Selkirk Metals Corp fka SLK

[NYBob]

Imperial Plus Selkirk Is One Of The Few Deals Where One And One Make More Than Two

By Charles Wyatt

http://www.minesite.com/nc/minews/singlenews/article/imperial-plus-selkirk-is-one-of-the-few-deals-where-one-and-one-make-more-than-two/1058.html

It is no sudden whim this proposed takeover of Selkirk Metals by Imperial Metals Corporation, as discussions have been going on since last year. The question that has to be asked, however, is whether it would have materialised if the junior mining sector had not received such a battering at the end of last year. The terms of the deal make clear who ends up in charge, as each Selkirk shareholder can elect to receive C12 cents per share or one share in Imperial Metals for every 30 Selkirk shares. And Selkirk is going to have the right to have a single nominee on the board of Imperial. Whichever way you look at it, that looks like a takeover and the chart of the Selkirk share price tends to confirm this. The share price is currently C13.5 cents against a low of only C3 cents back in February. Set that against the current value of this paper offer at C13.7 cents, given that Imperial Metals is trading at C$4.12, and it looks like no rival bid expected then. It all seems to add up to: “ave Imperial, atque vale Selkirk” – which translates from the Latin as “Hail Imperial, Farewell Selkirk”.

A quick look back to the last quarterly results from Imperial Metals explains all. In the period to March revenue from copper production amounted to C$34.9 million, though there was actually a loss at the net income level due to a combination of hedging and the copper price. Amazing how accountants manage to make a dog’s breakfast out of profit and loss on a mining business, but the message is that Imperial Metals is a well managed mid-tier copper producer, and Selkirk Metals needs a partner with power and money to bring its Ruddock Creek project into production.

Gordon Keevil, chief executive of Selkirk, explains that back in the dog days of late 2008 he and his team had plenty of time to consider all options for the future. The underground development and diamond drilling programme had been completed at the Ruddock Creek lead-zinc project, as had the surface diamond drilling programme on the Catface copper property. Just last month a resource estimate was announced for the E Zone at Ruddock Creek and this is just one of eight known mineralised zones which have been drilled sufficiently to estimate a resource. Selkirk has been slogging away here for the past four years and though both Ruddock Creek and Catface are at advanced stages and have established resources, a whole lot of money will still have to be spent to achieve the next step towards development.

As far as Catface is concerned an MOU was signed with the Ahousaht First Nation in January 2008 and last summer the first exploration programme was carried out on the property for almost 30 years. Meanwhile Selkirk has filed an amendment to its exploration permit which allows the company to re-establish road access to the area of the main workings and conduct an expanded diamond drilling program to further define and expand the recourse. Raising finance to continue such work by an equity placing would mean hefty dilution, whereas the takeover by Imperial means that Selkirk shareholders can retain an interest in these projects within a portfolio that will now include the Mount Polley open pit copper-gold producing mine in central British Columbia, the Huckleberry open pit copper-molybdenum producing mine in northern British Columbia, the development stage Red Chris property in northern British Columbia, and the exploration stage Sterling gold property in southwest Nevada, all owned by Imperial Metals.

Apart from Sterling, all the properties in the combined portfolio are situated in British Columbia which only enhances the common sense element of the deal. This portfolio also runs all the way from early exploration through to production, and offers a diverse commodity base with a long history of exploration and mine operations within the province. Imperial is one of the best positioned mining companies in the region and has strong finances, no long term debt, a strong working capital position and well established operating experience. When making up his mind about the deal Gordon Keevil also had to bear in mind that although finance for junior exploration companies is more easily available than it was, investors are still looking for companies close to production.

It is a hard decision for directors to make to relinquish control of a company which they regard as their baby, and credit for being willing to let go must be given to Gordon Keevil and his co-directors. Both companies know each other well, as Brian Kynoch, president of Imperial Metals has been a director of Selkirk since way back. The final crunch behind the decision making comes from the production profile, which will all emanate from Imperial Metals in the early days of the enlarged company. Selkirk will play its part later. In the medium term, Red Chris could play a major role as this is seen as a billion tonne copper-gold deposit for which all necessary permits have been received and which is simply awaiting construction of the northwest corridor power line. The new Imperial Metals will certainly go down well in London and the sooner Gordon and Brian can spare time to come over and present, the better.