Sale of Westfield gold mine to Northgate to be studied

Westfield Minerals (TSE) appeared to bow to pressure from some minority shareholders when it agreed recently to commission an independent study into the sale of its mining assets to Northgate Exploration (TSE). The study was announced at Northgate’s annual meeting in Toronto. It is designed to demonstrate that the $25.4 million, which Northgate paid for the assets, including a 35% stake in a Chilean gold mine, represents fair value.

“Northgate has agreed to co- operate in the preparation of the valuation and to make all information available to Burns Fry Ltd. (which will conduct the study),” said Northgate President John Kearney.

The announcement was called “a very significant development” by Mike Cahill. He is a member of the minority shareholders’ committee, which has spent about $50,000 to bring the sale to the attention of regulatory bodies, including the Ontario Securities Commission.

“We will have to discuss the situations with our lawyers and the OSC to make sure this is done fairly and to our satisfaction,” he told The Northern Miner.

Cahill is particularly angry over losing to Northgate, Westfield’s 35% stake in the Choquelimpie gold mine in Chile which last year produced 89,400 oz. gold and 620,000 oz. silver at a cost of US$2.30 per oz. The mine is now operated under a joint venture involving Northgate, Shell Chile (42%) and Citibank N.A. (23%).

As Westfield and Northgate are both connected to the Bronfman family’s vast financial empire through Hees International Bancorp, he and other shareholders believe the sale wasn’t conducted at arm’s length.

The sale essentially stripped Westfield, now a 53% owned subsidiary of Bermuda banking company American Resource, of its mining assets and its only exposure to mining is through a 10% interest in Northgate.

However, Kearney said his only concern is that Northgate will be found to have paid too much for the Westfield assets. “Northgate understands that when the valuation is completed, it will be submitted to the appropriate regulatory authorities for their review and a summary distributed to all Westfield shareholders,” he said.