Merger puts Conwest back in mining

“It’s good to see Conwest Exploration (TSE) getting back in the mining business — and with a great mine, a real winner.” So said Graham Farquharson, president and founder of Nanisivik Mines, which operates the money- making 2,000-tonne zinc-lead- silver producer on Baffin Island in Canada’s Arctic. Conwest shareholders voted almost unanimous approval of the marriage with Mineral Resources International (TSE), which owns the mine, and Barons Oil (ASE).

“We’ve had fun over the past 10 years carefully building our company into a major,” responded John Lamacraft, Conwest’s president and chief executive officer who was certainly in the right place at the right time when he stepped into the MRI- Nanisivik picture.

With this year’s operating income estimated at $65.5 million and assets in excess of $400 million, Lamacraft estimates the net asset value of the shares of the new company at around $20. “Our task now is to bring that intrinsic value out in the marketplace,” he said. “We will be doing a lot more missionary work meeting brokers.”

Provided both zinc and oil-gas prices hold around current levels, the merged company’s net profit this year should be close to $2 per share, Vice-President and Secretary J. A. Patterson told The Northern Miner after the meeting.

A showcase operation now in its 14th year of continuous production, Nanisivik is one of the lowest-cost zinc producers in the world despite its remote location. Total costs are but $37 per ton. It consistently turns out about 100,000 tonnes of premium grade zinc concentrate each year, from ore reserves still standing of 2,955,000 tonnes grading 8.5% zinc, the price of which remains quite firm.

In addition, Nanisivik turns over other valuable assets including its 35% interest in the Midway silver- zinc-lead mine in northern British Columbia where a $7.2-million underground program is under way. Underground diamond drilling, soon to start, will endeavor to double current indicated reserves of 1.2 million tonnes grading 410 grams silver per tonne, 9.6% zinc and 7.0% lead. And its 23% interest in Highwood Resources (TSE) which has an interest in two specialty metals projects — the Thor Lake beryllium deposit in the Northwest Territories and a zirconium-yttrium project in Greenland.

And Barons Oil will add considerably to Conwest’s growing oil and gas reserves, on which more than $100 million has been spent in the past few years. “We are doing a lot of work in some high interest plays. We are excited,” said J.A. Kalman of Calgary, executive vice-president of Conwest’s oil and gas division. Present oil-gas reserves are valued at $270 million.

This new merged company will have a well-balanced and diversified mix of assets and operating income, capable of undertaking projects and investments beyond the scope of any of the three individual companies, shareholders were told.

Operating under the same name as of June 1, Conwest shareholders will receive share-for-share in the new company, while MRI shareholders will receive one Class B share in the merged company for every 2.35 MRI shares and Barons holders will get one new share for every four old shares. On an undiluted basis, there will then be 2,032,139 Class A shares and 16,435,467 Class B shares outstanding in the new Conwest company.

The company has just raised its quarterly dividend from 11 cents to 12 cents, payable July 1 to shareholders of record June 25.

Elected to the new board of directors are William Barnett, Joseph Bennett, Martin Connell, Colin Coolican, Graham Farquharson, John Gairdner, Harley Hotchkiss, William James, James Kalman, John Lamacraft, James MacDonald and Colin Watson.