Low metal prices stall Audrey deal

Quebec-based Audrey Resources (TSE) is close to completing the sale of its assets of the Mobrun mine and mill and its 50% interest in the 1100 project at Rouyn-Noranda, Que., to a European firm, President Guy Hebert said at the annual meeting staged here recently.

Negotiations have been continuing for a month with the interested party and talks were scheduled to continue in the coming days, he revealed.

Audrey, which operates a zinc, copper, gold and silver mine and mill, has been looking for financing for the past six months to pay for the potentially lucrative 1100 project at the Mobrun mine. A feasibility study of the 1100 project projected a production scenario of 3,000 tonnes per day, requiring the construction of new surface infrastructure and a new shaft for about $90 million. This scenario would allow the development of 9 million tonnes once production gets under way in 1993.

By using existing infrastructure, the 1100 could also be mined at the rate of 2,000 tonnes per day, according to a second feasibility study. The cost of the second scenario is estimated to be $65 million.

Audrey retained a brokerage firm to solicit offers and 32 companies asked for information, but only three have maintained an interest. One of the companies rumored to be in the running is Billiton Metals Canada, a subsidiary of Royal Dutch-Shell of the Netherlands.

Hebert noted that the interested company has agreed to all of the conditions of the sale but one: the asking price. He said the interested company wants to pay less because of this year’s drop in metal prices.

Hebert, a major Audrey shareholder, says he will not give up the shop in making the sale. “We think we’ll get our price,” he said.

Toronto-based Minnova (TSE), Audrey’s 50% partner in the 1100 property, has the right of first refusal in the sale of assets. Under the Audrey-Minnova joint-venture agreement, all exploration and development work on the 1100 project is being financed by Minnova. Toronto-based Minnova has paid $8.5 million of the first $10 million of costs.

A sale would also require a special meeting of Audrey shareholders. If the sale fails, Audrey will consider financing the development through issuing debentures or preferred shares.

In 1990, Audrey lost $2.99 million (19 cents per share) on revenue of $19.9 million, compared with a 1989 loss of $525,000 (five cents per share) on revenue of $5.6 million. Hebert blamed the results on a strong Canadian dollar, high interest rates and low metal prices.