Western Pacific Enters Into Deal With
Profitable Australian Gold Producer
EDMONTON, ALBERTA--The President of Western
Pacific Gold Inc. (WPI), Mr. Nicholas Mather is pleased to announce that WPI has entered into
an agreement to sell Australian Resource Management (ARM) Pty Ltd., a wholly owned
subsidiary of WPI, to SMC Resourc es Limited (SMC), an Australian gold producer listed on the
Australian Stock Exchange as ''SMU'', for 31.5 million fully paid shares of SMC. The sale is
subject to various conditions, including shareholder and regulatory approvals as agreed by both
SMC an d WPI.
SMC, for the six month period ended December 31,1998, produced over 12,000 ounces of gold
from operations in the Charters Towers area (Queensland Australia) netting a record profit of
$506,665. The SMC resource base consists of approximately 240,000 ounc es of gold in the
Hadleigh Castle Mine in Charters Towers. 724,000 tonnes at 10.33g/t gold were defined in the
measured, indicated and inferred categories as follows:
45,000 tonnes at 7.54g/t (10,900 oz) Measured
514,000 tonnes at 10.01g/t (165,000 oz) Indicated
165,000 tonnes at 12.07g/t (64,000 oz) Inferred
724,000 tonnes at 10.33g/t (240,000 oz) Total
These figures were current at June 30, 1998 and since then 62,112 tonnes have been mined for
the production of 10,434 oz at a grade of approximately 5.0g/t. A further 2,359 ounces have
been produced from lower grade ore from other sources. At current mi ning rates, Hadleigh
Castle has an inferred mine life of approximately 10 years.
At closing, ARM's assets will include the Solomon Islands tenements, valued at AUS$1.65
million by SMC's appointed independent advisors, and AUS$1.6 million cash. This cash will
provide SMC with additional capital to further fund operational and business
development, including additional capital expenditures at the Hadleigh Castle underground mine,
Rishton milling operations at Charters Towers (Queensland Australia) and other operational
improvements. SMC is also investigating several opportunities for
resource acquisitions in the Charters Towers region which would have the effect of markedly
increasing mill throughput and gold production and reducing milling costs per tonne at the
company's Rishton Milling operation.
SMC will have 99.5 million shares issued and outstanding following the completion of the
purchase. The consideration paid to WPI shareholders will represent approximately 31.5
percent of SMC's issued capital. Additional information for SMC can be found on their web site
at www.smcresources.com.au.
WPI's directors believe that the sale of ARM to SMC and the distribution in specie of the SMC
shares to WPI shareholders provide a number of advantages and future opportunities:
MARKET PREMIUM DISTRIBUTION
It is management's intention, subject to regulatory and shareholder approval, to distribute
approximately 1.5 SMC shares for each WPI share. WPI shall reduce its stated capital by
approximately CAD$3.15 million and in the process return such capital to i ts shareholders by
way of an in-kind distribution of SMC shares. SMC's last trade price was AUS$0.10.
RETENTION OF WPI SHARES
Each shareholder will retain their investment in WPI. The company, through its wholly owned
subsidiary Magma Mines NL, will continue its activities in Papua New Guinea.
LIQUIDITY
SMC is listed on the Australian Stock Exchange and traded in excess of nine million shares in
the last 12 months.
PRODUCTION BASE
SMC has a production base that is profitable now and expected to increase in profitability. This
will give WPI shareholders an improved outlook for their equity in a current depressed market.
FUTURE UPSIDE
WPI Directors believe the outlook for gold prices is positive and that the outlook for profitability
of SMC's 22,000-oz pa Hadleigh Castle Mine is similarly very positive. The 800,000 tonne per
annum facility at Rishton currently has spare capacity of s ome 600,000 tonnes per annum. If the
company is successful in sourcing additional feed for the treatment plant as expected, then the
milling costs could be reduced by up to $6.00/tonne.
On the basis of the existing resource model and mine plan for the next nine months, it is expected
that the mine grade will significantly increase. Increased throughput at the treatment plant
coupled with the expected increase in mine grade could allow SMC profits to achieve $6 million
per annum.
SOLOMON ISLANDS
These projects represent WPI's highest current cost centre. Under SMC ownership, these
projects will be able to be funded out of cashflow rather than capital. The Solomon Islands
projects, particularly the Mbetilonga supergene copper project and the Mb ina and Chikora
porphyry copper-gold projects in the Koloula Valley, Guadalcanal, will likely receive higher
market acceptance being listed on the Australian Stock Exchange. Ross Mining, a listed
Australian gold miner has recently developed an impressive
AUS$100 million gold mine at Gold Ridge, on Guadalcanal, near WPI's tenements.
The Agreement provides, through Oribi Resources Inc., (Oribi), a working relationship with
Iscor Australia Ltd., a wholly owned subsidiary of Iscor Limited, a listed South African mining
and industrial conglomerate with significant iron ore mining intere sts in the Pilbara, Western
Australia, and copper-gold exploration interests through the south west Pacific and south east
Asia. Oribi has now waived it's pre-emptive rights in respect of the sale of ARM to SMC,
however Oribi will be entitled to a thirty
day first offer period on any project for which SMC seeks external financial assistance, and will
maintain its preemptive rights over the Solomons projects and ARM in respect of any future
dealings in the Solomons Tenements or ARM, subject to the terms
of the Oribi-SMC Participation Agreement.
Joining the Board of Directors of SMC on completion of the sale are Messrs. Nicholas Mather
and David Moore. Mr. Don Caron will be an alternate director and act as a Canadian
representative for SMC.
The sale of ARM is subject to various Canadian and Australian regulatory approvals, including
the approval of the Australian and Alberta Stock Exchanges, the Australian Securities and
Investment Commission, the Alberta Securities Commission, and the Aust ralian Foreign
Investment Review Board.
WPI expects the sale to be completed by the end of April 1999 and the distribution of SMC
shares to WPI shareholders by the end of May 1999. A shareholders meeting has been set for
April 12, 1999, at which time shareholders will be asked to vote on the approval of the sale of
ARM, the capital reduction of approximately CAD$3.15 million of WPI and the distribution of
31.5 million SMC shares to WPI shareholders. WPI expects to distribute the relevant
documentation to the shareholders by March 8, 1999.
On behalf of the Board of Directors,
(signed) ''Nicholas Mather''
Nicholas Mather, President
WPI Internet Web Site: www.reflections.com.au\wpi\
Contact:
Western Pacific Gold Inc.
Nick Mather, President
Australia
(617) 3229-4766
reflections.com.au\wpior
Western Pacific Gold Inc.
D.P. Caron, V.P.
Canada |
