Whither Bole, Nangodi, and Bolgatanga?
In my last message, I mentioned that I got the thick Notice of merger of Champion Resources (CHA.TO) with Red Back (RBK on Australian ASX), intended to form a Ghana gold miner and explorer.
But it's unclear, in the merger agreement, who will own the northern Ghana gold concessions currently owned by Red Back: Bole, Nangondi and Bolgatanga. The emphasis in the Notice is all on the southern Sefwi Belt properties, especially Chirano, as the assets of the new company. The northern properties are excluded and are treated more like Red Back's Australian properties, which are being spun off to old Red Back shareholders alone. (I'm only a Champion shareholder.)
The merger agreement of Nov. 4, 2003 says, Section 1.2:
"As part of the scheme of arrangement ...
prior to the Merger ... Red Back will distribute
to each of its shareholders a pro rata interest
in a corporation established by Red Back
(the "Acquiring Corporation") that will own
all of Red Back's non-Ghanaian mineral
properties. ... Red Back may ... appoint an
independent valuer to value its Bole, Nangodi
and Bolgatanga Projects. ... The Acquiring Corporation
shall purchase from New Red Back ... the Bole , Nangodi
and Bolgatanga projects in consideration of the issuance
to New Red Back of ... shares in Acquiring Corporation
... equal to the value of the Bole, Nangodi and
Bolgatanga Projects at the same issue price per share
as the Red Back shareholders are issued their shares in
the Acquiring Corporation."
Note the "may" and the "shall" -- Is this mandatory or not?
If so, it looks as though the old Red Back shareholders' new spin-off "Acquiring Company" (not the new, merged New Red Back) will get the northern Ghana properties, and that it will "pay" with its own shares priced solely according to its own decree (using the so-called "issue price" of the spin-off shares).
This doesn't look so great for the merged company.
Those northern Ghana concessions are very different from the established Sefwi-belt assets. The north has hardly been explored, and these large concessions may be a continuation of the the huge Bui concession geological structures owned by Birim Gold (BGI.TO - my current favorite explorer in West Africa) in which Birim keeps finding wholly new goldfields periodically. These northern areas are wide open for totally new, big discoveries (wildcat-style) rather than just "development" exploration near existing lodes.
Here's a quote from Champion's and Red Back's latest announcement of Feb. 23:
"The Bole Joint Venture covers a 70km
strike length of the Bole Belt, one of the
four major gold bearing belts in Ghana.
Also situated on the Bole Belt is Red
Back's 100% owned 770 square kilometre Nangodi
Project covering the largest
historical gold workings in northern Ghana
and located approximately 250km
north of Bole. The largest gold deposit on
the Bole Belt is the 1 million ounce
Youga deposit, located 7km north of
Nangodi in Burkina Faso."
"Since Ghana attracted international mineral
exploration investor interest in
the 1980's more than 95% of exploration budgets
have focused on southwest Ghana
and in particular on the Ashanti Belt. Red Back
regards the Bole Belt in northern Ghana as being
significantly under explored but with considerable
potential for multi million ounce gold deposits."
I agree, so it would be nice to have these properties in the merged company, especially since the two merging entities have been trumpeting this property in connection with the merger.
In the Bole property, there's a trench reported with 2 meters at 10.6g/ton Au. (Redback-Champion Specialist Report, AMC Consultants, Dec. 2003, p. 28)
It should be mentioned that whereas central and southern Ghana in general is a very peaceful, stable and safe country, the far North of Ghana is not. There have been tribal disputes with riots and killings, most famously the assassination of the King of Dagbon in which his killer ran through the streets with the severed head, publicly, but has never been prosecuted. Also, as a muslim area, it has young men who admire Osama Bin Ladin and Al Qaeda. So there's a possible "political risk" with the northern properties that's absent in the rest of Ghana.
An odd effect of the quoted contract provision is that it would inadvertently give the merged company a minor interest in the Australian properties that will have just been spun off. This is because "New" Red Back would own some shares in the old Red Back's separate "Acquiring Company" that is getting the Australian properties.
Comparing the values of Red Back and Champion shares turns out to be a headache.
FL
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