,050 troy oz.

Too, Echo Bay has acquired a number of gold exploration properties, located mainly in the western portion of the U.S.

Meanwhile, in Canada Echo Bay plans to spend $5.2 million on exploration next year. To finance this program, the company has announced it is selling 500 flow- through units to Canadian investors at $6,525 per unit.

Each unit will entitle the purchaser to receive 100 common shares of Echo Bay at a cost of $65.25 per share. The offering is being managed by Burns Fry and Wood Gundy.