Minorca to buy chunk of McWatters

Minorca Resources (MAR-T), flush with $67 million in cash once earmarked for its Indonesian projects (including a 60% financing of Askatindo Karya Mineral’s 10% share of the Busang gold bluff), will spend $24.8 million to become McWatters Mining’s (MCW-M) largest shareholder, with a 32% interest.

The deal is part of McWatters’ effort to raise $80 million by filing a prospectus for the issuance of $50 million in equity and $30 million in senior unsecured notes. The funds will go towards paying for its $55-million acquisition of Placer Dome’s (PDG-T) Val d’Or operations, including the Kiena and Sigma gold mines and 18 nearby gold exploration properties (T.N.M., June 2/97).

The $50-million equity portion of the prospectus consists of more than 13 million shares sold to Minorca at $1.90 each, as well as an additional 13.3 million units sold at $1.90 each.

A unit consists of one share and 0.275 of a purchase warrant, each of which is exercisable (beginning six months after closing, and for a duration not exceeding 18 months) at a price of $2.50.

The 5-year notes will bear interest at an annual rate of 10% and include a gold-link participation of 0.04% of the amount by which the average gold price exceeds US$325 per oz.

After the issue’s closing, 40.6 million McWatters shares will be outstanding, 7.3 million of which will be issued to Placer Dome as part of the deal for the Val d’Or projects.

Placer Dome has granted Minorca an option to buy half of its McWatters shares for $2.50 each during an 18-month period following the 6-month anniversary of the closing of the Placer Dome-McWatters deal. Placer Dome has also granted Minorca the right of first refusal and the right of first opportunity on its remaining McWatters shares until Placer Dome owns fewer than 2 million McWatters shares. Should Minorca exercise fully both its option and right of first refusal, it would then hold a 45% interest in McWatters.

Minorca has entered into a 2-year standstill agreement with McWatters whereby Minorca will refrain from acquiring additional McWatters shares, unless special circumstances warrant such an acquisition.