Editor’s Picks: in the Concrete Jungle, Lionore Doesn’t Sleep Tonight

Merger and acquisition activity once again topped the mining news of the week ended May 19, the twentieth trading week of 2007, as the battle over nickel miner LionOre Mining International intensified.

* On May 15, Swiss-based Xstrata girded its loins and tabled a revised, still-friendly $25-per-share bid for LionOre — exceeding its first, low-ball bid of $18.50 and trumping Norilsk Nickel’s hostile $21.50 bid, launched earlier in the month.

At presstime, Russia’s Norilsk had until May 25 to best Xstrata. In the meantime, Norilsk has a legitimate complaint that LionOre’s decision to increase the break fee to $305 million from $131 million payable to Xstrata (or from roughly 2.8% to 4.9% of the cash offer) is unjustified and only intended to inhibit a vigorous bidding process.

Break fees are typically about 3% of a transaction’s value but, as market caps have increased, the actual dollar value of these fees has ballooned to levels well beyond any out-of-pocket expenses incurred by a typical company involved in a merger or acquisition.

* Members of the Toronto mining community were shocked on May 17 upon learning that Frank and Joe Grieco, the two principals of Oshawa, Ont., crusher-manufacturer PR Engineering, were killed alongside their pilot Max Hudson in a small plane crash near Buffalo, N.Y.

The gregarious and generous Frank was a beloved fixture of the mining scene in eastern Canada and, along with his brother, will be sorely missed by thousands in the industry.

The tragedy also underscores the extreme level of risk imposed on a business when the key driving forces behind that business travel together.

* As reporters who love a good story, we’re heartened in a way to see that higher gold prices are bringing back some of the wackiness to the American southwest. On May 18, Barrick Gold filed suit against Au Mining, former leasehold operator of the Golden Wonder gold mine in Hinsdale Cty., Colo., claiming that operators salted samples of ore shipped to Barrick’s Goldstrike mine in Nevada.

The allegations — which have not yet been heard in court — are that Au Mining sent material to Goldstrike’s plant for processing, and claimed the material averaged 28 oz. per ton. Barrick said the actual content was “very substantially less.”

Tiny, Washington-based LKA International, which had leased the Golden Wonder to Au Mining in 1997, looks to be stuck in the middle of the warring parties.

* Another brass-knuckled brawl broke out between Washington-based Century Mining and Montreal’s Sulliden Exploration over the fate of the Shahuindo gold project, in Cajamarca, Peru. While Sulliden has been “reaffirming that it is the registered lawful and proper owner” of Shahuindo, Century, which is led by Margaret Kent (the miner formerly known as Peggy Witte) is now declaring that it has bought the project and nearby concessions for US$52 million and intends to be in production at Shahuindo as early as the fourth quarter of 2009.

Having already endured years of Shahuindo-related litigation, Sulliden shareholders are in danger of spending the entire gold boom in Peru’s court system rather than out making a fortune in the country’s rich goldfields.

* While uranium oxide prices are still on the rise and showing no signs of retreat, the boom in uranium stocks seems to have entered a more treacherous phase for investors: priced-for-perfection uranium exploration stocks are now plummeting when half-decent drill or resource results are being released. In the last week we’ve seen the price support collapse below stocks of such diverse uranium explorers as Continental Precious Minerals, Rockgate Capital, Delta Exploration, International Arimex Resources and U3O8.

* Regrettably, for all the industry’s happy talk about community relations, it looks like roadblocks at mines in the Third World are becoming routine: Centerra Gold reported that another illegal roadblock of its Kumtor mine in Kyrgyzstan had ended, while Hecla Mining temporarily closed its Isidora gold mine in Venezuela’s El Callao district, owing to newly formed roadblocks by locals apparently wanting the mine to hire more workers and spend more money locally.

Send your Letters-to-the-Editor and other op-ed submissions to the Editor at: tnm@northernminer.com, fax: (416) 510-5137, or 12 Concorde Pl., Suite 800, Toronto, ON M3C 4J2.