IMA, Kobex And International Barytex Plan Merger

The proposed merger of three junior explorers would create a cash-rich company with a star-studded cast of directors including Canadian Mining Hall of Fame inductee Roman Shklanka and Alexander Davidson, the retiring executive vice-president exploration and corporate development of Barrick Gold (ABX-T, ABX-N) and recipient of the Prospectors and Developers Association of Canada’s Prospector of the Year award in 2003.

The merger of IMA Exploration (IMR-V, IMR-X), Kobex Resources (KBX-V, KBXRF-O) and International Barytex Resources (IBX-V, IBYXF-O) will give the combined entity roughly $44 million in cash with which to go after substantial new projects at a time when the economy favours acquisitions of low-risk mining projects at significantly discounted prices.

The weight of the new entity’s cash position would give it credibility in the financial markets, which could open the door to financing for project development.

It would also significantly reduce overall overhead costs, the companies say.

The boards of each of the three companies have approved the transaction. The next step is to sign a definitive agreement and nail down regulatory and shareholder approvals.

The merged company will aim to identify, acquire and develop known mineral deposits that have the potential to become world-class assets in the lower-cost quartile and in acceptable political risk environments.

Explaining his thinking behind the merger, Joseph Grosso, president and chief executive of IMA Exploration, says that over the last year and a half his company, with about $23 million in cash, had looked at more than 160 projects of all different sizes. But IMA management came to the realization that the reason why the owners of those properties were looking for cash was because they were “under water,” he says.

“They had decent projects but no cash,” Grosso elaborates. “And $23 million doesn’t really go very far if you’re going after a large-size deposit. . . By the time you fund their past debts and you advance the next step or two of exploration, all of a sudden you realize you’ve spent the $23 million and you’re in the same position they were (originally). . . So we figured out we’d need staying cash power and so we concentrated on companies with cash as a priority objective of a merger.”

The merger with Kobex and International Barytex will also bring together management with the depth of experience and skills to seek world-class deposits.

Over the last 45 years, for example, Shklanka has served as the chairman of Canico Resource and Sutton Resources as well as vice-president of exploration at Placer Dome. He is currently the chairman of Kobex Resources, International Barytex and Polaris Minerals (PLS-T, POLMF-O).

Alfred Hills — slated to be the new entity’s president and chief executive and who is currently the chief executive and director of International Barytex — has more than 30 years of international mine evaluation and development experience, including 26 years at Placer Dome.

As far as acquisitions go, Grosso says the combined entity will be looking broadly at properties in the Americas and in Europe, particularly Eastern Europe, where Shklanka “has got very good connections.”

In terms of non-cash assets the three companies bring to the merger, only IMA has a major property to contribute. IMA owns the Island Copper project on Vancouver Island, about 25 km west of Port Hardy and 360 km northwest of Vancouver. The property surrounds the reclaimed BHP Billiton (BHP-N, BLT-L) Island Copper mine.

IMA’s Island Copper project has a measured and indicated resource of 231 million tonnes grading 0.32 gram gold per tonne and 0.28% copper for contained gold of 2.3 million oz. and 1.4 billion lbs. copper. In the inferred category, the deposit hosts 53 million tonnes grading 0.38 gram gold (640,000 oz. gold) and 0.28% copper (326 million lbs. copper.)

The project has been put on ice, however, due to low metal prices. “With the price of copper coming up above US$2, it is looking more interesting again and we have concluded 5,000 metres of drilling this year,” Grosso notes. “The results were very pleasing. But it’s not a priority.”

Earlier this year, International Barytex sold its Shituru copper-cobalt project in the Democratic Republic of the Congo to a Chinese company, East China Capital Holdings. Shituru is a high-grade oxide copper resource amenable to open-pit mining.

The transaction will include calculating the relative values of each merging company, based on the estimated value of each one’s working capital at the time a definitive agreement is executed.

The value is subject to adjustment if the estimated actual working capital of the transaction differs by more than 1% from the estimated working capital at the time of the def initive agreement.

At presstime, IMA Exploration was trading at 34¢ per share, Kobex Resources at 42¢ per share, and International Barytex Resources at 10.5¢ per share.

IMA has 52.1 million shares outstanding; Kobex 34.9 million shares and International Barytex 55.9 million shares.