Here's the article I got through another Kenite (!) - format messed a bit - but readable.
So, with this kind of development in hand, why does the stock close at C$0.14 with over 300,000 shares traded??
United Keno Hill Mines Ltd -
Atna scoops United Keno; UKH not amused
United Keno Hill Mines Ltd
UKH
Shares issued 39,408,557
2000-02-28 close $0.105
Tuesday Feb 29 2000
Also Atna Resources Ltd (ATN)
A STEAL OF A DEAL?
by Will Purcell
United Keno Hill Mines Ltd. is upset at the turn of events which has led to
its
apparent loss of the Central Yukon Marg property to Peter DeLancey's Atna
Resources Ltd. Atna announced Friday that it had purchased a majority
interest
in
the base-metal property for $250,000 from an undisclosed vendor, believed to
be
Norvista Development Ltd., a private company. United Keno acquired the
two-thirds interest as a result of its 1997 takeover of NDU Resources Ltd.,
but
was forced to relinquish it as a result of a judgment against the company,
for
what
United Keno president, Gerald Gauthier, termed a "pittance".
United Keno financial documents indicate that the company had issued
convertible
debentures to a number of companies, including Norvista, and these are now
in
default. The $500,000 debenture was issued to Norvista in July, 1998, and
United Keno ultimately drew $200,000 of that amount through a promissory
note.
Last October, the first secured creditor took action, and obtained a
judgment
against United Keno, which began that company's current round of troubles. A
month ago, the Supreme Court of Yukon Territory ordered that the United Keno
Hill mine and all of its assets be advertised for sale, as proposed under a
marketing plan proposed by creditors of the company. United Keno was granted
protection from those creditors about 10 days ago, under the Companies'
Creditors Arrangement Act, by the Superior Court of Ontario. That decision
apparently gives the company some time to make alternate financing
arrangements, and a very faint hope for reversing the Marg sale. Mr.
Gauthier
was
unsure if the protection ruling would stay the earlier judgment that ordered
the
sale, but he said United Keno was attempting to find out.
Mr. Gauthier was particularly disenchanted with the intertwining
relationships
involved with the deal. Al Archer, a principal of Norvista, also happened to
be
one of the original principals with NDU Resources, but it was Mr. Archer's
involvement with Expatriate Resources Ltd. that had Mr. Gauthier suitably
riled.
He claimed that Mr. Archer did an appraisal on the Marg property, and
questioned the coincidence of it subsequently being sold to Atna, who happen
to
be Expatriate's joint venture partner on the Wolverine base-metal property
in
the
Yukon. Mr. Gauthier grumbled, "It is a wonderful deal for them I think,
especially
when they had appraised it prior to that at something way over $10-million."
Mr. Archer has been an active man in the Canadian junior resource sector. He
served on the board of NDU, and while Mr. Gauthier failed to mention it, he
served on the board of United Keno after the merger, along with James
Stephen,
another Norvista participant. Both gentlemen resigned from the United Keno
board in August, 1998. Mr. Archer was undoubtedly quite familiar with the
Marg
property as he had been a director of NDU since the fall of 1993, through a
time
when most of United Keno's plans to develop Marg were laid.
Whether Mr. Archer and Expatriate are especially friendly with Mr. DeLancey
and Atna is quite another matter. Mr. Archer has been a director of
Expatriate
since 1993, and two years ago a legal squabble with Atna occurred when
Boliden
Westmin sold its 60-per-cent interest in the Wolverine property to
Expatriate.
The
sale that was contested by Atna, who claimed a tight of first refusal and
took
the
matter went to court, but ultimately lost.
Meanwhile, Atna vice-president, Peter Holbek, painted a more detailed
picture
of
the transaction from his company's perspective. He said that the Marg
property
was purchased essentially from the court, not directly from Norvista. The
deal
was
made in haste, without the normal due diligence that would normally be
performed
prior to purchasing such a property. According to Mr. Holbek, letters were
sent
out to a dozen different companies requesting bids on the property, and the
first
bid that exceeded the debt and court costs was accepted. "That's why we were
able to get it for a fire-sale price," he said. If that was indeed the
procedure, it's
little wonder that Mr. Gauthier and United Keno are a trifle steamed at the
turn of
events.
The unusual deal had the players saying unusual things. The reluctant
vendor,
United Keno, remains a staunch believer in the property, while the
purchaser,
Atna's Mr. DeLancey, seemed rather dour about the whole thing. He described
the deposit as "not ore in the economic sense," saying that the grade wasn't
sufficiently high, and in any case there wasn't enough of it. Strange words
indeed
for someone who just went out of their way to acquire the asset. He added
that
it
was hard to put a value on a property that was not in production, and
suggested
that simply using the amount previously spent on the property was not a fair
valuation.
Mr. Holbek was far more enthusiastic about Marg's potential. He stated that
the
Marg grades were very typical for volcanogenic massive sulphide deposits in
production in Canada, but he believed more of it would be needed; perhaps
double the existing figure. Nevertheless, he described the move by Atna as
"an
astute purchase."
Atna plans to proceed with a fairly light program this year, examining the
data and
conducting preliminary geology to determine how hard to hit it next year.
Hitting it
hard would almost certainly involve performing step out drilling in an
attempt
to
expand the tonnage, conducting a considerable amount of infill drilling to
better
prove the existing resource, and commencing metallurgical work to
investigate
methods of recovery. While Atna knows little about the metallurgy of Marg,
they
do at least know that there is not a selenium problem such as plagues the
company
at the prospective Wolverine property, which should come as a relief to
shareholders. Atna believes the property may be economic, based on the
available
information, although Mr. Holbek cautioned that they expected to find a few
warts
once they began work.
Warts or not, the Marg property appears attractive. The latest resource
estimate
was conducted in 1997, and revealed a drill-indicated reserve of 5.5 million
tonnes of ore containing 4.6 per cent zinc, 2.5 per cent lead, 1.8 per cent
copper.
The rock contains a contribution from precious metals as well, with 62.7
grams
of
silver per tonne, and 0.98 gram of gold per tonne of ore. At current metal
prices,
the gross value of the ore would be $115 (U.S.) per tonne, which suggests a
gross
in-the-ground value of about $600-million (U.S.). The deposit remains open
along
strike to the west, down plunge to the east, and at depth, so the chance for
expanding the resource appears very good.
Atna should have volumes of data to pore through, as the Marg property has
been
explored since the 1980s. NDU began to drill the property in 1988 and the
company had quickly identified over two million tonnes of ore. That piqued
the
interest of Noranda, who agreed to purchase $900,000 worth of NDU stock,
with staged options to buy a $20-million controlling interest in NDU.
Noranda's
interest was fleeting, and they abandoned the deal the following year,
however
NDU and its minority partner, Cameco Corp., conducted further drilling and
succeeded in doubling the reserve to four million tonnes. In 1996, Mr.
Archer
was
sufficiently encouraged that NDU agreed to purchase Cameco's one-third
interest
for $750,000 in payments. Some of the required payments were apparently
missed, as Cameco continues to hold its interest. Interestingly, the
transaction
would suggest $1.5-million would be a reasonable value for United Keno's
two-third share.
United Keno had big plans for Marg, incorporating the property into its
strategy to
revive the mines and mill near Elsa, Yukon. The feed for the Elsa mill was
to
be
augmented with ore from Marg, perhaps as much as 3,000 tonnes per day. A
preliminary study stated capital costs would be in the order of $90-million,
and
suggested the Marg deposit had a net present value of $28-million, based on
using
United Keno's infrastructure. It is that figure that undoubtedly has left
Mr.
Gauthier
rather disgruntled. United Keno shares closed Monday at 10.5 cents, down one
cent since the news, while Atna closed at 56 cents, also down one cent since
the
announcement.
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