Minorca moves into Dayton Mining

For $16 million, Minorca Resources (MAR-T) has bought a 12.2% interest in Vancouver-based gold producer Dayton Mining (day-t) and moved into Dayton’s boardroom.

Minorca purchased 5 million Dayton shares at $3.20 each from outgoing Dayton President Wayne McClay, who stated that the sale was made for personal reasons.

Minorca President Roland Horst is resigning his post to become Dayton’s chairman; he will also serve as Minorca’s vice-chairman. Rex Outzen, Dayton’s vice-president of operations, is being promoted to president and chief operating officer of Dayton. Minorca Vice-President of Finance Joseph Del Campo will serve as interim Minorca president.

Horst, Outzen and Minorca Chairman Alfred Lenarciak have been appointed as directors of Dayton, while McClay and Kamel Lazaar have resigned from Dayton’s board.

Dayton’s chief asset is the wholly owned Andacollo open-pit gold mine in Chile, where total resources are pegged at 130 million tonnes grading 0.7 gram gold per tonne at a cutoff grade of 0.3 gram gold.

The most recent production figures for Andacollo come from Dayton’s third quarter ended Sept. 30, 1997, when the mine produced 22,793 oz. gold at a cash operating cost of US$230 per oz. During 1997, Dayton expanded daily production to 20,000 tonnes by installing a third tertiary crusher, doubling plant capacity with the addition of a second set of carbon columns and completing more than 32,000 metres of exploration and development drilling.

Plans are underway to begin production from the nearby Churrumata deposit, giving the company four sources of ore.

Minorca’s purchase of Dayton shares follows on the heels of its acquisition last September of a 32% stake in Montreal-based McWatters Mining (MCW-T) for $24.8 million. Even after the Dayton deal, Minorca is left with about $18 million in cash and no debt. It raised $67 million last spring, stating at the time that the money was intended for the company’s Indonesian projects.

Minorca also recently announced that it is embarking on a share buy-back program that will end either by Feb. 2, 1999, or by the time 3.6 million shares (10% of the public float) have been bought back, whichever occurs first.

For its part, Dayton has announced it will issue debentures for at least US$60 million. The debentures will have a 5-year term, bear interest at 7% annually and be convertible, after three years, into Dayton shares at $8.60 or US$6.36 per share. Closing of the transaction is expected by Feb. 28.

Dayton currently has about $70 million in cash and $40 million in project debt.