Here it it
B.C. Report
Freegold finds a $10M friend
By JOHN SCHREINER
Vancouver Bureau Chief The Financial Post
You would not know
it from the stock price
but Harry Barr's
International Freegold
Mineral Development
Inc. did a deal this
week that should bring
some credibility to the
persistent Vancouver
junior.
Barrick Gold Corp.
agreed to invest up to
$10 million in
Freegold's shares in several tranches between now and March 1, 2000, potentially giving
Barrick a 25% interest in Barr's company.
The market was unimpressed by the news. The shares (ITF/VSE), which have traded in a
52-week range of $1.59 to 55›, lost a nickel on Tuesday, the day of the announcement. They
fell 8› to 70› yesterday.
Barr puts it down to bad luck. He unveiled the agreement on the morning the business pages
were full of stories that Delgratia Mining Corp.'s Josh project didn't have the gold it claimed to
have. Barr figures Josh, the third alleged core-salting episode in a month, had investors
backing away from junior gold exploration companies.
Barr has been dogged in his efforts to produce results that reward investors, some of whom
might still remember headier days for the stock in 1987, shortly after it listed on the
Vancouver Stock Exchange and was about to recover gold from tailings in the Campbell Red
Lake mine in Ontario. Placer Dome Inc. then took over the mine and paid Barr (modestly) to
go away.
He went to Alaska in 1991, where he secured the rights to the Golden Summit property just
north of Fairbanks about the same time that Eric Friedland was selling Fairbanks Gold Ltd.,
with its Fort Knox property, to Cyprus Amax.
Fort Knox became a producing mine last year and, with reserves of almost seven million
ounces, is expected to yield 350,000 ounces of gold a year.
"We've got a mining district coming back into its own," Barr believes.
The district is a short commute by paved road from Fairbanks, in an area that has seen gold
production on and off since 1902 and is actually zoned for mining -- a land use concept that
shows what Alaska thinks of the industry.
Golden Summit's address was good and there was a history of high-grade mining on the
property in the 1930s but, when Freegold got it, the resource was not much greater than
300,000 ounces.
Barr then ran into a series of problems raising money or doing joint ventures with majors. In
1993 Freegold rolled back its shares (six into one new share) and re-organized.
Freegold now has 16.3 million shares outstanding, of which International Canalaska
Resources Ltd., another of Barr's companies, owns 2.4 million. He says that La Teko
Resources Ltd., another Vancouver junior with Alaska property, owns about 1.5 million
shares. As well, some shares are in the hands of institutions.
"It wasn't until last year that we had enough money to do a big program," Barr says.
He says the company identified a number of anomalies and raised the resource to about 1.2
million ounces. That work included a tantalizing bit of drilling in the Cleary Hill mine, a former
producing mine that was closed in 1942 under the U.S. War Measures Act. It was a small but
high-grade mine.
"Management believes there is an excellent opportunity to develop a substantial high-grade
gold reserve which could quickly be brought into production," Barr wrote in the most recent
annual report.
This spring Barr again began pitching Freegold and its Golden Summit property to the
majors. "It's a simple North American story," he says. "Up until a few months ago, we were
discounted because of that."
At the same time, Freegold, which had a 62% interest in the property, struck a deal with
Fairbanks Exploration Inc., the previous property holder, to raise that to 93%. The deal
committed Barr to spend US$11 million on additional exploration -- meaning he needed either
to raise a lot of money or find a patron.
His breakthrough came when he met a senior Barrick decisionmaker at a recent Miami gold
show. Two other majors were interested but he liked the Barrick offer best because it
involved an equity investment.
Barrick is moving cautiously. It will begin by investing $750,000 in a Freegold special
warrant financing, with each warrant consisting of one 70› share and one warrant exercisable
at 95›. There is also a simultaneous investment in a series C warrant on similar terms.
The rest of the deal allows Barrick to buy further blocks of Freegold shares in each of the
next three years. If it invests the full $10 million, it will have an option to earn 51% of the
Golden Summit property by making a production decision by 2002.
It can raise that to 70% by taking Golden Summit to production.
The deal is carefully staged to provide for the exploration that will show whether or not
Golden Summit actually is golden. This summer Freegold intends to spend at least US$1.1
million on diamond drilling and reverse circulation drilling of the property.
This is not the only iron Freegold has in the fire. Consultants Watts Griffiths McOaut are
completing a feasibility study on what is called the Almaden property in Idaho. Freegold is
earning a 60% interest in the property, which Barr believes has about 600,000 ounces of
recoverable gold but also other exploration targets.
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