1535 DJ 19-Mar-03 at 09:00:00 09:12
DJN =DJ Southwestern Resources Seen Dealing With Major Partner
Symbol: C/SWG
Industry: PCS
Subject: DJIN DJN CNW DJS DJSS DJWB DJWI
Market Sector: BSC NND
Geographic Region: BRC CH CN FE FEO NME PRM
Product/Service: RTRS
By Lynne Olver
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--Some observers expect that Southwestern Resources
Corp.
(T.SWG), which recently released results from its first Boka drill hole in
China, will do an equity financing involving a major mining company.
But president John Paterson said recently that the company is happy with
its
working capital position and isn't worried about fund raising. The company's
working capital is C$8.5 million, as of January. It has three drill rigs
operating on the Boka property but that is due to rise to five rigs, and
"hopefully six," Paterson said in a brief interview last week at a Toronto
mining conference.
Southwestern stock ran up as high as C$19.20 earlier this year on
speculation about rich mineralization at the company's big Boka gold project
in Yunnan province, southern China.
In Toronto Tuesday, Southwestern shares gained 10 Canadian cents to
C$15.90
on light volume. The company said Tuesday that it has a letter agreement to
enter into a new Chinese joint venture to explore other land packages in
neighboring Sichuan province.
John Kaiser, who writes the Kaiser Bottom-Fishing Report, believes that
Southwestern is working on a non-brokered financing that he suspects will be
with a major mining company, such as Barrick Gold Corp. (ABX), Placer Dome
Inc. (PDG) or Newmont Mining Corp. (NEM).
"The ones that come to mind (as possibilities) are Barrick, Placer,
Newmont," Kaiser said.
"China is a major frontier, and this project is a juicy one," he noted.
"With gold now being a legitimate target for exploration by foreigners,
which
it wasn't before, the majors are going to be interested."
Kaiser figures an equity infusion from a major could resemble the deal
that
Teck Corp. (now Teck Cominco Ltd. (TEK.B)) struck in 1995 to acquire 10% of
Diamond Fields Resources for C$108 million, in the early days of Diamond
Fields' Voisey's Bay nickel-copper discovery in Labrador. Voisey's Bay was
sold to Inco Ltd. (N) in 1996 for C$4.3 billion.
"I suspect what's going on now is both technical and title due diligence
by
some big mining companies," Kaiser said. If such a financing were to occur
at
Southwestern's current share price or above, "it will serve as a big vote of
confidence and remove worries that Boka is just a flash in the pan," he
wrote
in a recent note. Kaiser doesn't own Southwestern shares.
Fund Mgr Believes Major Co. Was On Site
Others also think that a senior mining company is interested in the
project.
"I believe a major has been on the property," said Peter Hodson, a
small-cap
portfolio manager at Synergy Asset Management in Toronto who owns
Southwestern
shares.
Hodson said he believes that Southwestern has no desire to do a near-term
financing. But Hodson added that, in the gold sector, companies "should
probably raise money when they can."
Octagon Capital analyst Julian Baldry, who owns Southwestern shares, said
in
a television interview Tuesday that "sooner or later" a major mining company
will buy 10% of Southwestern at above-market prices. He predicted that the
company will eventually get taken out, as further drill-hole results at Boka
are released.
While attending the Prospectors & Developers Association of Canada
convention last week, company president Paterson told Dow Jones that "at the
moment, we're quite happy with our financial position."
When asked if any outside companies were looking at or have looked at the
Boka data, Paterson declined to comment.
The Boka project is a joint venture between Southwestern and a Chinese
government entity, Team 209 of the Yunnan Nuclear Industry. Southwestern can
earn a 90% interest in the project over four years.
The project is 150 kilometers north of Kunming, the provincial capital,
but
is about 280 kilometers away by road.
A technical report prepared by a consulting geologist for the company said
the Boka area "based on evidence to date, has the potential to host a very
large, world-class gold deposit or deposits." The technical report was done
by
Sudbury, Ont.-based geologist Lionel D. S. Winter, who evaluated the site
from
Jan. 10 to Jan. 14.
A six-month, Phase 1 drilling program for the first half of 2003 is
budgeted
at $800,000, the technical report states.
Company Web Site: swgold.com
-Lynne Olver, Dow Jones Newswires; 416-306-2028; lynne.olver@dowjones.com
(END) Dow Jones Newswires
03-19-03 0900ET
End of News |
