rpt on rengold mines ltd (the former renabie
TRANSCRIPT
42B85NWe044 0822 RENNIE 010
ON
(THK rORMKR l.'KNABIK MHJf:)
Toronto, On t d r i. o Keviscd Juno 1 2 1.07-1
U'attu, Grjffis tind McOuat Limited Consulting Cooloyjsts and lincjineers
42B05NW0044 00aa RENNIE 010C
TABLE OF CONTENTS
Page
List of Tables.................................... iii
List of Figures................................... iii
1. Summary....................................... l
2. Introduction and Scope of Work................ 3
3. Property and Facilities....................... 5
4. Location and Access........................... 12
5. History and Production Records................ 14
6. Work Currently Underway....................... 19
7. Geology and Ore Reserves...................... 21
8. Development Program and Capital Costs......... 28
9. Operating Costs............................... 39
10. Cash Flow Projections . . . . . . . . . . . . . . . . . . . . . . . . 42
H. Conclusions and Recommendations............... 45
LIST OF TABLES
1. Operating Profit and Net Income, J 963-1 969
2. Production and Ore Reserves, 1948-1969
3. Mine Development, 19G2-1969
4. Mill Operations, 1963-1969
5. Diamond Drill Intersection Below 2625 Level
6. Projected Profit and Cash Flow at $]40
7. Projected Prof.it and Cash Flow at 5160
Page
15
16
17
17
25
43
44
LIST OF l-'l CURES
Plan o i C l a .ins
Sketch ol Plant S i he
Location Map
Longitudinal Projection Below 2625 Level
Deveiopnen l Schedule
6. Projection of Mint' Operating Cor-ts
BACK POCKI:T
j. Longitudinal Section - Looking North
2. Long i tiHJ nal Section - Looking West
1.
2.
3.
4.
5.
6
9
13
24
29
40
Walls.. t'fHs nnrlMcOuul [imdfct** i*
l. S UMMAKY
Rcngold Mines Limited is a newly-incorporated company that lias acquired an option on 28 claims in the Sudbury Mining District of Ontario from WiJlroy i-'.ines Limited. 31 has purchased a] l of the plant and equipment, v/h i eh supported the former 500- Ion per day gold mining oporation located on the property from Nelson Machinery Company Limited.
The former Kenabie gold mine located on these claims produced at a rate of 300 to 'JOO tons per day for approximately 23 years during which tiiv.a approximately 3,600,000 tons averaging 0.23 ounces of gold por ton wore mined and milled for a gross revenue of about ^.28,000,000.
The mine war; closed in 1970 api.-.'.reiit.ly due to the cost-price squeeze which forced the cJosurc of so map.y Canadian gold mines, rather thin because of any lac:'; of reserves. Production was carried out above the 2(: ?5 le^.i]. The .shaft extends to 3460 feet and in.iMa] dovoJopmi nt has been carried out on the 29f)S ami 3] 05 ]c~. r-U-.
Prior to closing, vipproy.imate.lv l C gold intersections were obtained in d ri j] hr-le.s bolov; tin- principal mine workings and f,fi:\\c i nitial devo.l ov:i ; nt. begun. at is t IK- intention of Kenqo3d Mines Lin.iic.-ii to dowater the nr.ru. and continue the develop men t of t!. .. .' rerorvr;, md to eo:ifi*';n 'lie corvxmy ' s records v.'i.'ich i iv'J i c''!~ r ' that substantial reserves of a lower grade may be avaJj'ibK i n the uppt-r levels t';S wo. l as some siaailer blocks of averaqc rii;.'j c;i."cKK'.
Wliil( b no n.. ..liJcv.i ore reseive est i:; \ ( i-:; have boon calculated by ourselves o" ! : o;:-jr:] d , tho dri'J] iiol-"- i :.tx s rpecta on.s obtained b'M v:er.-r. t K .'.' f 2 ii ]e\\.l aj'.-.l the ?-?.^'' j c"el incicat'e that up to #00,000 t r : r of :ni ne n r a J e cc'.:b:'; b. .h-vv. lo:.(-d if the average t or. s per vert i,.-,- jvrn \ :\ t he uppt-r .:(.^ : . '\-.-' \ -.-\-v \ s t . bver. if thesc- tons v.-er-. - (".incee by b(y,, ji-.ore ore t :. e; 'i^it rt\"j'.: j reti to a::'ort::^ tlie p'-c.'v' 1 ' : e.ip'.t'il investrv:; 1 w i uj,! b' av.iilab]^. Grae. of t h. e i I'iii i e;.' '-.; r t'."o rv-r. exct c .^.' ii i r; t e-'i e.i ] ::nnc average cracio hut. we- have :v..*t '-:;ed the.^e fiiijhei" i.;, ad- : in the- casli f .1 ow pro j-.-ct io;;.':.
Ti:e c\x;: l ('V.:' ir-r. C', 'su i t 5; M/id. .:" .1 l ib r ;o 'is ecu: ^lc.d with the re! at j \ . l y .:-. i :' '. ; . : i s t 01 : i\: . ' - r.i. ^ a : i'i c;: ;;cu.' n'r ve r t i ea l foot i.at i:., y us t;..,^ the ex: ' ..'';:r r r:- -e^u'a rv te reiiabi J i tat.e the mini- a:...i :';;;i;';;. the i in: . i". 1 i'f(i ; cr,'..-r\'OLS ai~e warranted.
Waits, Griffis andJ-lcOual
1. SUMMARY
Rengold Mines Limited is a newly-incorporated company that has acquired an option on 28 claims in the Sudbury Mining District of Ontario from Willroy Mines Limited. It has purchased all of the plant and equipment which supported the former 500-ton per day gold mining operation located on the property from Nelson Machinery Company Limited.
The former Renabie gold mine, located on these claims, produced at a rate of 300 to 500 tons per day for approximately 23 years, during which time approximately 3,600,000 tons averaging 0.23 ounces of gold per ton were mined and milled for a gross revenue of about 528,000,000.
The mine was closed in 1970 apparently due to the cost-price squeeze which forced the closure of so many Canadian gold mines, rather than because of any lack of reserves. Production was carried out above the 2625 level. The shaft extends to 3460 feet and initial development has been carried out on the 2955 and 3105 levels.
Prior to closing, some 46 gold-bearing drill intersections were obtained below the principal mine workings and some initial development begun, Rengold Mines Limited intends to dewflter the mine and continue the development of these reserves and to confirm the company's records which indicate that substantial reserves of a lower grade may be available in the upper levels as well as some smaller blocks of average mine grade.
The exploration results made available to us, coupled with the relatively uniform historical tonnage and grade per vertical foot,satisfy us that the expenditures necessary to rehabilitate the mine and confirm the indicated reserves are warranted.
Ore reserves have been calculated in several categories. Over 350,000 tons in the upper levels of the mine were reported by the previous mine management. These are in pillars and sills or v;ere previously sub-economic at $35 gold. While previously classified a s proven, it will only be possible to determine whether these reserves can now be profitably mined after the dewatering program is completed.
Probable reserves of 260,000 tons grading 0.248 ounces of gold per ton were confuted between the 2625 and 3105 levels, based on drilling results.
Mining from surface to the 2625 level yielded an average of 1300 to 1400 tons of ore per vertical toot, grading about 0.23 ounces per ton. If this ore persists to the 'bottom mine level of 3255, some 800,000 tons would result. As the previously computed 260,000 tons of probable ore lies within this zone, a net figure of 540,000 tons of possible ore would result.
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\Vrttts,^-iffis ami jMcOutil [imiH'tl Q*
With stope preparation previously carried out. on the 2955 level, the company is in the fortunate uosition of bcina able to beain full-scale production in a matter of months.
Capital costs have been broken into two stages. Stacjc I, involving mine rehabilitation and development, payments for the surface plant and the re-establishment of power and camp facilities, amounts to 3.1,250,000 including a contingency allowance of over 25?,.
Stage II involves a further 31,225,000 including a 10* contingency allowance-. These funds would bc required to acquire major equipment, complete mill equipment installation and repairs, and permanent camp accommodation required for full mine and mill production.
Working capital requirements are norrnrlly available from banking sources, and in the case of a gold producer, which receives prompt bullion se 11 laments , should not bc a inajoi item. The capita] costs projected have been largely supplied by Rengold personnel, and v,v have-, by spot-chock i n*j, satisfied ourselves that these arc reasonable, particularly with the large ooiitinge.iiev allowance- made i ri Stage l .
Detailed est i ma i '.-s for Stage ir haw not been prepared and should be durin ; the Stage ] program. Howi.-ver, it should be pointed out that in vi*-w of tin.- ran it] i mi i ea t -.-d return of capital, the project is. not particularly capii.al sensitive and that u 20'u ir /o^so in total cop i t,.J requirement v;ould still, allow total return of capital during the second year of operation.
Operating cost estimator, supplied to us by P. on go l d ar.ount to 31 : i.fiO per ton. This est JT-.ate, to a l a r ac.1 exiont,is based upoij proic-'cti 0:1 of historJtral cc'.-.vs. '.%'c 1 have inspected these cost projections against, detailed estimates '.-i: hovo recently pr o p.:red for s.i;,-ilar se.i le underground 'ease ri,.val iniiv..-;; and be.lieV'.-' tiiesc- l ) i:e a reason;;!.)} v ;.;r'.; j'j'C:t i c^:i. To test the sensitivity of the project to mieh hi(;h,er C';.-orating costs, we incr.v.^or cap.it e. l -a.;; o; \ fa t i ria e^st.s j. y .-'(' . I'auital was still returi'.vd durina the s e cor. "i year c*i c-jr-r.' ion.
Cash fi, ;v pro u o t i .i } } ; :s; rat e t he a,.-; t : . ; l .. :a'.i-CJ e. •••.-- ' a g li a n M Lv of or i .
i :V.'t-; t : '. : L of S '.', -\ r,i j l l Cvi and go! e! pr
.:rt:Jc']' i l a i i l i '.y c.:
years toi ,:: i ''a shou ! a
f l 'JO per on.ce.
s n: ...T,, t.-v; : y t !,e ea; '- ; t i !of 313.00 per ton
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Wfills.,i.y.ffis rtncl ^IcOual
2. INTRODUCTION AND SCOPR OF WORK
On January 17, 1974, Rengold Mines Limited entered into an option- to-purchase agreement v/ith Willroy Mines Limited, concerning 28 patented mining claims in Leeson and Rennie Townships, District of Sudbury in the Province of Ontario.
Most of the claims carry both surface and mineral rights. Located on these claims are the gold deposits; known as the Renabie Mine, which yielded some 3,633,386 tons of ore grading 0.23 ounces of gold per ton between July 1947 and July 1970. The rate of production was 1.00 tons per day between 1947 and 1959, and 500 tons per day betv.'C'on 1959 and 1967/70. Operations appear to have been terminated owing to the cost-price squeeze, which affected all Canadian gold mines, rather than any lack of reserves,
Under the 5200,000 as broad l exercised into prod Kengo]d i f roil) prof divided '., Rongold , of the c.l
terms of the option agreement, Kongo.Id must spend by July 15, 1974 on "exploration and development work", y defined .in the agreement, and if the option is , must, by December 31, 197*1, elect to pla^e the property uction at a rate of not less than 300 tons per day. z entitled to receive all of its investments back first .it, and then the crash flow from production is to be 0/5-0 be t v.'eon Willroy and a wholly-owned subsidiary of v.-hich i:, to be inoorpontcd, and will become? the owner aims .
If the option is exercised, Rengold' s subsidiary shall comr.ience commercial production of gold and/or silver on or beforeJanuary l, 1976.
When the Rervibie operations were terminated in 1970, all the facil.it i.;, on the property v.vre sold and Nelson Machinery Company Limited ;.c\;u.'rod the buildings and equipment remaining on the property.
] n an ac;: v e:;:ent datod February 16, 197-J, Rengold Mines Limited purchase;: from .'.'(.Ison Machinery alJ of the rema.ir.i-ig buildings and e qu.i i . . ':. r o n t he property un an as-is whc-re-is basis. The purcJia.'-.i.: ;-nco uviy ?250,000: ;- rJO,000 0:1 .sig:ii.:)q ar d the balance an in:;l.! l l i ..v.-iits o.'" ;"SO,000 .U G-;.!OiiLh i;iLervaJs.
In gem j J , the principal ass.-ts :;uj'e;!:..f :ed inc J i.\i.: 19 buildings, i ncl u:!j r. ; i.):c; mill, iioist, o r i.- bins, .^h..ift s): i:;;, compressors, jaw en: r.-, r, r ocj aiu! pebble' mills, .steai.i boilers, flotation cell::., thickener.;, agitators, water tanks, a truck and d bulldozer.
•\Viills, (.Jril'l'ls .iiulMcOu.u
The purpose of this report is to briefly rev.iYw the historical production, and costs, but more importantly to assess the deposits and the associated facilities now ov:ncd, or optioned by Rengold, in vi',-w of the current price of gold.
Ore reserves are reviewed, and capital costs to renovate the plant and re-equip the mine arc projected. Operating cost projections are discussed and revenue forecast:; arc made for several prices of gold.
In preparing these projections and estimates, we have relied heavily u; . t information supplied to us by Kenuold concerning the former operations, current ore reserve::: and the cor t s of rehabilitation of the j.i.ino and mill. We J i.-j ve .spot checked these and have satisfied ourselves a.-, to their rea.'-.onablcncss.
Hany of the cost projections, partici)];,rly in the capital cost area, arc just the.t - projections. U'e have not made a site visit, and wo h;:ve not er:.~u.ii,ncd the equip:;.-:.-);!-, on site to dcter:;)ir,e its usefuln'.''.r;, or co::t to pl-;c-o it into ope.rati )iij condition. How ever, tTie pJant v-.'js shut c'o;-/j i onJy j i 39/0, a/id the discussions we have iuid witii i h;; I'enrc'.lc'i c nf|inc-er.k: Jiavc I't! us to the hc-lief that Jiiuch of th.-' T.x-ij i i:y \:j1] iirca o iily ruin.i ' .1 -.^or): to hcoome ojjerationaJ . JJ.jsed upon this, we ix-.lieve t)u- L -:; t i mn tes to bc aderjua Le-.
The costs of dcv.Mtcrino an;:' L\-!K;bil r f.-; lien of L::c mine arc encjineerii)'./ estiiiiu Les only, as the; Mi).e is jJoci.Kd, and con sequently no inspection of l he work i IK y i s re-:::; J Lie.
llts, iffis diulJ^lcOual [hnJlcd
3. PROPERTY AND FACILITIES
The property optioned from Willroy Mines Limited consists of28 patented claims in Leeson and Rennie Township;; in the Districtof Sudbury, Province of Ontario, as shown on Figure 1.
The claims are numbered as follows:
Leeson Township
Rennie Township
S-3430634307343083430934315343163431734318343283432934330 34339 3479-'. 3479:. 34790 34313 343'4
S-34310 343113432234323343.1934320343213432434325 3432G 34327
It should be noted that in the anreeiiient between Willroy and RonqoJd, rla.ii.is 'M 31 J ...ne! 3-1314 :tro listed a s beinq in Rannio To;.:, s In p, v; h e r o a s they are shown on the claim maps in Looson Tov.'Mshi p.
It has been rc.M'ortec: to us by Rcnqold officials that several of the claims acc]uired do not have surface rights.
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S3432I \ S34525 t SM324
RENNIE TWR
STOVER TWR l Mile
SURFACE RIGHTS OWNED BY OTHERS
W*TTS .ORIFFIt tt McOUAT UMlTtO
RENGOLD MINES LIMITED
PLAN OF CLAIMSRENABIE MINE
SUDBURY MINING DIST.-ONTARIO
Copied from Deportment of Mine* Plan*
Walls,Griffis *ndJ4cOuat y/nlled
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
These are:
Rennie
S-34320 34326 34321 34325 34324
Leeson
S-34306 3433934328343293433034796
The surface rights to the claims on which the mill and other facilities are located are owned. However, it should be noted that the company does not own the surface rights to all the claims on which tailings were previously discharged, nor does it own all the claims, either surface or mineral rights, where some of the tailings were previously deposited.
We understand it is Rcngold's intention to arrange for the right to discharge tailings into the previous tailings area, and this detail should h? attended to as soon ay possible.
The terms of the option agreement, dated January 17, 1974 are quite straightforward. Willroy has undertaken that the 28 claims, described previously, are free and clear of all lien or encumbrance. Rengold undertakes to spend $200,000 by July 15, 1974 in the performance of exploration and development work as defined in the agreement.
If the $200,000 has been spent, Rengold can, up to December 31, 1974, elect to place the property into production at a rate of not less than 300 tons per day.
Once the election is made, the claims are to be transferred to a new wholly-owned subsidiary of Rengold whose activities will be restricted to exploration, development and production of the Renabie and contiguous properties. This company shall begin production before January l, 1976.
All cash generated from the operation is to be applied as follows:
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l
Walts,Grilfis andjMcOual limited
1. Against the costs of mining and concentrating, including head office costs to a maximum of 53,000 per month.
2. Paid to Rengold to reimburse it for all monies expended by it, or advanced by it to the new subsidiary, to bring the property into commercial production.
3. After repayment of the above expenditures, and establishment of a reasonable working capital position cash flow from the production is to be distributed 50* to IVillroy and 50% to be used as the directors of Rengold's subsidiary direct.
A sketch of the surface plant acquired by the company in an agreement dated February 16, 1974 between Rengold and Nelson Machinery Company Limited, is shown on Figure 2. This plan was supplied by Rengold.
The assets were purchsed on an as-is where-is basis and include the following items. The agreed price was 3250,000: $50,000 paid on signing, and the balance in four 550,000 payments at 6-month intervals. The valuation beside each item is an estimate by Rengold personnel after visiting the site and inspecting the buildings.
Description
Fine ore; binCoarse ore binWaste ore binShaft skips, 85 cu. ft.Compressor I.R. - 1,000 C.Compressor I.R. - 1,500 C.Compressor low pressureDrag conveyorSteam ooilersC'-ane over-head 7-1/2 H. P,
'not on site) Jaw crusher 24' x 36' Dust collector cyclone Drum filters Flotation cells - Wemco Hoist, Nordberg 2-clrum Ball/pebble mill 9' x 11'
F.M,F. M,
Rod mill 6' x Clarification
8'unit
Quantity
l l l 3 l l l12
l l l 3 l l l l l
Estimated Replacement Value
5 40,00040,00010,00036,00030,00040,00018,0006,000
30,000
8,00030,0003,000
90,00032,000
220,000100,00055,0008,OCO
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MINE STAFF RESIDENCE
DRILL SHOP f~~l l l
LIME SHEDWATTS . OftlFFfS k McOWAT LiMlTfO
RENGOLO MINES LIMITED
SKETCH OF PLANT SITESOURCE :MENGOLD MINES LIMITED
SUDBURY MINING DIST.- ONTARIO.
Stole: l** 100* lOotti **i 1 974 iFifgM0'**" ky 0 A 6 J Ap*r*vH: l *
?Waiis,rs;fih; [United
Description
Precipitation press Vacuum receiver 5' x 8' Zinc feeder Duplex diaphragm pumps Bullion furnace Bullion furnace spare Forming rig Storage tanks 8' x 1 4' Water storage tank 100,000 gal Water steel storage tower Thickeners 30' x 12' Thickeners 30' x 10' Agitators 20' x 22' Agitators 1 4' x 22' Dodge truck 4 -ton Tractor D-C Caterpillar Sheldon f an 4 ' diameter Assay office fume exhaust fan 20 lb.CC'2 fire extinguishers Set of liners for 9 ' x 11 '
pebbJc millKodStructural steel Grinv:ell sprinkler system c/w
stations, piping, etc.
Piping for water lines, etc., within plant and leading to various buildings
Quantity
2 l12
13
i*23 3 6 lll l
l10 tonsl lot
Estimated Replacement Value
524,0006,0004,0001,600
6,000
5004,500
80,000
50,00040,00075,000
120,0007,000
40,0007,0002,000
150
12,0002,000
170,000
50,000
Dui ! cii
Mill 144' x 18d'Lime shed 20' x 30'Assay office 2 5' x 40'Oil siicd 20' x 30'Fuse and cap hou:;eShaft Lin:] crush'.'?- house 40' xKa eh n.e shop -10' x 80'Dry 35' x 75' (double)Hoist room, electrical f.O' xElectrical stox\uje 20' x 30'*Plai;er shedBlacksmith shop (drill shop)
130' (concrete- bloc}:) (double)
324 8C 47,200
12,000 200 O 00
7 l
l 6 73 863
11714
,? r; O , u u O ,000 ,000 , 400
5,400
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Walts, Griffis anclJ*fcOuat
Description
Boiler house 20' x 45' {concrete block double) Garage 25' x 45' *Carpenter shop 23' x 40' Warehouse and office 40' x 250* Hospital 20' x 40'Mine supt.. Pump house
house 8' x 10'
Estimated Replacement Value
$32,40014,40023,080
120,0009,600
25,0001,400
Total Estimated Replacement Value
Same Building
$2,480,894
While we have not visited the property, or inspected the facilities, we have been advised by Rengold that the buildings are in reasonable shape, as is most of the equipment. Most, if not all, of the mining equipment has been removed from the property, as have many of the electric motors. The tailings line will need repair and the hoisting cable has been removed and will need to be replaced.
Regardless of the accuracy of the appraisals, it seems obvious that the purchase of the plant is of major assistance in the overall project development.
In addition to the facilities listed above, it should be noted that there are two shafts on the property and that one of these, a rectangular three-compartment timbered shaft, extends to the 3460 level. This shaft is to be used for development and production. To sink such a shaft at current prices would cost in the order of 3800 per foot or $2 / 750,000.
In addition, substantial drifting towards the undeveloped indicated oro, described later, was accomplished before the mine was closed in 1970, on the 2625, 2955 and 3105 levels. The 2955 level ended close by undeveloped drilx proven ore. Both ore and waste passes were completed for the entire shaft length.
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Wans,Griffis andJUcOual Limited
f l l l l l l l l l
4. LOCATION AND ACCESS
The claims are located in the Sudbury Mining Division, Province of Ontario, Leeson and Rennie Townships at approximately 480 20' N 840 15' W. '
Access to the property, as shown on Figure No. 3, from Missanabie the nearest community is by 12 miles of secondary (gravel) road which provides access to the property.
Missanabie, a community of 100 to 200 people is accessible by both road and rail. It is a station stop on the Canadian Pacific Railroad, transcontinental line.
The principal cities of Sudbury and Thunder Bay are about 250 miles southeast and'JOO miles west respectively alpng the railroad, Highway 651, completed in 1968, connects Missanabie to Highways 10L and 17, the principal highways in this part of Ontario. Highway 17 is part of the Trans-Canada Highway system.
' ..uiiins and Wawa, the nearest major commercial centres, accessible by road, are both regional centres with major mining developments .located nearby. Timmins is approximately 200 miles by road and Wawa about 75 miles from the town of Missanabie.Timmins is serviced by Air Canada and wawa is to be serviced in 1974 by Norontair.
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LEGENDy— Highwoy
CXR RoilroodReivjoid Mines Limited
RENGOLf) MINES LIMITED
LOCATION MAPSUDBURY MINING DIST.-ONTARIO.
•CAL t".•tt 9 t 60 ~ ipo
*Vat:s,Gfitt;a divct McOuat
5. HISTORY AND PRODUCTION RECORDS
Knowledge of the gold deposits dates back to at least 1939,when some or all of the claims now optioned by Rengold Mines wereacquired by Renabie Mines Limited.
In the period' 1939-1942 limited work was carried out, including the sinking of t-^c NO. l shaft and tome underground development to the 250-f*~vL level.
The mine was shut down between 1942 and 1946 owing to the demands of the Secord World War.
Wor1 . was resumed in 1946, and production began in 1947 at a rate of 300 tons per day. It appears that the No. l shaft was, for all practical purposes, abandoned in 194^ and No. 2 shaft was sunk as the main production shaft. Tnis sha'.t was deepened in 1959, 19G2 ,md I960 to its current depth at the 3,460 level.
By 1959 production was increased to 500 tons per day and the mine operated at thJs rate until 1964-1970, when production began to fal] off for a variety of reasons, including labour and cost squeezing. The Company's annual reports during the years of production, indicate that a total of 3,633,386 tons of ore were milled for a revenue of $27,763,532, al] during the period of time when the price of gold was US$35 per ounce. Some of this revenue, in the later years, would have been derived from the Canadian Government cost-aid subsidy program for gold producers.
Table l shows that in the period 1963 to 1968 the Company each year made an operating profit and until 1967 made a net income which totalled $377,800 over four years.
Table 2 on page 17 shows the annual tons milled, as derived from the annual reports of Renabie Mines Limited.
The average recovered grade of ore milled as reported by Renabie Mines was 0.217 ounces of gold per short ton. Mil'-head grade was reported to be 0.23 ounces and mill recovery was over 941, certainly in the last seven years, as indicated in Table 4 on page ]8 .
A review of the history of the operation, indicates that lack of reserves did not. force mine clor.ure. Rather it was the problem of fixed revenues againr.t rising coste which eventually strangled this operation, as in the case of so many other Canadian gold mines.
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ivy VkV,is.i- v fifis , mcl McOti l jjn-ulccl
TABLi: l
OPERATING mor TT AND ::FT INCOME
m m m m m i i
Year
100;;1 9G \19*'i rj
190039071 90830cn
Opo' at : i. f.\ ,.'*-' i C J J C4 C. i i J .
S US,81,
233 ,2,r)5, 19,
3G3,(102,
Profitc c i a t ion)
i
7-J310-120?.3-123-) 9 1152lO)los5;
NetI iK-o;:iO
? -13 OG338 S f. f)
3 ft 3 J 1. 20303 MO
(18o ,".f)2)los^(22 2;'i 5)) loss
(237 357) loss
WAtts.Griffis [Iniilcd
TABLE 2
PRODUCTION AKO OKE RESERVES 1918-1969
Year
194819491950195119521953195419551956195719581959I96019611962196319G419651966196719681969
Tons Milled
100,9721 55, 0-1 9157,94888,736369,674168,243166,082366,055153,322167,133177,475195,898179,520200,215198,019182,552171,830165,018162,580171 .729171 .452138,5 10
Ore Reserves Tons
315,000440,000483,000473,000495,000504,000502 , 000505,000475,648402,497356,536262,538318,304322,454204 , 2'J7301,932245,324282,376272,591288,345157,704101,025
Resiervc Grade oz.Au per ton
0.2500.2500.2500.2600.2500.2500.2500.2480.2320.2120.2130.2100.2080.2200.2000.2150.2800.2600.2300.2080.2110.204
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WAtts, Griffis andJicOual ymlled
TABLE 3
MINE DEVELOPMENT 1962-1969
-feet-
Year
19621963196419651966196719681969
TOTAL
Average
Drifting
17532933282130421505191613571314
16,641
2,080
Cross Cutting
189915331847457105945217261917
10,890
1,361
Raising
2691152311081828783
16341370645
11,582
1,1-18
Diamond Drilling
20,72616,78927,35620,00413,35715,42911,32012,790
137,771
17,221
TAR1, E 4
MILL1963-3969
Year
1963196-119G510 G G196719681969
Average Daily Tons Milled
500.14 69. G452.14-1 c). 4470 .0408.0380.0
7, Gold Recovered
94.895.593.893.893.594 .594.8
Mil ling Cost (S)
1.831 .97?, . OR2 . 362. GO3.023.23
Mint Settlement Aver.Au S/oz A- S/r.z
37.7617.7637.7537.7137.7737.6837.67
1.371.391.391.39i .702.281.94
- 17 -
Watts, Griffis and jMcOuAj [Imlted
Between 1948 and 1969 the company's annual reports included Ftatements regarding ore reserves. Those are summarized in Table 2. Most producing Canadian gold mines followed the practice of only reporting "proven" reserves according to the classic definition of ore blocked out on four sides by underground openings. Only rarely were reserves indicated by diamond drilling reported. Consequently, the reserves discussed elsewhere in this report were not mentioned. The decline in published reserves in the last two years of operations, then, is more tied to reduced underground development, as illustrated in Table 3 , than to any absence of mineralization.
The reserves and exploration potential, referred to elsewhere in this report, are derived essentially from Renabie Mines Limited annual reports, and from exploration holes drilled from under ground while the n.ine was in production.
- 18 -
Walls, Griffis andflcOual Limited
6. WORK CURRENTLY UNDERWAY
Since Rengold Mines Limited optioned the property, and purchased the plant facilities, a number of activities have been undertaken. These have been described as follows:
1. Negotiation of a draft contract with Great Lakes Power Company, regarding the rehabilitation of a branch transmission line, and the addition of certain facilities. In this contract, Rengold is to pay the cost of the repairs to the 44,000- volt trans mission line, but Great Lakes Power is to install and maintain the line. Rengold has paid a S25,000 deposit against the line.
2. A draft power contract has been negotiated and submitted by Great Lakes Power.
3. A hoisting rope and sheave wheels have been ordered for delivery in June.
4. A camp consisting of a 20-man cookery, a 20-man bunkhouse, awash car, and two mobile homes, have been purchased and largely installed on the property.
5. Negotiations are currently underway for the purchase of a stand-by power unit, a 5 1/2 foot short-head cone crusher and a 9 x 11 foot ball mill (to replace the ones removed from the property).
G. A number of transformers have been purchased, including:
Six at 750 KVA capacity Two at 600 KVA capacity One at 300 KVA capacity.
7. Pumpo necessary for mine dcwatoring have been located and priced.
8. Negotiations with Nelson Machinery have boon concludedto purchase a J l equipment r.ot y o t sold, which was re;m ved from the property and stored in Geraldton.
9. Preliminary dif;cussions and negotiations have boon hold with at least one- mining contractor, and it is his verbally-quoted rates which have been used in this study.
- 19 -
Watts. Griffis and JtfcOual JJmJled
10. Staff including either full or part-time consultants is being acquired. To date, these include:
a. Mr. P. S. B/oadhurst has been retained as Consulting Engineer and Acting Manager.
b. Mr. Art Stothart, Consulting Electrical Engineer,
c. Mr. W. Griffin as Mill Consultant.
d. A mine captain, accountant, master mechanic, chiefengineer, cook and three mechanical labourers have been hired and are working on the property.
- 20 -
Walls. Griffis dwljVcOtidf [ imtlvd
7. GEOLOGY AND ORE RESERVES
GEOLOGY
The terms of reference have not provided sufficient latitude to become familiar with the regional and local geology. The general setting may be broadly described as follows:
A wide belt of steep, westerly dipping, north-northwest striking Keewatin volcanics lies west of the mine area, while gneissose granite, followed on the east by quartz diorite (tonalite) host the or. bodies of Rengold and the adjacent Nudulama deposits respectively. Post-ore feldspar porphyry and diabase dykes occur.
Foliation in the granite gneiss is arcuate on the property, changing from northwest to west and finally northeast. The control portion (west) is slightly faulted parallel with the foliation in the mine area, and tlu: rocks have been contorted providing the dilatent recepticol for ore and gangu. emplacement. In go-iK.-ral, the ore is apparently contained in one i..ujrr ore shoot. In the upper levels this has been dislocated by up to 200 or 300 feet by post-ore north trending faults and dyke intrusions. The resulting segments have been alphabetically designated, though some such as the "C" arc distinctly separate structures. The ore shoots plunge west-southwest at 60 0 -70 0 . The "N" ore shoot measures about 250 by 30 feet in plan, and seems to extend i roro the surface to at least 2,955 feet, where it has cleared the off setting faults o f. the upper levels, and shows some evidence of tightening. However, this may only be apparent cwin'j to portrayal on longitudinal section without a p lot of the lower grado intersections which could be used to more accurately delineate the higher grade mineralization.
The ore; consists of fine pyrite, very minor galena, and possibly molybdenite in a quartz sericite cataclasite. At least two generations of quartz filling are in evidence. Vertical grade fluctuations, probably reflective of structural roll?;, do occur, but me average grade dees not scorn to fall below C.10 ounces gold per ton.
- 21 -
Walts. Griffis and JtoOuai JJnUlcd
ORE RESERVES
In a mine such as this, which has previously been operated for many years, four types of ore can be outlined. These are:
(1) Unmined zones of "ore" grade in and around the previous workings. These can include pillars, undrawn stopes and "ore" as yet unopened.
(2) Additional reserves formerly classified as sub-ore in and around previous workings which can be re-classified to an "ore" reserve category owing to improvement in commodity price, improvement in metallurgical recovery or a reduction in costs usually clue to installation of larger more mechanized equipment, thereby reducing mine unit costs.
(3) Undeveloped "ore",probable or possible, below or extending beyond the previously mined areas.
(4) The exploration for and discovery of absolutely new reserves.
At the Renabie property all four types of ore are possibly present.
Proven and Probable Ore -Upper Levels
An analysis by Rengold personnel of the Annual Rcportc indicated that a significant tonnace of low-grade reserves (i.e. sub-ore at $35 per ounce for gold) existed in pillars, sills, and low- grade stopes and that not all of the ore reserves reported in the 1969 Annual Report were mined before closure in July 1970.
A summary of these reserves, which fall into categories (1) and (2) above, as compiled by Rengold, is as follows:
Grade Location Tons Ounce Gold Per Ton
Pillars and Sills Low-Grade Stopes Unmined Reserves
Total Indicated Above 2625 Level
143,903174,90041,025
359,828
1411420
0.15
To confirm these reserves as minable, a detailed study of all production records, assay records, drawings and plans would be required. In addition, an on-site assessment of ground conditions would bc required once dewatering is completed to determine which of t.hese reserves could be profitably mined. It has been stated that in some of the upper levels some of
- 22 -
l l 1 l l
Wans, Griffis and^IcOual U/rutcd
rORE RESERVES
In a mine such as this, which has previously been operated for many years, four types of ore can be outlined. These are:
(l)
(2)
Unmined zones of "ore" grade in and around the previous workings. These can include pillars, undrawn stopes and
as yet unopened."ore"
(3)
(4)
Additional reserves formerly classified as sub-ore in and around previous workings which can be re-classified to an "ore" reserve category owing to improvement in commodity price, improvement in metallurgical recovery or a reduction in costs usually due to installation of larger more mechanized equipment, thereby reducing mine unit costs.
Undeveloped "ore",probable* or possible, below or extending beyond the previously mined areas.
The exploration for and discovery of absolutely new reserves.
At the Renabie property all four types of ore are possibly present.
Proven and Probable Ore - Upper Levels
An analysis by Rengold personnel of the Annual Reports indicated that a significant tonnage cf low-grade reserves (i.e. sub-ore at $35 per ounce for gold) existed in pillars, sills, and low- grade stopes and that not all of the ore reserves reported in the 1969 Annual Report were mined before closure in July 1970.
A summary of these reserves, which fall into categories (1) and (2) above, as compiled by Rengold, is as follows:
Grade Location Tons Ounce Gold Per Ton
Pillars and Sills Low-Grade Stopes Unmined Reserves
Total Indicated Above 2625 Level
143,903174,90041,025
359,82N 0.15
To confirm these reserves as minable, a detailed study of all production records, assay records, drawings and plans would be required. In addition, an on-site assessment of ground conditions would be required once dewate'ring is completed to determine which of these reserves could be profitably mined. It has been stated that in some of the upper levels some of
- 22 -
Walls,G "Vis and NlcOual
l
l
i
l
l
i
are located in unstable ground, and until the dowatering program is complete no full assessment of them can be made.
As shown in the cash flow projections and schedule, we have not included these os the "first" ore to be taken.
It could well be, however, that some of these reserves, parti cularly those low-grade reserves in stopcs in the "C" zone (79,000 tons @ .15 ounces gold per ton) and the 21K zone (25,000 tons @ .15 ounces gold per ton) which the 1964 and 1965 Annual Reports state as being withdrawn from reserves, could be quite easily obtained.
The balance of the reserves indicated above the 2625 level would need more detailed study as to their location and the economics of recovery before they could be included in a minable category. This includes the 143,903 tons of low grade referred to in pillars and sills, and to the 70,400-ton balance of the low grade referred to in the 1968 Annual Report but without location.
Rengold's calculation of 41,025 tons of proven reserves was obtained by deducting 60,000 tons assumed to have be cm mined in the period January-June, 1970, from the proven reserves estimated as of December 31, 1969. As it is not known at. this time where those reserves are located, i.e. how many levels or stopes are involved and until a detailed review and mine dowatering are completed, it is impossible to state how much of this ore warrant:, extraction. Undoubtedly sonic of it will represent cither early plant feed (not currently in our projections) or supplemental feed while new levels and stopes ara being developed.
the in
A report prepared in July 1973, by George Dimitrioff, P.Eng., reported that a check of the level plans from the 125 level t 2475 level revealed that 37 drill intersections had boon '.r.aae narrow gold-bearing quartz veins. Under previous economic conditions these had not been economic but at the now prevailing prices for gold some of them could be, particularly if the levels were re-opened to exploit the lower grade reserves p^nticnedpreviously. All of these should be overall re-assesr.rv.ent of the- upper is made.
taken into uccount when the workings and rer.'.ainxr.:: reserves
It is in the third category of reserves which tho Renabie property offer r, g r e at p r a :\\ i s e .
No mining has ta':-.::; place bi-U:w the 2625-foot lev-;; l, al ti.ouc.jh the shaft has been deepened to the J.-lfiO ievel and .seme dri:"t;:'ig towards drill indicated ore a-ui s tope development n the 2955 l eve] was just he^un prior to closure. This work wu-, undertaken to reach ore: indicated by so;,,e 46 drill intersections, as shown on Figure 4.
-23-
Watts.Gfiffls dndJteOudl ymJled
the pillars and stopes are located in unstable ground, and until the dewatering program is complete no full assessment of them can be made.
We have not included these reserves in the cash flow projections. It could well be, however, that some of these reserves, parti cularly those low-grade reserves in stopes in the "C" zone (79,000 tons @ .15 ounces gold per ton) and the 21K zone (25,000 tons @ .15 ounces gold per ton) which the 1964 and 1965 Annual Reports state as being withdrawn from reserves, could be quite easily obtained, and could be classified as proven ore.
The balance of the reserves indicated above the 2625 level would need more detailed study as to their location and the economics of recovery before they could be included in a minable category. This includes the 143,903 tons of low grade referred to in pillars and sills, and to the 70,400-ton balance of the low grade referred to in the 1968 Annual Report but without location.
Rengold's calculation of 41,025 tons of proven reserves was obtained by deducting 60,000 tons assumed to have been mined in the period January-June, 1970, from the proven reserves estimated as of December 31, 1969. As it is not known at this time where these reserves are located, i.e. how many levels or stopes are involved and until a detailed review and mine dewatering are completed, it is impossible to state how much of this ore warrants extraction. Undoubtedly some of it will repre sent either oarly plant feed (not currently in our projections) or supplemental feed while new levels and stopes are being developed.
A report prepared in July 1973, by George Dimitrieff, P.Eng., reported that a check of the level plans from the 125 level to the 247J level revealed that 37 drill intersections had been made in narrow gold-bearing quartz veins. Under previous economic conditions these had not been economic but at the now prevailing prices for gold, some of them could be, particularly if the levels were re-opened to exploit the lower grade reserves mentioned previously. All of these should be taken into account when the overall re-assessment of the upper workings and remaing reserves is made.
Probable Ore
A calculation './as r -. '.e of the ore outlined by the deep drilling, as shown on Fi-T re 4. Vertical cross-sections were not available which could be used to carry out a detailed interpretation of
ore. The calculation vas made using only the longitudinal projection of the drill hole intersections. Ore was assumed to
n- 23 -
m
l x**^ -2643^^^-
• ?6-:
*-50'
HIS-26-h
530 26 .j7i v J '
/ 26-96
j* ^ j-, t
2JZ 6-/V
l 2 08
O 4} 470'26-IO/
*
77 26-9J
26-74058
O3534 O'
320'iO 18 i
26-tt?i ? d'
[ 19 i60'26 70 O 14 320'
Q-1Q -•40^^a XJiO1 /
.— ..^f..
> " -Mfc•'.•'i-f f j IN THIS
'JO DRlLl IN G/OR ^ 't
DEVELOPMENT.
56 O
W-
29
430
0,29 "
,, ,o, X
/.500'
— INDICATED L
29 W-o4^ i 1
77
7.'•3
i? 9-
P '! " "
, OJ?4'l i I'D' ? 'W'
O 56 65-0
L L PL S' L)
i N MiNE
77
77
7NOTE
3600E 3700 E 3800 E 3900 E
1 ——— . — - ——————————————————— —P—— 2t-*0—— 2fe"3l — — to-*/- ——— * ———————————————— "2R5** i cx/Pl" ——— "" — ii--
fr 2i rf-vO-15 -x 0*iO * twcwucvcu.2Wi " 0 45 '* '
F5' l40 \
\ \ \ L EGENDZ6-69J3-J-X. \ \ \
'" u \ \ N 036 ^UNCE (GOLD) UNCUT?fi .oQ|^iI ^ \ \ 850 HOR PROJLEN OF ORE 25 ^1190' 7 X v INTERSECTION
' \ ^~ t 0 17 . v \ j, 66'130' .^ \ ,
^^^ \ DYKE x
— LEVEL ft OOH NUMBERVERT PROSOPORE
INTERSECTION
^* \ \ ?6 J5 _ OOH NO AND
lr
LOW ' VALUES
OF ORE
kFT LOCATED 925' FAST, IDD' NORTH (6105 M, 4925 E )
COLLAR
\
'2955 LEVEL"
\^ \\ \
2805 LEVEL..-.....— ,
\
4000 E
3105 LEVEL
4IOOE
(ENGOLD MINES LIMITEDGENERALIZED VERTICAL LONGfTUDINAL
PROJECTION BELOW 2625 ! LEVELat (cmp.lto by N*ngoia Mini* Limitt*
RENABlE MINE SUDBURY MINING DIST-ONTARIO
^caltj l"* 90' l Ottt ! April 197^ j F.tur Pf3*r' tj : O..*..0^i.*ll?***j' f:? i i ^
DIAMOHIi 1*11! l..l vn.
Hole Mo.
36-93
26-52
26-54
36-55
26-94
26-67
36-96
26-81
36-83
26-43
'6-45
36-78
36-79
38-39
36-41
36-43
26-98
26-71
26-73
26-74
26-35
26-37
26-38
26-66
26-102
36-30
36-32
36-51
96-69
86-37
96-29
99-36
39-4-
29-42
29-44
29-44
29-31
29-29
39-37
29-25
29-24
29-28
29-39
29-38
29-41
29-23
29-21
30- It
Section
3666E
3700E
3700E
3700E
3700E
3725E
37SOE
3775E
3775E
3800E
3BOOE
3825E
3825E
3850E
3B50E
3850E
3950E
3875E
3875E
3B75E
3900S
3900E
3900E
3925E
3925E
39*iOE
39501
3975E
39751
4 OOOt
4000E
36001
3600E
3600E
3600E
3600E
3650E
36&CE
38761
3700E
3700E
3750E
3750i
3750E
377JE
3800E
SHOOK
W'Of
i^i
305
201
163
19S
298
292
295
300
298
290
290
290
300
267
275
332
335
275
260
302
204
262
356
276
205
264
320
243
250
303
366
481
460
450
515
515
240
358
247
267
406
236
57
45
63
400
410
41,4
Dip
-4ft
0
-15
-30
-45
-45
-45
-30
-45
0
-15
-30
- SO
0
-15
-30
-45
0
-15
-30
0
-20
-35
-15
-50
0
-20
0
-15
0
-30
0
-17
-17
-29
-29
45
r?^r
192
00
117
120
307
256
126
330
195
70
81
150
330
100
132
162
260
199
195
240
185
200
284
95
141
178
233
155
BO
173
1(0
94
210
334
176
245
173
15 140
0 227
30
15
45
80
0
KO
30
15
i i)
171
134
85
25
0
35
230
220
! 21*
.-rx.x-llnn (H)f ii t.riurth
317
116
123
181
224
278
176
248
240
9i
115
204
280
129
179
186
295
217
230
280
215
245
291
120
151
205
247
210
95
216.5
200
117
247
340.5
169
340
197
160
248
181
182
146
57
15
03
257.4
2S1
r," -i
25
26
e61
17
22
48
18
45
25
34
54
50
29
47
24
35
18
35
40
30
45
7
25
10
27
14
55
15
43.5
30
33
37
6.5
13
95
24
30
31
10
58
61
32
15
28
27.4
31
1 11 J
llorlx. t lift M f l
18
26
6
53
12
16
34
16
32
25
33
47
32
2ft
45
21
25
18
34
34
30
42
6
24
e27
13
55
14
43.5
19
33
35
6.2
11
85
17
19
21
9
56
43
6
15
5.5
23.8
30
11 1
11*7^
0.56
0.23
0.10
0.26
0.23
1.19
0.17
2.08
0.14
0.34
0.23
0.43
0.14
0.18
0.36
0.36
0.50
0.34
0.30
0.35
0.30
0.13
0.18
0.31
0.76
0.31
0.17
0.15
0.19
0.10
0.17
0.13
D. 11
1 .57
0.14
0.36
0.21
0.15
0.17
0.38
0.26
0.15
0.23
0.18
0.77
0.30
0.77
0.12
f.fir*]
CO. 60
27.60
13.00
31.20
27.60
142.80
20.40
249.60
16.80
40.80
27.60
51.60
16.80
21.60
43.20
31.20
60.00
40.60
24.00
30.00
36.00
15.60
21.60
37.20
94.80
25.30
30.40
18.00
23.80
13.00
30.40
15.60
13.30
188.40
2ft. 80
43.30
25.30
K. 00
30.40
33.60
31.30
18.00
27.00
21.60
92.40
36.00
92.40
1 1 to
Valin- .it "fl-lifl
81.20
32.20
14.00
36.40
32.20
166.60
23.60
191.20
19.60
47.60
32.20
60.20
19.60
25 20
50.40
36.40
70.00
47.60
28.00
35.40
42.00
18.20
25.20
43.40
110.60
29.40
33.80
31.00
36 60
14.00
33 80
li. 30
15.40
219. tO
::.co50.40
39.40
31.00
33. 80
39.20
36.40
21.00
32.20
25.30
107.80
4 'J on
107. HO
ir, to
-firn
02.80
36.80
16.00
41.60
36 . CO
190.40
27.20
332. SO
22.40
54.40
36 . 80
68,80
32.40
28.80
57.60
41.60
80.00
54 . 40
32.00
40.00
48.00
20 . 80
28. 8C
49.60
126.40
33.60
27.20
24.0'
30.40
16- Or
27 J(
30 k(
17.6'
251 J.
:-.:
57 . C,
33. t
24. t,
27.1
44, h
41 t
24. (
36,1
28. f
i?3.: IS '
123.:
11
'SSa.tls.fy/itfis and ^IcOual IJmiled
l
l
l
l
l
l
l
l
V
It is a remarkable feature of the deposit that segmentsof the ore zone have persisted continuously from surface tothe lowest developed level in the mine at 2,955 feet. In addition,thedeepest hole drilled to date intersected 95.0 feet of0.36 ounces gold per ton at a vertical depth of 3,105 feet.
The records indicate that the deposit has yielded between 1,300 and 1,400 tons per vertical foot from surface to the 2625 level. If this rate of ore development persists to the 3255 level, the 630 feet of vertical height not yet mined would yield in excess of 800,000 tons of ore. The grade of this tonnage, as indicated by drilling to date, would meet or slightly exceed the mine average. An arithmetic average grade, after cutting all high assay: to one ounce, but without any weighting, was calculated as O.,1.; ounces gold per ton. After making an allowance of 10% for dilution, this reduces to 0.24 ounces gold per ton.
When tonnages are calculated from the vertical projection provided it appears that the tons per vertical foot are not as high as the mine average, and on the basis of this section if one deals only with the drill holes presented, it could be interpreted that the tons per vortical foot are declining.
It should be emphasized that geologically the "IN" zone, which is the only zone located bolow the 2625 level to date o. l though pinching and swelling, has shown a remarkable persistency with depth.
It is our opinion that the apparent drop-off in tons per vertical foot on the section examined by us is more likely duo to a decline in drilling density, the lack of plotting of all data (i.e. low-grade intersections), and the fact that a longitudinal section cannot portray more than one zone effectively than to any real reduction :in the size of the zone itself. In view of the foregoing, it ir, remarkable that the tonnage indicated by the one section available to us amounts to over 400,000 tons after dilution.
Thus, over 800,000 262 s) l evel and theKith in thiscor..;-] o V od .
tons are indicated in 3T!55 level, on a tons
over 400,000 tons have been
the interval per vert i ccl l indicated by
between the foot basis, the drilling
The only points of caution which wo noted were that on the 2625 level, plan, which we examined, 1,000 tons p o r vert, i ea l foot were indicated for the "K" zone and that be-low the 2;) 00-foot level apparently no satellite ore shoots have been mined. Thin situation may well be due merely to the lack of exploration work.
- 26 -
Watts, Griffis and JicOual Jjlmilcd
extend 25 feet beyond the exterior drill holes and to extend from the 2600-foot horizon to the 2980-foot horizon. An average horizontal width of 26.1 feet was calculated. A reserve of 236,500 tons was computed using 12 cubic feet to the short ton. An average grade of 0.273 ounces gold per ton was calculated after cutting all high-grade assays to one ounce and by weighting all assays according to the width. An allowance of 10% for dilution of zero grade was made to give a probable'reserve of 260,000 tons grading 0.248 ounces gold per ton.
Possible Ore
No mining has taken place below the 2625-foot level, although the shaft has been deepened to the 3460 level and some drifting towards drill indicated ore and stope development on the 2955 level was just begun prior to closure. This work was under taken to reach ore intersected by some 46 drill holes, as shown on Figure 4.
It is a remarkable feature of the deposit that segments of the ore zone have persisted continuously from surface to the lowest developed level in the mine at 2,955 feet. In addition, the deepest hole drilled to date intersected 95.0 feet of 0.36 ounces gold per ton at a vertical depth of 3,105 feet.
The records indicate that the deposit has yielded between 1,300 and 1,400 tons per vertical foot from surface to the 2625 level. If this rate of ore development persists to the 3255 level, the 630 feet of vertical height not yet mined would yeild in excess of 800,000 tons. The grade of this tonnage,as indicated by drilling to date, would meet or slightly exceed the mine average.
It should be emphasized that geologically the "N" zone, which is the only zone located below the 2625 level to date, has shown a remarkable persistency with depth, even though it pinches and swells.
It is our opinion that the apparent drop-off in tons per vertical foot on the section examined by us is more likely due to a decline in drilling density, the lack of plotting of all data (i.e. low-grade intersections), and the fact that a longitudinal section cannot portray more than one zone effectively than to any real reduction in the size of the zone itself.
Thus, over 800,000 tons of possible ore are inferred in the interval between the 2625 level and the 3255 level, on a tons per vertical foot basis. Within this, 260,000 tons of probable ore have been computed, resulting in a net possible ore reserve of 540,000 tons.
R
- 26 -
Griff is and^lcOual [fmlled i, O
Consequently, a minimum indicated ore reserve in excess of 400,000 tons or greater than tv;o years can be forecast and more likely a tonnage up to double this number is a reasonable projection at this time.
EXPLORATION POTENTIAL
There is some potential for new ore in the mine, particularly at the lower levels where it is felt that considerable diamond drillir.c: cculd be dene to the oast and west of the main zone. The *.:~~.~l:-.r.2. c r e rcr.e which war- searched for to the east on the
"it exists a t depth, p I;:.-. ..t e at a steeper ..i t'.i c:-.J. ..-f this ex-.'lvT5-- s. - ..C
w^ v. v: .7 c s t c a on the
ore toJ.ios t-uch as the "C and Nuduiau'.a ore bodies.
cvty.t r. correspond: aps, there r.', j y :oi;v 01 the
aboac r.'.io-wav rc;-s.vr. th^ Re r. .10 lo
In addition, there is no indication that the main ore zone has yet been explored to its ultimate depth. Additional ore will undoubtedly be outlined below the lowest exploration work to date.
- 27 - O
i W Alls, Griffis anclJ-IcOual limited
The only points of caution which we noted were that on the 2625 lave* plan, which we examined, 1,000 tons per vertical foot were indicated for the "N" zone and that bf ow the 2200-foot level apparently no satellite ore shoots have been mined. This situation may well be due merely to the lack of exploration work,
Exploration Potential
There is some potential for new ore in the mine, particularly at the lower levels where it is felt that considerable diamond drilling could be done to the east and west of the main zone. Tiie Nudulama ore zone which was searched fer to the east on the 1400-foot level may, if it exists at depth, plunge at a steeper than projected angle and occur beyond the end of this explora tion drift and at deeper levels on the Rengold property.
Similarly, if the ore, in fact, pinches and swells with corresponding grade fluctuations, as suggested on the available maps, there may be hope of pre-determining the amplitude and periodicity of the controlling swells to find new ore beneath supposedly rootless ore bodies such as the "C" zone about mid way between the Rengold and Nudulama ore bodies.
In addition, there is no indication that the main ore zone has yet beer, explored to its ultimate depth. Additional ore will undoubtedly be outlined below the lowest exploration work to date.
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l Walls, Griffis and J-lcOual \Jmllcd
8. DEVELOPMENT PROGRAM AND CAPITAL COSTS
DEVELOPMENT PROGRAM
Rengold has been working on the schedule and proposed scope of work for mine and mill rehabi litation foj some time and now has personnel working on the property and is also conducting negotiations with the power company and various contractors. Planning, then, seems to be well in hand.
Based on the information supplied and our understanding of the project, we have no reason to change the proposed schedule as indicated to us.
Mine Dewatcring
It is reported that the mine was closed in July of 1970 and to date, has flooded to approximately 1,000 feet below the shaftcol l ci r.
Renyold has estimated that there is a probable 220 million gallons of water to be pumped from the mine at this date, based on references to the old mine level plans in their possession, and this is probably a reasonable estimate. We have checked this figure using certain assumptions and came to within 251 of their figure.
Rengold has estimated about four months to dewater the mine. We understand dewcitering plans are well advanced with pumps selected and pricing discussed with a contractor. Provision for pumping will have to be ample and steady. Allowing for 20 effective pumping hours per day, an average pumping capacity of 1,600 gallons per minute will be required to pump this gallonage to surface in just under four months.
It is expected and assumed that the shaft timbers, guides and landings will require little repair in view of the relatively recent closing of the mine in 1970.
The disposal of over 200 million gallons of nine water in four months should bc investigated ahead of time. This would probably include examination of local topography, along with local and regional drainage and watershed. The Ministry of Natural Resources should be contacted well in advance for their requirements and permission.
- 2 fi -
FIGURE-5
R E N G O L D MINES LIMITEDDEVELOPMENT SCHEDULE
MARCH APRIL MAY JUNE JULY AUG. JAN. FEB. MARCH APRIL
COOKERY, BUNKHOUSE,HOUSING ACTIVATE PLANT
DEWATER MINE
DEVELOP UPPER LEVELS
DEVELOP ?955 LEVEL
DEVELOP 3?55 LEVEL
BREAK ORE RESERVES
TOWNSITE HOUSING
PREPARE MILL FOR PRODUCTION
PRODUCTION 300 I/O
PRODUCTION 500 T/D
Watts, Griffis amlJfoOual [united
Housing
It is reported that preliminary camp accommodation has been established at the mine site with a cookery, washcar and bunk- house that can accommodate up to 20 men. Two more bunkhouses are planned to be set up in the near future and these are supplemented by mobile home trailers to form the major camp component.
Along with an office, these facilities are being established on an interim basis using a limited power and water supply system and septic tank.
Plans are to establish a permanent townsite in co-operation with the various provincial authorities in a contemplated improvement district in the Missant*bie area.
Power
The existing transmission line from Missanabie to the mine site will be rehabilitated and the missing mine site transformers will be replaced with purchased units. Six transformers have been purchased and delivered to the mine site. Negotiations have been carried out with the Great Lakes Power Company and contracts drafted to carry out repairs on the power supply line and supply power to the mine site.
It is planned that transformer capacity at the mine sub-station will be increased to 4,500 KVA, which we understand is double the previous supply, in oicer to adequately handle any planned increase in production.
Mi no Plant
The mint- shaft is a timbered three-compartment opening. The head frame is of timber construction, 9b feet high. Hoisting is done by an eight-foot double drum Nordbery hoist powered by two 250 H.P. motors. Two compressors, located in an adjoining roor.i, are reported to bc able to supply up to 2,500 cubic feet of air per minute.
Ore and waste -"'re hoisted by counter-balanced four~ton capacity skips in two of the compartments. A cage for men and material movement is suspended below the centre compartment skip.
- 30 -
Grif/Js and ^JcOueii [Jlmiicd
It is understood that the mine plant is in relatively good condition with complete electric controls. Some repairs will be required to the heau frame itself. New hoist rope has been ordered.
Mine Road
A secondary road of approximately 12 miles length provides access to the mine property from Missanabie. This road was maintained by Renabie Mines Limited, the former operator, up until the time of mine closure. While providing sufficient access, it is understood that this road will require extensive repairs.
It is planned to work in co-operation with the Provincial Government and other mine operations in the area to up-grade the road standards and provide good connection with the Provincial Highway system.
M in ing Eguipme nt
An allowance has been made to purchase initial mine development and start-up requirements. It is understood that an agreement has been made to re-purchase tho available former underground equipment of the. Renabie Mine from an equipment dealer at favourable prices.
It is often difficult to complete all equipment purchases at favourable prices. Consequently, a contingency has beenprovided for.
Plant Pu r char. Q Agreement
Rengold Mines Limited has an agreement with an equipment company to purchase the plant and equipment of Renabie Mines. The total agreed price is $2SO,000. A down-payment of SBO.OOO has been made and further payments of $50,000 at six-month intervals muse be made.
Supervision, Knqineer'nu and Labour
The estimates made by Rengold have been reviewed and appear to be reasonable.
- 31 -
Walts.Grtf Cis and J^IcOual ll
Underground Development
The two levels that would provide initial access, development and mining are planned to be the 2955 level and the 3255 level. These lie beneath the last level that was stoped (2625) and are accessible from the present shaft.
It is reported that the 2955 level has been extended to the ore zone, a distance of 2,300 feet and some preliminary work, preparatory to stoping, carried out. The 3105 level has a cross-cut driven 1,600 feet that may be about 700 feet from the ore zone. A shaft station only was cut at the 3255 level. The ore and waste p^s system has been extended to below the 3255 level.
We have examined two vertical longitudinal projections of the ;nine and the other available data. Until exploration work is completed, it is not possible to outline the amount of development work needed in detail. We have reviewed the estimates of drifting and diamond drilling made by Rengcld and find these to be reasonable.
It is understood that the unit costs represent verbal quotes from a Sudbury area contractor. These are quite favourable rates.
Stope Development and Mine Start-up
In their estimates, Rengold personnel have allowed 5300,000 for an initial stope start-up including drilling and blasting of 60,000 tons of ore. It is not possible to further comment on this without detailed layouts which cannot be done until the mine- is deweitcred. However, we agree with this provision in the pre-production capital costs. Provision must be made for adequate broken ore to feed the mill when it goes into production and afterwards so that the mine must be generally started ahead of mill production.
We would envisage this initial ore break to be done above the 2955 level which is reported to be extended to the ore zone.
The? allowance is not considered excessive. 3 f the- initial stopes are by shrink method, then only 40* or about 24,000 tons would bc initially availc'ible as free pull drawdown prior to stope completion. This would be adequate for almost three months milling at the initial rate. If the initial stopes are wide enough for sub-level lor.ghold open stopes, this money would be required for extra development costs while all muck broken from such a method would be immediately available for mill feed.
- 32 -
Wat 'Griffis and McOual
Service and Plant Buildings
These are reported to be in good condition and with minor repairs should be satisfactory for many years. Major repairs will be required to a section of the mill roof that collapsed under a snow load. The mill had a capacity for many years of 500 tons per day with a proven flowsheet and achieved 941 gold recovery.
Water Supply
No undue problems are anticipated here. It is planned to get clean v,'ater ^upply from Campbell Lake, a distance of greater than l l/ L miles. M?ne, mill and fire protection water supply is planned to come from Renabie Lake which is a few hundred yards from the mine shaft.
Tciilings Disposal
Tailings disposal should be properly investigated as to possible sites and environmental requirements.
This would include estimates of expected tailings production, physical and chemical characteristics, former tailings sites, local topography, local and regional drainage and other pertinent factors.
Rengold personnel have reported that the tailings pond abandoned in 1970 appears favourable. Tt is dry and backs into a hill slope on tv:o sides.
The Ministry of Natural Resources should be contacted as early as possible for their requirements and permission.
CAPITAL COSTS
Capital cost estimates have been made on thr basis of information provided by Rengold personnel. WGM has no', made an independent estimate nor visited the property.
Oil the basis ci our review, we believe these estimates to be reasonable. After checking the cost of a iew of the major items tind in considering today's escalating prices and supply problems, we would provide a contingency fund i ,i addition to the capital estimate, and we have made such an allowance.
-33-
WAUS. Griffis andjMcOuat [
We have first listed the capital cost estimates in total. As some expenditures have already been made, and as some agreements have been made for extended payment terms, we have then shown the actual capital requirements at this time.
Capital cost estimates have been divided into Part I and Part II.
Part I (a) is. a cost estimate to re-open and rehabilitate the mine with particular emphasis on the development of the ore block between the 2625 and 2955 mine levels. This amounts to $7SJ,000. Part I (b) is a cost estimate to open up the block between the 2955 and 3255 mine levels. This amounts to $497,000.
The total for Part I, including a greater than 251 contingency is $l,250,000.
Part II is a cost estimate of funds to provide major equipment pure) ises, and to provide townsite facilities for permanent mine; .md mill crews. This amounts to SI, 225,000, including a contingency of approximately 10%.
Part I (a) is as follows:
Phase I
Provision of minimum housing, bunkhouses andcookery
Purchase of transformers and electrical hardware Installation of transfoimers, power, repairs to
head frame, dewatering shaft Supervision, engineering and labour
Sub Total
70,00050,000
75,000
42,000
$ 237,000
Phase II
Purchase of mining equipment Plant purchase, under agreement
Sub Total
$ 116,000 100,000
S 216,000
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R
Griffis and^IcOudl [JnUlcd
B
Phase III
Development of the 2955 level:Drifts and cross-cuts - 800' @ $70 $ 56,000 Drawpoints - 10 @ 51,900 19,000 Diamond drilling - 3,000' @ S3.50 10,500
Supervision, engineering and labour 107,500
Sub Total $ 193,000
- 35 -
R
Contingency $ 107,000
l TOTAL COST ESTIMATE - PART I (a) $ 753,000
ll Part 3 (b) is as follows:
Development of the 3255 level:Drifts and cross-cuts - 2,300' @ 370 $ 161,000
l Drawpoints - 15 Cd $1,900 28,500 1 Diamond drilling - 5,000' 9 $3.50 17,500
Supervision, encjineering and labour 135,000
Sub Total $ 342,000
l Contingency 5 155,000
TOTAL COST ESTIMATE - PART I (b) $ 497,000
( Total Cost Estimate Part I (a) $ 753,000 Total Cost Estimate Part l (b) S 497,000
* TOTAL COST ESTIMATE - PART I S I, 250, 000
'~ Gritfis and McOual
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Part II is as follows:
Plant purchase, under agreementRepairs to mill, purchase of start-up equipmentPurchase of major equipmentSubsidized housingMining
Sub Total
Contingency
TOTAL COST ESTIMATE - PART II
TOTAL CAPITAL COST ESTIMATE
$ 150,000 168,000 280,000 230,000 300,000
$1,128,000
$ 97,000
$1,225,000
$2,475,000
R - 36 -
War- Griffis and^tcOudi ijmJlcd
CAPITAL REQUIREMENTS
Certain expenditures which are included in the costs estimated above have already been made or arranaements for term financing have been made under aqreements to purchase. These items are shown in a financial statement dated May 15th, 1974, prepared by Fuller Jenks Landau, Chartered Accountants. The statement also shows that the company has over $100,000 on hand. Thus, credits can be made against the cost estimates, in order to determine current capital requirements, as outlined below:
Part I (a)
Estimated Cost
Credit:(a) Cash on hand(b) Down-payment of $25,000 already made
against the purchase price of $50,000 for transformers and electrical equip ment .
(c) Down-payment of $50,000 already madeagainst the purchase price of $250,000 for plant equipment.
(d) Deposit given to Great Lakes Power Co. against pov/er line repairs.
(e) Exploration and development expenditures incurred to May 15th, 1974.
TOTAL CREDITS
Net Capital Required - Part I (a)
$ 753,000
$ 102,000
S 25,000
S 50,000
S 25,000
65,000
267,000
S 486,000
i
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Part T (b)
No credits are available against this section, therefore:
Net Capital Required - Part I (b)
- 37 -
$ ' 497,000
R
Watfe? Orif fi:-; and jMcOual jjnxllcd
Part II
Estimated cost
Credit:Balance of $].50,000 duo in 1975 and 1976 against the purchase price of $250,000 for plant equipment.
$1,225,000
$ 150,000
Net Capital Required - Part II $1,075,000
Summary
Total capital cost estimate
Less credits, as above
$2,475,000
417,000
NET CAPITAL REQUIREMENT $2,058,000
- 38 -
dndJicOual limited
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9. OPERATING COSTS
Average weekly wages for Ontario gold mines, published by Statistics Canada, have been plotted on Figure 5. The trend of these figures parallels very closely the trend of operating costs of the Renabie Mine. A straight projection of these trends by Rengold personnel suggests an operating cost in 1974 in the range of S15 par ton.
Estimated operating costs might be distributed as follows:
Exploration Mine Development Stoping MillingAdministration, marketing, head
office, expenses, etc.
TOTAL
$ 1.00 per ton 3*00 per tor 6.00 per ton 3.50 per ton
1.50 per ton
$15.00 per ton
Wo. have recently completed a detailed operating cost study for a proposed 500 ton per day underground base metal mine, in roughly the came Canadian geographical circumstances. In that case, we used the current base metal wage rates in the district, which were until recently, at least, much higher than gold mine v;ages. The ore shoots were of limited strike extent, steeply dipping and varied in width from 8 to 20 feet, averaging about 14 feet.
Estimated costs were:
Direct mine cost Direct mill cost Indirect costs
TOTAL
$ 6.99 per ton milled 3.78 per ton milled 2.49 per ton milled
$13.26 per ton milled
Because of this and our knowledge of operating costs for similar sized mines in Canada, we believe these projected costs to be reasonable and have used them in the cash flow projections.
*
Detailed operating cost estimates for Rengold are not justified until ore reserves and mining plans have been established, and new ore cut-off grades reviewed and established.
-39 -
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As a measure of the sensitivity of the project to cost increases we calculated cash flow using c^erating and capital costs which were each increased by 2(H. Gold revenues were held constant. As shown in the discussion on cash flow projections, this increase deferred the total return of capital by only a few months.
41
and fcOual [ImJIed
10. CASH FLOW PROJECTIONS
The financial evaluation summarized in Tables 6 and 7, is based on the costs shown earlier, i.e. operating costs in 1974 of $15 per ton of ore milled, and capital costs of 82,475,000. The latter costs would be scheduled in some cases over a period of time to take into account the payment terms of some equip ment already purchased and for the leasing of major items according to the present plans of Rengold. We have not taken this into account in order to simplify the presentation of payback on the capital requirements.
Revenue is based on a price for gold of 8140 and 8160 per ounce with mill recovery of 94%, No escalation has been applied to either revenue or costs. It is assumed that mill production for the first two months will be at the rate of 300 tons per day, increasing to 500 tons per day thereafter.
Revenue is based on the treatment of 175,000 tons per year ata grade of 0.23 ounces per ton obtained below the last productionlevel worked.
The operating period used in the cash flow tables is six years, based on the assumption that the development work to be carried out by Rengold will be successful in outlining six year's ore. Gold sales revenues are assumed to be received during the month following production.
Income taxes and mining taxes have been calculated based upon the presently known tax rates and regulations. New mining taxes recently announced for Ontario have been used, although these are not yet passed into law. The application of all taxes on income is difficult to calculate with precision, as many regulations are still ambiguous and subject to interpretation.
The cash flow calculated indicates that the capital invested may be returned early during the second year of operations and that a considerable profit will accrue to the shareholders. A tonnage of 350,000 tons would be milled in two years, a figure that is well defined by the drilling completed below the 2623 level.
A separate calculation was made using gold revenues at S150 per ounce with capital and operating costr. increased by 20"?., It indicated also that the capital would be retired by the end of the second year of operation. This calculation is not presented.
- 42 -
Vatts,Griffis andJ-IcOuat Jjmileci
10. CASH FLOW PROJECTIONS
The financial evaluation summarized in Tables 6 and 7, is based on the costs shown earlier, i.e. operating costs in 1974 of 315 per ton of ore milled, and capital costs of $2,475,000. The latter costs would be scheduled in some cases over a period of time to take into account the payment terms of some equip ment already purchased and for the leasing of major items according to the present plans of Rengold. We have not taken this into account in order to simplify the presentation of payback on the capital requirements.
Revenue is based on a price for gold of $140 and S160 per ounce with mill recovery of 941. No escalation has been applied to either revenue or costs. It is assumed that mill production for the first two months will be at the rate of 300 tons per day, increasing to 500 tons per day thereafter.
Revenue is based on the treatment of 175,000 tons per year at the historical mine average grade of 0.23 ounces per ton. The operating period used is six years, in order to show the profit potential if the development work to be carried out by Rengold is successful. The probable ore computed will be mined in about eighteen months, following which ore in the upper levels and ;the possible ore, if confirmed, would be mined.
Income taxes and mining taxes have been calculated based uponthe presently known tax rates and regulations. New rainingtaxes recently announced for Ontario have been used, althoughthese are not yet passed into law. The application of alltaxes on income is difficult to calculate with precision, asmany regulations are still ambiguous and subject to interpretation.
The cash flow calculated indicates that the capital invested may be returned early during the second year of operations when the probable ore will be mined. A considerable profit will accrue to
; the shareholders, if the ore remaining in the upper levels and the possible ore at depth are confirmed during the development
: program.
j A separate calculation was made using gold revenues at S150i per ounce with capital and operating costs increased by.20%.j It indicated also that the capital would be retired by the endj of the second year of operation. This calculation is not presented,i
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—hjy^-———•toMBf———"teLS^"* —""'tUiJ-'' ——OKIai M In m m
TABLE 6
PROJECTED PROFIT AND CASH FLOW
-Gold at SI'10 Per Ounee-
1975 1976 1977 1978 1979 1980
OPERATING PROFIT; Tons ore mi l J od
Average mine grade 07,7 Au 7 ton
Ounces gold produced
Revenue at Si 40/0-
Operating costs
000
3
175,000
0.23
175.000
0.23
175,000
0.23
175,000
0.23
175,000
0.23
7,500 l (iO, 000
0.23 0.23
1,621 36,538 37,835 37,835 37,835 37,835 37,835
227,000 5,115,000 5,297,000 5,297,000 5,297,000 5,297,000 5,297,000
112,500 2,535,000 2,625,000 2,625,000 2,625,000 2,625,000 2,625,000
Operating Prof i L
CASH FLOY;:
114,5002,580,000 2.672,000 2,672.000 2,672,000 2,672,000 2,672,000
Cash Hooejpts__________________iOperating costs
Capital costs
On t a r i o Mi n i n;: t ax
Fed. k On tar i o corpora t ion tax
-1,901,000 5,297,000 5,297,000 5,297,000 5,297,000 5,297,000
112,5002,535,000 2,625,000 '.625,000 2,625,000 2,625,000 2,625,000
2,-5 7 5, OH O
276,000 310,000 310,000 310,000 310,000 310,000
"_______345,000 010,000 882,000 882,000 882,000Total Cash Pi sburse:t:en t s 2,587,500 2,31],000 3,080,000 3,545,000 3,817,000 3,817,000 3,817,000
Net Cash Flow :2,5o7,500)2,090,000 2,217,000 1,752,000 1,^*0,000 1,480,000 1,480,000
Cumulat i vi- Cash Flow :2, [,F-,500) (497,^00) ],719,500 3,471,500 4,951,500 6,431,500 7,911,500
li m m m m m m
TADLE 7
PROJECTED PROFTT AND CASH FLOW
-Gold at SI60 Per Ounce-
1971 3975 1976 1977 1978 1979 1980
pPKUATING PROFIT: Tons ore milled
Average- mine ^ on/Auy ton
Ounces Kold produced
Revenue at $lGO/oz
OperM i MK costs
7,500 169,000 170,000
0.23 0.23 0.23
1,621 36,538 37,835
259,000 5,846,000 6,054,000
112,500 2,535,000 2,625,000
175,000 175,000
0.23 0.23
37,835 37,835
6,054,000 6,054,0002,625,000 2,625,000
175,000 175,000
0.23 0.23
37,835 37,835
6,054,000 6,054,000
2,625,000 2,625,000
Operating Profit. 146,500 3,311,000 3,429,000 3,429,000 3,429,000 3,429,000 3,429,000
CASH FLOW:Cash Receipts 5,600,500 6,054,000 6,054,000 6,054,000 6,054,000 6,054,000
Operut inp 'costs
Co p i t a l cos i s
Ontario I.Jininj'. tax
Fed k Ontario corporation tax
112,500 2,535,000 2,625,000
2,475,000
417,000 439,000
383,000
2,625,000 2,625,000 2,625,000 2,625,000
439,000 439,000 439.000 439,000
859,000 1,132,000 1,132,000 1,132,000
Total Cash Disburse ments 2,587,500 2,952,000 3,447,000 3,923,000 4,196,000 4,196,00d 4,196,000
Net Cash Flow (2,587,500) 2,648,500 2,607,000 2,131,000 1,856,000 1.858.000 1,858,000
Cumulative Cash Flow (2,587,500) 61,000 2,668,000 4,799,000 6,657,000 8,515,00010,373,000
W!* *^'r.
Watts. Griffis and JlcOual ymiled
11. CONCLUSIONS AND RECOMMENDATIONS
1.
5.
Rengold Mines Limited has acquired a very attractive former gold producing property. Our analysis has indicated that sufficient reserves of probable ore are available to repay the investments required to place the property into production and that possible ore, if con firmed, would allow profitable operations for several additional years.
The probable reserves lie above the current shaft bottom, between the 2625 level and the 2955 level and are indicated by 46 drill hole intersections. If the average tons per vertical foot mined from surface to the 2625 level persist to the 3255 level, additional possible reserves of 560,000 tons will be available.
Additional reserves could be outlined in the upper mine workings if access to these is available when the mine dewatering program is completed.
The deposit has good potential for additional reserves which might be developed along strike or at greater depth.
Rengold has acquire.' a property with an operation shaft and considerable development work plus surface facilities, including a 500-ton per day mill. These assets have a replacement value of over $4.5 million and in addition, allow the property to be brought into production within a very short time.
An estimate of the capital required to bring the project into production, which has been prepared by Rengold personnel, and spot-checked by WGM, is divided into two parts
Part I Part II
Total
$l f 175,000
SI,075,000
$2,250,000
Some expenditures have already been made and some agreements to purchase have been made which extend the period for payment past the pre-production period, and , therefore, do not require pre-production financing. These, plus cash on hand, amount to 3417,000, leaving a net capital require ment of $2,058,000.
Estimates of operating costs by Rengold are S15 per ton milled. We have compared this with other current estimates and costs with which we are familiar and believe that the figure is realistic.
- 45 -
Walts, Griffis and^JcOual ymited
6. Cash flow projections with gold priced at 3140 .md 3160 per ounce indicate that the capital cost of 52,575,000 will be returned early during the second year of operation in both cases.
7. As a test of the strength of the project, a further cash flow projection with capital costs increased by 201 and operating costs increased by 33.00 per ton and with gold at 3150 per ounce indicates that capital would be returned by the end of the second year following production start-up. This indicates that the project is extremely viable.
8. We have concluded that Rengold should complete its financing plans and proceed with the development scheduled as soon as possible.
9. All basic geological data should be replotted as soon as the mine has been dewatered. The feasibility of mining ore remaining on the upper levels should be assessed as soon as access is available, and detailed mine planning completed to optimize production.
10. Government agencies should be contacted to obtain the necessary permission or co-operation for:
4
a) water useb) tailings dischargec) up-grading of road between mine and Missanabied) townsite developmente) surface rights.f) mine water disposal.
Respectfully
Ros s D.La w re ne B. A. Se. , M.Conim
- 4u -
m m
Watts,Griffis dnd^IcOual limited
CERTIFICATE
I, Ross D. Lawrence, certify:
1. That' I am a geological engineer and reside at 179 Lord Seaton Road, Willowdale, Ontario.
2. That I graduated from the University of Toronto in 1956 with a Bachelor of Applied Science degree {Geological Engineering) and in 1959 with a Master of Commerce degree.
3. That I have practised my profession as a geologicalengineer for 18 years and am a member of the Association of Professional Engineers of the Province of Ontario.
4. That I have not visited the property.
m
5. That this report is based upon a review of records pertaining to the former production history of the property, and upon information supplied to Watts, Griffis and McOuat Limited by representatives of Rengold Mines Limited.
6. That I have no personal interest, nor do I expect to receive, directly or indirectly, any interest in the property, or the securities, of Rengold Mines Limited.
B. A.
42B05NW0044 0022 RENNIE O2O
This prospectus constitutes a public offering oj these securities only in jurisdictions where they may he lawfully of feral for sale, No xecuritir\ commission or other similar authority in Canada.lias ^ in any way pashJ upon the merits of the securities offered hereutlder. and any representation to the contrary is an offence. , -
RENGOLD MINES LIMITED
PROSPECTUS
Common Shares(without par value)
NEW ISSUE:600,000 underwritten shares and 400,000 optioned shares as follows:
Firmly Underwritten
600,000Under Option
200,000200,000
Proceeds to Company Per Share
S 1.00'.25
1.50
Maximum Maximum Offering Price of
Net Proceeds to Underwriter's These Shares to Company (1) Markup Pet Share (he Public
S 600,000250,000300,000
5.2.-*.31 'i.3
S 1.251.56V41.87V4
51,150,000 (l) Before deducting the expenses of this issue estimated at S15,000.
There is no obligation upon the Underwriter-Optionees ;iml there is no assurance that any of the optioned shares will be purchased.
The Underwriter-Optionees will offer (he underwritten and optioned shares as more particularly described under "Offering".
The Underv riter-Oplionees may be said lo realize a profit before expenses in an amount equal to the amount by which the price paid fur such shares is less than the price at which said shares arc sold to the public. This profit may not exceed a total of 5150.000 with respect lo the underwritten shares and 562,500 with respect to the slnres optioned at 51.25 and 575,000 with respect lo the shares optioned at S l.50.
The purpose of this issue is to secute funds for the gei lal expense of the Company and particularly to protidc funds for carrying out a development piogram on ihc Companv 's optioned properties as referred to under "Use of Proceeds".
THERE IS NO MARKET FOR THE SHARES OF THE COMPANY.
THESE ARE SPECULATIVE SECUR1TIES. NO DETAIl E.D ORE RESERVE ESTIMATES HAVE BEEN CALCULATED BY THE COMPANY OR BY INDEPENDENT ENGINEERS,
Particular reference should be made to the captions "History and Business", "Offering", "Promoters and Interest of Management in Material Transactions" and "Principal Holders of Shares".
The Underwriter-Optionees conditionally offer these Common Shaies, subject to prior sale, if, as and when issued by the Company and accepted by them in accordance with the conditions contained in the underwriting agi cement referred to unckr "Of fei ing" and subject to the approval of all legal matters on behalf of the Company by Messrs. Bassel, Sullivan, Lawson A Leake, Toronto, and by- Messrs. Salter A Apple, Toronto, on behalf of the Underwriter-Optionees.
42B85NW0944 8833 RENNIE 020C
TABLE OF CONTENTS
PageHistory and Business , . . . .. . l
Renabie Gold Property . . . l
Agreement with Willroy Mines Limited . .. l
Property A Location . . . . . 2
History and Prior Development Work . . . . 2
Engineers' Report . 2
Plant and Equipment . . 4
Environmental Considerations . . S
Use of Proceeds . . . . 5
Offering . , 5
Underwritten Shares . 5
Optioned Shares 6
Capitalization 7
Description of Common Shares 7
Management . . . . . . 7
Remuneration of Directors and Senior Officers " 7
Principal Shareholders 8
Escrowed Shares . . 8
Supplemental Escrow . . 8
Preliminary Expenses 9
Promoters and Interest of Management in Material Transactions 9-10
Voting Trust Agreement 10
Prior Sales of Shares 10
Dividends 10
Auditors, Transfer Agenl and Regisirai 10
Share Option Plan 11
Material Contracts . 11
Auditors' Report . . . . . . . . . 12
Financial Statements 12-14
Purchasers' Statutory Rights of Withdrawal and Recission 15
Certificates . . . . , . . . . . . 15
HISTORY AND BUSINESSRENGOLD MINES LIMITED (the "Company") was incorporated under the laws of Canada by
letters patent dated August 28, 1973, to engage in the acquisition, exploration, development and operation of mines, mineral lands and deposits. The head office of the Company is located at Suite 505, 55 York Street, Toronto, Ontario.
RENABIE GOLD PROPERTYThe Company is presently carrying out, and proposes tu continue, a development program on properties
near Missanahie, Ontario (the "Renabie Gold Property"), from which substantial quantities of gold bearing ores had been mined down to 1970 by Rename Mines Limited which was subsequently taken over by Willroy M'.nes Limited.
Agreement with Willroy Mines LimitedThe Company entered into an agreement dated January 17, 1974 (the "Whin, y Agreement") with
Willroy Mines Limited ("Willroy"), Suite 1901, 101 Richmond Street West, Toronto, Ontario, whercunder the Company was granted the exclusive right 10 enter on and explore the Renabie Gold Prcpe.iv the Company agreeing to spend at least S200.000 thereon by July 15, 1974, in carrying out exploratio,. and development work. The Willroy Agreement defines exploration and development work to include all expenses incurred in (he provision oi electrical power at or to the Renabie Gold Properly including the repair and establishment of transmission lines, electrical substations at the property, diescl generated electrical power, suitable sleeping, cookery and dry accommodation for approximately forty men, the purchase of ,i hoist, a deposit with respect to mill equipment, rehabilitation of the existing shaft, pumping and de watering operations, the maintenance of the Renabie Gold Property in good standing, geophysical, geochemical, geological and related studies, diamond drilling, assaying, metallurgical testing, salaries and wages of personnel cngugvd in the work ut the Renabie Gold Property plus 259fc of such salaries ami wages for all employee benefits and allowances for holiday and vacation pay. Canada Pension Plan, pension plan costs, unemployment insurance, aviation accident insurance, medical insurance, group term life arii. income protection insurance and employer's liability insurance, travelling and other expenses including lodging for personnel engaged in the work at the Reliable Gold Properly, insurance premiums covering public liability, property damage and other risks ;..ssociaicd with mining exploration, development and production to the extent applicable, direct supervision and management of the exploration ami development work at the R'-nabic Gold Property and the preparing of feasibility studies. The Company has expended in excess of 5200,000 in carrying out exploration and development work to dale on the Renabie Gold Property.
The Company may at any time up lo and including December 31, 1974, elect to commit itself to bring the Renabie Gold Properly into commercial production at a rate of not less than 300 tons per day. Having made such production decision, the Renabie Gold Property will be transferred without further cost lo a new companv (the "Subsidiary") which will be a wholly owned subsidiary of tti-- Company, the Subsidiary to commence commercial production of gold ore on or before January l, 1976.
l-ollowing commencement of commercial production, cash flow generated therefrom shall be first applied against the cost of mining and concentrating operations, including head office costs of the Subsidiary and the Company at a rate not in excess of S3,000 per month; thereafter to reimburse the Company for all outlays, including exploration and development expenditures, in respect of the Renabie Gold Property prior to the making of the production decision; and thereafter to repay the Company for all advances made to the Subsidiary in urdei to bung the property into commercial production. After repayment of the aforegoing amounts, cash flow generated from production will be divided equally between Willroy and the Subsidiary. Cash How is defined under the Willroy Agreement to me.m all income of every nature from the sale or production from the Renabie Gold Property less all cash expenses, but excluding items such as depreciation, depletion or other non-cash wiitc-olls, less the maintenance ot reasonable services for working capital and contingencies.
The Willroy Agreement contains a force majeure clause and other miscellaneous operating provisions.
In the event that a production decision is not made bv the Company, it may remove its buildings and equipment from the propeitv by June 2 l), W75, tailing which same will become the property of Willroy.
The Willroy Agreement was entered into to amend .nnl siiperccde certain contractual relationships which had evolved as a result ut prior agreements referred to below.
By agreement made as of December 4. 1973. Sheridan Geophysics Limited (the "Assignor") assigned to the Company all of its interests under an agreement between the Assign.'' and Willroy dated M eh 15, 1973. As a result ot the Companv subsequently entering into the Willroy Agreement, the said agreement dated
larch 15, 1973, was supcrccded. In consideration therefor the Compan) issued lo the A signer 750,000 fully paid and non-assessable Common Shares of the Company. 375,000 of which shares were sold to Murray Watts. In April, 1974, the other 375.0OO shares were transferred to Rencan Rev.mrce Investments Limited, (sec "Promoters and Interest of Management in Material Transactions").
So far as the Company is aware, the only persons or companies beneficially owning, directly or indirectly, in excess of 5*36 of the equity shares of Willroy are: Lake Shore Mines Ltd.. 101 Richmond Street West, Toronto, Ontario, and Wrighl-Hargrcaws Mines Ltd.. 101 Richmond Street West, Toronto, Ontario, both of which companies are listed on the Toronto Stock Exchange.
Property 4 LocationThe property, formerly known as the Rcnabic Gold Mine, is comprised of 28 contiguous patented
mining claims totalling 738.06 acres, located in both Leeson and Rennie Townships, Sudbury District, Ontario, li is accessible by a 12 mile secondary gravel road from the Town of Missanabie, a station stop on the Canadian Pacific Railroad, transcontinental line. The principal cities of Sudbury and Thunder Hay are about 250 miles southeast and 400 miles west respectively along the railroad. Highway 651, completed in 1968, connects Missanabie to Highways 101 and 17, the principal highways in this part of Ontario. Highway 17 is part of the Trans-Canada Highway system. Timmins and Wawa are the nearest major regional commercial centres accessible by road. Timmins is approximately 200 miles by road and Wawa about 75 miles from the Town of Missanabie. Timmins is serviced by Air Canada and Wawa is to be serviced in 1974 by Norontair.
The 28 patented claims, recorded in the name of Willroy Mines Limited, are numbered as follows: S-3430G -W inclusive, S-34313 -18 inclusive, S-34328 -30 inclusive. S-34339 and S-34794 -96 inclusive in Leeson Township, and S-34310 -II, S-34319 -27 inclusive in Rennie Township. Sixteen of the claims having an area of some 406 37 acres, and being numbers S-34306, S-34309 -II, S-34319 -21 inclusive, S-34324 -30 inclusive, S-343.49 and S-34796, carry with them mineral rights only and not surface rights. The other 12 claims enjoy boih surface and mineral righu and on which are located the buildings referred lo under "Plant and fiquipment" as well as the two shafts tin the property.
No work commitments are required under The Mining Act (Ontario) to keep the claims in good standing. Annual acreage taxes of S309 are payable to ihe Province of Ontario, 'l ule to the claims as previously described is the usual lille lo patented mining claims enjoyed in the Province of Ontario.
Tailings resulting from prior operations were deposited in part on portions of the property to which surface rights are nvi now owned by Willioy. The Company considers that Ihe undisposed of surface rights attaching to the Rcnabic Gold Property will be sufficient for tailings disposal purposes in the foreseeable future.
X o undue problems are anticipated in obtaining water as mine, mill and lire protection water is available from Smith Lake, a lew hundred yards from the main shaft.
History and Prior Development \Voil.Knowledge of the gold deposits dates b.ick to at least 1939, when some or all of the claims referred
lo herein were acquired by Renabie Mines Limited.
In the period 1939-1942. limited work was carried out. including the sinking of the No. l shaft and some underground development to the 250-foot level. Ihe mine was shut down between 1942 and I94o owing to the demands of the Second World War.
ih.it the ihr
Work was resumed in ! l)46. and production began in 1947 at a rate of 300 tons per day. It appears ii.ii ue No. i shaft was. for all practical purposes, abar toned in 1946 and No. 2 shaft, which is a rectangular hree-compartment timbered shaft, was sunk as the main production shall, l his shaft was deepened in ' '), 1M2 and 146(1 lo its euncnt depth at ihe 34M) level Hy I'lsi), production was increased to 500 ton .r
day. The mine operated at this r;ite until I l'd4-l')d l), during which period production varied between J51) and 470 ions per day. Ihe mine was closed during 1970 and accordingly did not produce for a full year.
The average recovered grade of ore milled as reported by Kenabie Mines Limited was 0.217 ounces of gold per short ion. Mill-head grade was icpoiicd lo be i'. 23 ounces and mill recovery averaged 94.4Cr, during the last seven years.
Kngi IK-ITS' Report
The following is a summary of a report dated July 30. 1974. prepared by Walts, Griffis o; McOuat Limited ("l :.ngineers") on the Kenabie Gold Property. Ihe original report is available for inspection m the public files of the Ontario and Alberta Securities Commissions.
— 2 —
The Engineers state that the former Rcnabie gold mine located on the property produced at a rate of 300 to 500 tons per day for some 23 ycurs during which time approximately 3,600,000 tons averaging 0.23 ounces of gold per tun were mined and milled for a gross revenue of about S 2 S, 000,000, some of which revenue would have been derived from the Canadian Cioveriuiieiu's cost-aid subsidy program for gold producers.
The mine was closed in WO apparently due to the cost-price squeeze and a shortage of experienced miners which forced the closure of so many Canadian gold mines, rather than because of any lack of reserves. Production was carried uut above the 2o25 level. Ihc sluit extends to 3460 feet and initial devr' j; --cm ''as been carried out on the 2955 and 3105 levels.
i'., to closing, approximately 46 gold intersections were obtained in drill holes below the principal mine w^- Jngs. .The Company intends to dcwatcr the mine and continue development of these reserves and confirm company records of substantial reserves in the upper levels of the mine.
The exploration results made available to the Engineers coupled with the relatively uniform historical tonnage and grade per vertical foot satisfy them that the expenditures necessary to rehabilitate the mine and confirm the indicated reserves arc warranted.
Ore reserves have been calculated in several categories. Over 350,000 tons in the upper levels of the mine were reported by the previous mine management. These are in pillars and sills or were previously sub-economic at S35 gold. While previously classified as proven, it will be possible to reassess these reserves as soon as the underground program commences.
Probable reserves of 260,000 tons grading 0.248 ounces of gold per ton were computed between the 2625 and 3105 levels, based on drilling results.
from surface 1.1 he 2625 lc\el yielded an average of 1.300 to 1,400 tons of ore per vertical foot, grading about 0.23 ounces per Ion. If this ore persists to the bottom mine level of 3255, some 800,000 tons would result. As the previously computed 260,000 tons of probable ore lies within this /one, a net figure of 540,000 ions of possible ore would result.
With stope preparation previously carried out on the 2955 level, the lingineers state that full-scale production could commence in a matter of months.
Operating cost estimates supplied the Engineers by the Company amount lo S 1 5.00 per ton. Thus estimate, to a l;:rge extent, is based upon projection of historical costs. The Engineers aJvise that they have compared these cost projections against detailed estimates they have recently prepared for similar scJe underground base metal mines and believe these to be a reasonable projection
Ca^h flow projections h:ivc been piepared by the Engineers to illustrate the potential profitability of the op-.'i..:."n should the planned development program be successful in outlining ore reserves. They state that Ic^s ilian two year's operations, requiring 350,0(10 tons of ore, are needed to repay the capital investment of SO. 4 75,000 with operating costs of i 1 5.01) per ton milled and gold priced at $140 per ounce. To test the sensitivity of the project to much higher costs, they increased capital and operating costs by 209fc and capital was still returned during the second year.
The Engineers have recommended a three stage program designed to re-open and rehabilitate the property, dcwaier the shaft and cam out an underground program designed to develop ore reserves, particularly between the 2625 and 2955 levels. Their cost estimates for these programs are as follows:
ST AC i E lProvision ol minimum housing, bunkhoiises und cookeryPurchase of transformers and electrical hardwareInstallation ot transformers, pow ei. repairs to head frame, dewatering shaftPurchase of mining equipmentPlant purchase, under agreementDevelopment of the 2955 level:
Drills and cross-cuts -— SIM)' y. S70Draw points — 10 (J S l,900Dumond drilling—3,000' 0{ S3.50
Supervision, engineering and labour Contingency
Total — Stage l
S 70,00050,0001 5,000
116,000100,000
56,00019,00010,500
149,500107,000
S 753,000
— 3
J
f.
f ST AGE HDevelopment of the 3255 level:
Drifts and cross-cuts — 2,300' @ 570 Drawpoints— 15 @ 51,900 Diamond drilling — 5,000' @ 53.50
Supervision, engineering and labourContingency
Total — Stage II
STAGE HIPlant purchase, under agreementRepairs to mill, purchase of start-up equipmentPurchase of major equipment .Subsidized housing . .Mining , . . Contingency
Total — Stage III
Cost SummaryStage IStage IIStage lil
S 161,00028,50017400
135,000155,000
S 497,000
5 150,000 168,000 2bO,000 230,000 300,000 97,000
51,225,000
5 753,000497,000
1,225,000
52,475,000
The Company plans to initially carry out the Stage l program recommended by the Engineers. To May 15, 1974, approximately S165,000 has been paid in cash in the implementation of this program as follows:
Down payment of 525,000 on purchase of transformers andelectrical equipment 5 25,000
Down payment against 5250,000 purchase price of buildingsand equipment at the Renabie Gold Proper!) 50,000
Deposit against power line repair 25,000 Exploration and development expenditures 65,000
5 165,000
Examination of ore possibilities on the up[x;r levels may be completed concurrently with the dewatcring program, while a detailed assessment of reserves from the 2955 ;md 3255 levels will be carried out once dewaiering is completed. Assuming sufficient ore is developed, the expenditures in Stage 111 will bring the property to production. It should be emphasi/cd that, following receipt of the proceeds from the underwriting referred to under "Offering", the Company will only have sufficient funds to complete the Stage l program. The implementation of Stages II and HI will necessitate the obtaining by the Company of additional funds.
Plant and EquipmentWhen operations were suspended in 1970, all facilities on the property were sold and part thereof
removed. By agreement dated February 16. 1974. between the Company and Nelson Machinery Company Ltd., the Company purchased all of the remaining buildings and equipment on the property for the sum of 5250,000 whereof the sum of 550,000 has been piiid. the balance of 5200,000 to be payable in equal semi-annual instalments of S50.000, the next of which payments is due August 16, 1974. Unpaid balances bear interest at the prime rate charged by Canadian Chartered banks on the due date of a payment plus I9fc.
The buildings and equipment so purchased comprise !9 buildings, including the mill, hoist, ore bins, shaft skips, compressors, jaw crusher, rod and pebble mills, steam boilers, flotation cells, thickeners, agitators, water tanks, a truck and a bulldo/.er and miscellaneous equipment. An 8 foot diameter double drum mine hoist, hcadframe and compressors are in place with the office, machine shop and ancillary buildings in fair condition, but some machinery and equipment had been removed anil i. now in process of replacement.
The mill equipment is in operative condition though the cone crusher, motors, wnd sonveyon have been removed. The mill building needs repairs. The electrical wiring, certain transformers and motor controls require replacement.
A power contract has been signed and 525,000 cash deposit made with Great Lakes Power Company for rehabilitation of the power line with expected initial partial delivery about the end of August, 1974.
The concrete slab covering the No. 2 shaft collar has been removed and, by measurement, the water below the shaft collar was at a depth of 1440 feet. De watering of the underground working should take approximately six months allowing for an average pumping capacity of 800 gallons per minute. It b anticipated that shaft timbers, guide* and landings will require little repair.
Environmental ConsiderationsThe necessary consents from the requisite regulatory authorities in Ontario for the disposal of the
substantial amounts of water resulting from mine-working dewatcring, and, s'.iould production recommence, for the disposal of tailings have been applied for or obtained. Milling operations would also be required lo conform with applicable pollution control standards.
USE OF PROCEEDSThe net proceeds to the Company from the sale of the underwritten Common Shares will be S585,000
after deducting the expenses of the issue. If all of the optioned shares are taken up and paid for, the Company would receive an additional S5 50,000. The net proceeds will form part of the Company's working capital to be used to eliminate the working capital deficiency as at May 15, 1974 in the amount of S48,577 and for general operating expenses, including estimated administrative expenses ut S32,000, the purchase of necessary pla.it und equipment and to carry out the Stage l progrun ecommended by Watts, Griffis it McOuat Limited (see "Renabie Gold Property — Hngineers' Report"). The cost of this program is estimated at 5753,000 on account of which some 5256,000 has been expended down lo May 15, 1974. Dependant upon the results achieved irom the Stage l program and the availability of funds, the additional recommended programs may be carried out. 'l he Company lias incorporated under i he laws of CanaJa as a wholly owned subsidiary, Kengold Mines & R esources Ltd. lo which funds may be advanced for the purposes aforesaid. Subject to the foregoing, while the Company has no plans in this regard at the present time, monies in its treasury as available may also be used to defray the cost of programs of acquiring, staking, exploring and developing of other properties, either alone or in concert with others and gencr.illy to carry out exploration programs as opportunities and finances permit, but no such properties will be acquired and monies will not be expended thereon without an amendment to this Prospectus being filed if the securities offered herein are then in the course of distribution to the public.
Monies not immediately required for the Company's purposes are deposited in interest bearing accounts with Canadian Chartered banks and/or Trust companies. While there are no such immediate plans, monies available in the Company's treasury, subject to the approval of the shareholders of the Company, may be utilized to purchase securities in which insurance companies may invest under the provisions of the Canadian i'tid British Insurance Companies Act, R.S.C. 1971). Chapter 1-15, as amended, but no such purchases will be made while the securities offered herein arc in the course of distribution to the public.
OFFERINGThe Company entered into an agreement (the "Underwriting Agreement") dated June 20, 1974,
wiih Davidson Partners Limited f the "UnJ -rwriter"), -5 Adelaide Street West. Toronto, acting as to '/s on its behalf and on behalf of R. A. Lambert and Company, Ltd C Lambert"). Lord Beaverbrook Hotel, Fredericton, New Brunswick, as to ^- with respect to the underwritten and optioned shares referred to below, whereunder the Underwriter agreed to purchase the following Common Shares ot the Company, namely:
Underwritten SharesNumber of Common Shares__ ^^Underwritten ^ Pricx Per Share
600,000 S LOO
The Underwriter is obligated to take up and pay for all o: the imdrrwriHcn Common Sh;itvs if any are taken up, within three business days of the date of acceptance k-r tiling of this Prospectus by the Ontario
t
l Securities Commission (such date of acceptance being hereinafter referred to as the "Acceptance Date") subject to the terms, condition;, and provisions of the Underwriting Agreement pursuant to which ihe Underwriter has the right to refuse to complete the purchase in certain events.
To enable the Company to continue development of (he Renabie Gold Property prior to the acceptance of the Prospect UN by regulatory authorities, Lambert has advanced lo the Company the sum of 5100,000, which sum represents a portion of the S4(K),tKH) purchase price for the underwriter's shares referred to under the heading "Offering" on page 5.
Optioned SharesPursuant to the Underwriting Agreement, the Underwriter, acting as aforesaid, was granted options to
purchase additional Common Shares o! the Company as follows:Time Within Which
Number of Common Option Hxercisable ^Shares Optioned JPrice Per Share l-'rom Acceptance^ Date
200,000 S 1.25 3 months 200,000 S 1.50 6 months
There is no assurance that any of the Common Shares under option will bc purchased by the Underwriter or by Lambert, eoilectivel) soiiuiimcs relerred lo as ilie "Underwriter-Optionees'", li either the Underwriter or Lambert fail to purchase its portion of the Common Shares optioned to it as above set forth, the oilier party has the right so 10 do and, in which event, the right 10 purchase any further Common Shares .shall belong exclusively to the last mentioned parly. Lambert and Davidson have agreed that, without Davidson's written consent, none of the 4(K),000 underwritten shares acquired by Lambert will be sold by it until Davidson has sold the 200,000 undeiwritten shares puuhased by it together with any shares it may acijuirc m the course of such distribution; however, if 30 days from the Acceptance Dale any of such shares remain unsold by Davidson. Lambert may (hereafter offer to purchase same at Davidson's cost, such offer to be open one week for acceptance, and whether or not Davidson accepts such oiler, the aforegoing ro-Mriciion on sales by Lambert shall cease to apply provided Lambert completes the purchase of shares from Davidson consequent upon its acceptance of an offer received Irom Lambert. Should such an offer be made by Lambert to Davidson, an Amendment to this Prospectus will be filed. Save as aforesaid, die Company is not aware of any assignments, sub-options 01 sub-underwrit ng with respect lo the aforementioned under written and optioned shares.
The Underwriter, acting as principal, will offer the underwritten and optioned Common Shares purchased by it as principal over-the-counter m the Province of Ontario within the maximum price ceilings set Unin on :he lacing pag. ol liiis Piospeuus. Sales ol sin. h i.iidciwi iiten a.id opiioncd Common Shares may also be made through other registered dealers acting a. agents who will be paid commissions by the Underwriter not exc'.vding 20'i of the offering pi ice to the public of the Common Shares so sold.
Lambert, acting as principal, will offer the underwritten and optioned Common Shares purchased by it as principal over-the-counter in the Provinces of Ontaiio, Ail erta and New Brunswick, within the maximum price ceilings set forth on the lacing page of this Prospectus, thu-ugh legistered dealers acting as agents who will be paul commissions by L.unbcit not exceeding 20'.* of the otfeimg pi ice ot the Common Shares so sold. Lambert will also pay the Underwriter a commission ut the normal rates prescribed by Ihe Toronto Stock Exchange with respect to all underwritten a IK! optioned Com mm Shares purchased by Lambert under the Undei writing Agreement:
The Underwriting Agreement provides that while any of the aforesaid options continue in force, ;;ic Company shall not without ilie prior wiiiten consent of the l nderw liter.
(a) increase or decrease its auihon/cd capital ot subdivide ^r consolidate the shares of its capital or convert any class ol shares in iis capital into any other class or classes of shares;
(b) exchange shaies in its capita 1 for -.hares or other securities or obligations in any other company or companies whether upon the sale ol any securities or i-ih.-tw ise,
(c) save with uspect lo ihe shaies relerred to under 'Share Option Plan", sell or otherwise dispose of shaies m its eapilal 01 option or agiee li opium lor sale 01 other drjMsilion any ol the shares in Us capital;
(d) declare or pay any dividend on iis shares or make any distribui.on lo its shareholders;
(e) transfer, sell or otherwise dispose of any part of its assets except in the ordinary course of business.
_ f, _
The Company has granted Davidson a first right of refusal for a period of five years from the Acceptance Date to provide future financing if undertaken hy the Company, such privilege to terminate earlier if at any time declined. Such right will he shared as to "4 hy Davidson and *S hy Lambert, and if either party does not fully exercise same, it will have no fuiihcr interest in such arrangement which will be enjoyed exclusively by the other party. The prices for the underwritten shares and the optioned shares were determined by negotiation between the Company and the Underwriter.
Designation of Security
Common Shares without par value
Amount Authorized^5,000,000
(55,000,000)
CAPITALIZATIONAmount Outstanding
Amount Outstanding Amount Outstanding if all Securities as at May 15, as at June 30, being issued are
1974 1974 sold (1)1,350,005
(5350,005)1.350.005
(5350,005)1,950,005
(1950,005)
(1) This figure assumes that the 600,000 underwritten shares are all taken up and paid for If all of the optioned shares urc purchased, the number of shares lo bc outstanding will bc 2,350,005 and the consideration paid therefor will be 51,500,005.
(2) Reference is made to "Share Option Plan" for particulars of shares reserved for stock incentive options.
DESCRIPTION OF COMMON SHARKSThe Common Shares are the Company's only class of shares. All Common Shares issued by the
Company rank equal as lo dividends and there are no indentures or agreements limiting the pa)ment of dividends save as referred to under "Offering". All Common Shares issued hy the Company rank equal as to voting power, one vote for each Common Share. There are no conversion rights and theft are no special liquidation rights, pre-emptive rights, or subscription rights. The presently outstanding Common Shares are not subject to any call or assessment r..id the Common Shares offered hereby when issued and j,old as described by this Prospectus will not tx: subject to any call or assessment.
MANAGEMENTThe names of the directors and officers of the Company,
occupations during the preceding five years arc as follows:Office Held
President and DirectorN;imc and Address
Murray F.dmund Watts 55 Hayvicw Ridge Willowdale, Ontario.
James Arthur Stephenson 19 Saimfield Avenue Don Mills, Ontario.
Henry Wallace Norrington 24 Collegeview Avenue Toronto, Ontario.
Patrick Andrew Phillips 44 l.ongbourne Drive Toronto, Ontario.
Secretary-Treasurer and Director
Director
Director
their home addresses and their principal
I'rineipal Occupation
Self-employed prospector and mining engineer.
Barrister and Solicitor; from March l, 1474, partner, U.tssel, Sullivan, Lawson A l.eake, for the 5 years prior thereto, partner. Beaton A Lcake.
Director, Standard Securities Limited.
Since July, 1973, Consulting Engineer, self-cmplo\cd; for the )eur and one-half prior thereto, lixecutive, Lost River Min ing Corporation Limited; prior thereto, non-ferrous development manager of Rio Tinto /inc Corporation (North America).
Remuneration of Directors and Senior Officers
Since the incorporation of the Company, no remuneration ha- been paid or is payable to directors. They arc entitled to receive S100 for each meeting attended. The on!\ remuneration paid or payable to senior officers is the sum of 59,000 paid to Assembly Mines Limited ("Assembly") pursuant to agreement between
• l —
it and the Company dated January 23, 1974. Under this agreement the Company, through Assembly, engaged the services of Mr. Watts, who agreed to serve as President, Chief Executive Officer and General Manager of the Company for a period of six years, subject to earlier termination within three months in the event of death or incapacity. Under the agreement, coinmencinp as of January l, !974, Mr. Watts i* to devote such amount of time ns may bc required for the Company's business, for which Assembly is to receive the sum of S40 per hour. The only person having a greater lha.i 5Cfc interest in Assembly Mines Limited is Murray Waits.
PRINCIPAL SHAREHOLDERS
Set forth below arc particulars of the present principal holders of Common Shares in the Company:Percentage
Name and Address ^ a 'H SL Ow"]*rsh'P No^ ofJShares of Class (1)Murray Watts Direct, of record 245,000 IR.1% 55 Bayvicw Ridge and beneficial Willowdale, Ontario.
Rcncan Resource In vestments Limited Direct, of record 100,000 7.496 Suite 204, 60 St. Clair Avenue East and beneficialToronto. Ontario. Beneficial, not 875,000 64^
of record (2)( l ) Calculated on the basis of there being 1,350,005 Common Shares issued and outstanding.
(2) Those shares are registered in the name of United Trust Company pursuant to agreement dated April 24, 1974, and referred to under "Promoters and Interest of Management in Material Transactions".
As at the date of this Prospectus the directors and senior officers of the Company owned, directly or indirectly, 18.9^. of the issued and outstanding Common Shares of the Company.
ESCROWED SHARESCertificates representing 675,000 Common Shares of the Co npany are held in escrow by United Trust
Company, 21 St. Clair Avenue East, Toronto, Ontario (the "1'riKiec") The ten\s of escrow provide that the shares and the beneficial ownership of or any interest in them and the certificates representing them (including any replacement share or certificates) shall not bc :-old, assigned. hypothecated, alienated, released from escrow, transferred within escrow or otherwise in any manner dealt with without ihe express consent, order or direction in writing of the Ontario Securities Commission, the Alberta Securities Commission and the Board of Directors of the Company.
Number of Shares held Capital Stock in escrow Percentage of Class (1)
Common Shares without par value 675,000
(1) Calculated on the basis of there being 1,350,00.'' Common Shares issued and outstanding.
All or pail of the escrowed shaies .ire subject lo surrender for the benefit of the Company under certain circumstances including abandonment ui the Renabie Gold Property, i-'or further particulars, reference should be made lo the escrow agreement (.luted June 2 0 1 974, made between the Company, United Trust Company, Murray Walts and Rencan Resource Development Limited, referred to herein under "Material Contiacts". Relerence is also made to "Promoters and Interest of M.uugciueiH in Material Transactions".
SUPPLEMENTAL ESCROWCertificates representing 300.000 Common Shares of the Company are held in escrow by United Trust
Compjri), 21 Si. Clair A\enue lij\t, Toronto. Ontario (the "Trustee"). The terms of escrow provide that the shares and the beneficial ownership of or any interest in them and the certificates representing them shall not Ix: sold, assigned, hypothecated, alienated, released from escrow, transferred within escrow or otherwise in any manner iicalt will) without the express consent, order or direction in writing of the Ontario Securities Commission. In the event the Renabie Gold Properly is financed to production the shares will be released.
_ g _
PRELIMINARY EXPENSESThe preliminary administrative expenses to May IS, 1974, including the incorporation and
organization of the Company, are 541,281. Future administrative expenses of the Company during the current year are estimated at the sum of 532.000. The preliminary development expenses to May 15, 1974, are 565,043. Future development expenses on the Company's Renabie Gold Property during the current year are estimated at 5497,000, being the balance required to implement the initial development prpgran. referred to under "Use of Proceeds". To the extent that funds are available to the Company, additional expenses thereon may be incurred.
PROMOTERS AND INTEREST OF MANAGEMENT IN MATERIAL TRANSACTIONSThe Company was incorporated to develop the Renabie Gold Property pursuant to agreement between
Sheridan Geophysics Limited ("Sheridan"), Suite 1500, 4 King Street West, Toronto, Ontario, and Murray Watts, the President and a director of the Company. Provision was made for an equal sharing between the said parties, who are promoters of the Company, of vendor's shares to be issued by the Company, Mr. Watts to pay the sum of 525,000 to Sheridan incidental to the acquisition of his one-half interest. Pursuant to the agreement dated December 4, 1973, between the Company and Sheridan, referred to under "Renabie Gold Property", 750,000 shares of the Company were allotted and issued to Sheridan. These shares were arbitrarily valued by the then directors of the Company, who included Messrs. Watts, Stephenson and Phillips, at 550,000. By agreement dated December 4, 1973, between Sheridan and Mr. Watts, Sheridan transferred 375,000 of the aforementioned shares to Mr. Watts who agreed to pay therefor the aforementioned sum of 525,000. Subsequently, Mr. Watts transferred 130,000 of said shares, and now holds 245,000 shares (see "Principal Shareholders" on page 8). Pursuant to its agreement with Willroy dated March 15, 1973, referred to under "Renabie Gold Property", Sheridan committed to expend 5100,000 in carrying out exploration work on the ilencbic Gold Property by December 31, 1974 and the subsequent entering into of the Willroy Agreement relieved Sheridan from fully complying with such commitment. The Willroy Agreement also supcrccdcd the March 15, 1973 agreement, which had provided, upon fulfilment 01 certain conditions, for the transfer of the Renabie Gold Property to a new company in which initially Sheridan and Willroy would be equal shareholders. The Company understands that the agreement with Willroy Mines Limited, assigned to the Company by Sheridan, was acquired by it without payment to Willroy. The only person having a grcaiei than 57p interest in Sheridan Geophysics Limited is J. Patrick Sheridan, Suite 1500, 4 King Street West, Toronto, Ontario. Save u.s set forth herein, so far as the Company is aware, no person or company has received or is entitled to icceive from Sheridan more than 5% of the consideration accruing to it.
On January 16, 1974, Bryan E. W GransJen ("Gransden") Suite 204, 60 St. Ciair Avenue East, Toronto, Ontario, a promoter of the Company, advanced the sum of S200,000 lo the Company, secured by its interest bearing promissory note maturing December 31, 1974, so as to enable the Company to consummate the agreement dated January 17, 1974, with Willroy and proceed wiih development of the Renabie GoU Property. It had initially been contemplated by Mr. Watts and Mr. Gransden thai they would each acquire shares of Kencan Resource Investment? Limited ("Rencan"), a promoter of the Company and referred to under "Principal Shareholders", which would merge with the Company, but this arrangement was rescinded and, as hereinafter referred to and us provided for as an alternative, Mr. Gransden entered into an agreement with Mr. SVatts and the Company dated February 14, 1974, pursuant to which he subscribed for .i.id purchased 500.000 shares of the Company for 5200,000, surrendering the aforementioned promissory note, ("'.•-•rest free, in payment for said shares. Said agreement of February 14. 1974, also made provision for UK- purchase by Mr Gransden of an idaional 200,000 shares of the Company ut S l.00 per share of which 520,000 was paid to the Company.
By agreement dated March 8, 1974, as amended July 15, 1974, Mr. Gransden sold to Rencan his interest in the February 14, 1974 agreement referred to above, 500,000 shares of the Company and the entitlement lo the suni of 520,000 paid bv Mr. Gransden to the Company as afoics.nd, all for the sun; of 5320,00(1 of which 5245,000 has been paid, the balance being secured by Rencan's non interest bearing promissory mile due March 7, 1975 Subsequent to the action commenced by Sheridan, as referred to below, Mr. (iransdcn tendered a certified cheque in :he suni of S180,000 to complete the purchase of 200,000 shares of the Company ai S l.OD pet share Because of the Sheridan action, which resulted in xvriain injunciivc relief being gianted. the Company refused .such suiisci iption. iiy agreement Uatetl April 23, 1074 between the Companv ami Mr. dransden, entered into incidental to the settlement of lin- Sheridan litigation, the subscription for shaics of the Company was reduced to 100,000 shares, and as ci May 13, 1974, Rencan purchased 100.000 shares of the Company ai S 1.00 per shale, paying the sum of 580,000 which, together with the amount ol 520.001) previously paid to the Company by Mr. Gransden, comprised the total subscription price
When shares of the Company were sold for cash as hereinbefore set forth there was no market for shares of the Company and the respective subscription prices were determined bs the then directors of the Company who included Messrs. Watts, Stephenson and Phillips.
_ 9 _
On February IS, 1974, Sheridan commenced action in the Supreme Court of Ontario in which the Company and Mr. Watts were named as defendants, Mr. Gransden later being added as a defendant. 7'ai
action was settled and an agreement dated April 29, 1974, entered into between Sheridan, Rencan, Mr. Gransden, Mr. Watts and Michael Arcus. Pursuant to this agreement, Mr. Watts paid to Sheridan 525,000, being the amount to bc paid by him for 375,000 shares of the Companj pursuant to agreement dated December 4, 1973, and previously referred to. Pursuant to the April 29, 1974 agreement, Rencan agreed to purchase 375,000 escrowed shares from Sheridan for the sum of 5299,500 of which the sum of 5149,500 has been paid, the balance to be paid in subsequent non-interest bearing instalments, save that in the event of default interest at the rate of 109fc is payable thereafter, of 550,000 each on December 27, 1974, and June 26, 1975; 525,000 on December 29, 1975, and the balance of 525,000 lo bc paid on the earlier of June 26, 1976, or as soon as the Rcn ^bie Gold Property has been operated for six consecutive months at the rate of 300 tons- per day and produces for such six month period a positive cash flow. The aforegoing amounts are each secured by promissory notes which notes have been guaranteed by Mr Gransden. As collateral security for the balance payable, certificates representing 875,000 Common Shares (including 375,000 escrowed shares) of the Company have been registered in the name of and are held by United Trust Company, to be dealt with by it as hereinafter described. The Common Shares are to be released from the provisions of the April 29, 1974 agreement on the following dates, namely: December 27, 1974 — 175,000 shares; June 26, 1975 — 175,000 shares; December 29, 1975 — 100,000 shares; and the balance of said shares to be released when the final payment is made. Any of the aforegoing payments may be prepaid. United Trust Company has advised that sulficicnt funds have been deposited with a Canadian chartered bank by Mr. Gransdcn for the specific and exclusive purpose ot' providing an irrevcx'ablc guarantee of all such payments, and accordingly the default provision in the said agreement are inoperative. Cei'ifieatis representing the first 200,000 Common Shares lo bc released, will be delivered by Rencan. Certif-jalcs representing the next 300,000 Common Shares to be released will continue to be held by United Trrst Company subject to the terms referred to under the heading "Supplemental Escrow" on papc 7. The balance of 375,000 Common shares form a portion of the vendor shares referred 'o under the heading "Escrowed Shaies" on page 8.
Kencan has the right lo receive any dividends paid on the shares and to vote the shares held by United Trust Company from time to time (sec. however, "Voting Trust Agreement' below) The only persons having a greater than 5^/1 interest in Rencan are Mr. Gransden, Michael Arcus, HM Heath Street Wcsl, Toronto, Ontario, and St. James Resources Limited, Suite 204, 60 St. Clair Au-nue East, Toronto, Ontario. Mr. Arcus is the only person having a greater than 59fc interesi in ihis latter corporation.
Reference is madr to "Remuneration of Directors and Senior Officers" for particulars of the agreement dated January 23, 1974 viih Assembly Mines Limited.Voting Trust Agrecmeiii
By Agreement made as of the 29th day of April, 1974, Rencan Resource Investments Limited has agreed that Ni Watts will be the voting trustee, at meetings of shareholders in respect of the 375,000 vendors shares of the Company purchased by Rencan from Sheridan Geophysics Limited. The Agreement provides that the shares will be voted by Mr. Walls for a period of five years from January 16, 1974 provided Mr. Watts stands for election as a director. By Agreement dated February 14, 1974, Mr. Watts obtained the voting rights in respect of 500,000 shares of the Company then held by Mr. B. K. W. Gransden (and presently held by Renean Resource Investments Limited), as long as Mr. Watts is president of the Company. This agreemenl is also to be binding upon any subsequent purchaser or purchasers ov these shares.
PRIOR SALES OF SHARESIncidental to its incorporation, 5 Common Shares of the Company were sold at a price of 51.00
per share.On February 14, 1974, 500,000 Common Shares were purchased by Bryan li. W. Gransden (see
"Promoters and Interest ol Management in Material transactions") at 4Uv' per share lor a totnJ of S 2 00,000.As of May 13, 1974. 100,000 Common Shares were purchased by Rencan Resource Development
Limited (see "Promoters and Interest of Management in Material Transactions") at SI.00 per share for a total of S100,000.
DIVIDENDSNo dividends have been paid lo date by the Company.
AUDITORS, TRANSFER AGENT AM) REGISTRARThe Auditors of (he Company ate Fuller, Jenks, Landau, Chartered Accountants, 101 Richmond
Streei West, Toronto, Ontario.The transfer agent and registrar for the Common Shares is United TILSI Company, 21 St. Clair Avenue
East, Toronto, Ontario, and 202. 6 lh Avenue S.W., C'alg.irv. Aiberia.
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SHARE OPTION PLANOn June 7, 1974, at which time there was no market for shares of the Company, the following non
transferable options to purchase Common Shares of the Company were granted.Optionees
Employees of the CompanyDirectors and Senior Officers
No. of SharesjOptioncd Purchase Price per Share Expiry Date of Option
40,000 S LOO (1)
30,000 (3) 51.00 (2) October 6, 1977
(1) 20,000 shares may bc purchased on or before June 7, 1977; 15,000 shares may be purchased on or before June 7, 1978; and 5,000 shares may be purchased on or before June 7, 1979.
(2) The respective optionees have agreed that no shares purchased by them under their respective options will be offered for sale so King as any of the options referred to under "Offering" are outstanding.
(3) 10,000 of these shares may bc purchased by the estate of a deceased former director on or before October 6, 1974.
MATERIAL CONTRACTSThe only material contracts entered into by the Company to date (other than contracts entered into
by the Company in the ordinary course of business), copies of which may bc inspected at the head office of the Company during normal business hours while the shares offered hcreunder arc in the course of primary distribution, are as follows:
(1) Agreement to acquire mining interests in Leeson and Rennie Townships held by Willroy Mines Limited, between Sheridan Geophysics Limited and the Company, dated the 4th day of December, 1973, referred to under "Renabie Gold Property".
(2) A greement dated as of the 17ih day of January, 1974, between Willroy Mines Limited and the Company, referred lo under "Renabie Gold Property".
Agreement made as of the 23rd day of January, 1974, between the Company and Assembly Mines Limited, referred to under "Promoters and Interest of Management in Material Transactions — Management Contract".
Agreement dated February 14. 1974, between the Company, Murray Watts, and Bryan E. W. Gransden, referred to under "Promoters and Interest of Management in Material Transactions".Agreement dated February 16, 1974, between the Company and Nelson Machinery Company Ltd., referred to under "Renabie Gold Property".Agreement made as of the 22nd day of February1 . 1974, between the Company and Mr. P. S. Broadhurst whereundcr the Company retained the services of Mr. Broadhurst as Consulting Engineer and Acting Resident Manager of the Renabie Gold Properly fur a term of two years from the date of said Agreement at a remuneration of 53,000 per month.Agreement made as of the 23rd day of April, 1974, between the Company and Bryan E. W. Gransden, referred to under "Promoters and Interest of Management in Material 7 ransactions".
Agreement made the 29ih day of April, 1974. between Sheridan Geophysics Limited, Rencan Resource Investments Limited, Hryan l :.. W . Gransden. Murr.iy F.. Watts, and Michael Arcus, referred lo under "Promoters and Interest of Management in Material Transactions".Agreement dated June 20, 1974, between the Cor"oany and Davidson Partners Limited, respecting the underwriting and optioning of shares of the Ciimpaiit, md referred to under "Offering".
Agreement dated May -4, 1974 between United Trust Company and Muri,i) Watts, et al. respecting the holding of shares in escrow.
(11) Agreement dated July 30. 1974 between United Trust Company and Rencan Resource Investments Limited respecting the holding of shares in escrow.
(12) Agreement dated August 8. 1974 between United Trust Company and Rencan Resource Investments Limited respecting the holding of shares in escrow i see "Supplemental Escrow" on page 8).
(3)
(4)
(5)
(6)
(7)
(H)
(9)
RENGOLD MINES LIMITED
Balance Sheet-May 15, 1974
CurrentCashPrepaid expenses and inventoryAdvances
Mining properties — Note lFixed — at cost
Deposits on equipment — note 3 Mining equipment Camp equipment Office equipment
Deferred expendituresExploration and developmentAdministrationOrganizatiou
ASSETS
LIABILITIESCurrentAccounts payable — secured by equivalent fixed assets
-— other .
Long-termAccounts payable — secured by equivalent fixed assets Less due in current year . .
Capital stock SHAREHOLDERS' EQUITYAuthorized
5,000,000 shares, no par value, .ggregate value not to exceed S5,"00,000 Issued and fully paid — Note 2
750,000 shares for mining properties600,005 shares for cash
1,350,005 shares
Approved on behalf of the Board.u-iuTV M Wa(ls D, rccl , ir
. A - ,u i HC'O^-t'/J ' J A. ".lephcnson. Director
S 102,329 7,982 4,654 S 114,965
27,050276,561
37,2671,380
50,000
342,258
65,04338,3582,923 106,324
S 613,547
S 123,17940,363 S 163,542
200,000100,000 100,000
263,542
50,000300,005 350,005
5613,547
.,, IV . AUDIl'OR'S REPORTThe Directors,Rcngold Mines Limited.
We have examined !hc balance sheet t :', R engold Mines l iniiU'i! a. at May IS, 1974 and the statements of deferred exploration, development and administration expenses, and source and appK.iiion of funds for the period from inception (August 28, 1973) lo th.it date. Our examination included a general review o! the accounting procedures and such tests of the accounting records and other supporting evidence as we considered necessary in the circu.nstances.
In our upinion, these financial statements present fairly the financial position of !he company as at May 15, 1974 and the results ol operations and the source and application of kinds lor the period from inception (August 28, 1973) to that date, in accordance with genci.dly accepted accounting principles.Toronto, Ontario. .. i,-.,*., *. HA May 28, 1974, " f ^uK JtuKV i A^PA(June 7, 1974 as to Note S) Chartered .'"cotmiM".!.
— 12 —
RENGOLD MINES LIMI1ED
STATEMENT OF EXPLORATION, DEVELOPMENT AND ADMINISTRATION EXPENSES For the Period from Inception (August 28, 1973) to May IS, 1974
Exploration and developmentConsulting and mine management S 17,314Engineering services . 12,507Travel 5 ,397 Contractors ' . . .......... .. . 5,111Freight ... , .. . . , 3,797Equipment rental . . . . . . . 1,703Wages . . . 5,776Board and lodging 4,463Road plowing . . 640Repairs and maintenance 562Insurance 7,327Miscellaneous 446 S 65,043
AdministrationProfessional fees 30,326 Rent 2,800 Telephone . 1,699 General and office . 1,775 Interest and bank charges 5,111
41,711 Less interest earned 3,353 38,358
103,401
STATEMENT OF SOURCE AND AI'I'LICATION OF For (he Period from Inception (August 28, 1973) lo May 15,
Sourer of fundsIssue of capital stock * 300,005Interest earned on deposit certificates 3,353 J 303,358
Application of fundsPurchase of fixed assets S 342,258Less amount financed on long-term 100.UOO 242,258
Deferred expenses incurred— exploration and development 65,043— administration 41,711— organization ?,923 109,677 351,935
Decrease in working capital (48,577) \Voiking cupiial .il inception —
Working capital deficiency at May 15. 1974 S (48,577)
Working capital deficiency at May 15, 1974 is represented by:Current assets S 114,965Current liabilities 163,542
S (48,577)
— 13 —
-L f
RENGOLD MINES LIMITED
NOTES TO FINANCIAL STATEMENTS MAY 15, 1974
1. The Company has entered into an agreement dated January 17, 1974 with Willroy Mines Limited {Willroy), pursuant to which it has committed to spend S200.000 to explore and develop Willroy's Renabic Gold Property, comprising 28 patented mining claims situated in Leeson and Rennie Townships, Sudbury District, Ontario, before July 15, 1974 which commitment has now been satisfied. In consideration of this expenditure, the Company may elect on or before December 31, 19V1 to place the Renabic ' .inc into produciion at a rate of not less than 300 tons per day, such production ; A begin on or before January l, 1976. The Company is entitled to recover all of its outlays and to set aside adequate working capital reserves from the first proceeds of production; thereafter, it must divide the ciish flow equally with Willroy .
The amount of S50.000 shown on the balance, sheet as the cost of mining properties represents the value assigned to 750,000 shares issued by Rcngold for its interest in the above agreement.
375,000 of these fharcs were issued to Murray Watts, the President of the Company, for his 5096 interest in the agreement.
2. The Company issued the following shares of capital stock during the period:
600.005 for cash750,000 for mining properties
1,350,005 shares
S 300,005 50,000
S 350,005
The deposits include 525,000 paid as a deposit against a contract to provide a power line to the mine property, the total cost and terms of which have not yet been finalized.
The Company has outstanding purchase orders for equipment and supplies totalling approximately S70.000.
On June 7, 1974, the following options to purchase the Company's common shares were gran'ed:(a) lo employees — 40,000 shares at SI.00 each, excrcisablc as to 20,000 shares by June 7, 1977,
15,000 shares by June 7, 1978; and 5,000 shares by June 7, 1979.(b) to directors and senior officers— 30,000 shares at SI.00 each, exereisable by October 6, 1977.
14 —
PURCHASERS' STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION
Section 64 and 65 of The Securities Act (Alberta) and sections 64 and 65 of The Securities Act (Ontario) provide, in effect, that where a security is offered in the course of distribution to the public:(a) a purchaser will not be bound by a contract for the purchase of such security if written or telegraphic notice of his intention not to be bound is received by the vendor or his agent not later than midnight on the second business day after the prospectus or amended prospectus offering such security is received or is deemed to be received by him or his agent, and(b) a purchaser has the right to rescind a contract for the purchase of such security, while still the owner thereof, if the prospectus or :iny amended prospectus offering such security contains an unlnic statement of a material fact i ir omits to state a material fact necessary in order to make any statement therein noi misleading in the light of the circumstances in which it was made, but no action to enforce this right can be commenced by a purchaser after the expiration of 90 days from the later of the date of such contract or the date on which such prospectus or amended prospectus is received or is deemed lo be received by him or his agent.
Reference is made to the said Acts for the complete text of the provisions under which the foregoing rights arc conferred and the foregoing summary is subject to the express provisions thereof.
DATED the 20th day of August, 1974.
CERTIFICATE OF THE COMPANYThe foregoing constitutes full, true and plain disclosure of all material facts relating to the securities
offered by this prospectus as required by Pan Vll of The Securities Act (Ontario), b) Pan 7 of The Sccurit'-js Act (Alberta), und the respective regulations thereunder, and by Section 13 of The Securities Act (New Brunswick).
i- MUVKA* ^An-.-" ' J A ;.~it f'Hto5OAjChief Executive Officer Chief Financial Officer
Signed Murray Watts Signed J. A. Stephenson
On behalf of the Board of Directors:- .' A i -t i u 11
Signed P. A. Phillips Director
ri i .. '. ' \ f\ l O 6fi
Signed H. W. Norrington Director
•v'a^. l- w. 1 ;.i ft Aov-. De j^j Bryan E. W. Gransdcn
i( t i',i. Af :-vA7Tj" Promoters Murray Watts
Rencan Resource Investments LimitedBy: Michael Arcus
i'! i L1 H At" i -VvPU^ '
CERTIFICATE OF THE UNDER WRITER-OmONKESTo the best of our knowledge, information and belief the foregoing constitutes full, true and plain
disclosure of all material facts relating to the securities offered by this pro-pecius as required by P.ui V ll o f The Securities Act (Ontaiio), by Part 7 ol l he Secinilies Aa (Alberta), and the respect ve regulations thereunder and by Section 13 of The Securities Act t New Brunswick).
DAVIDSON PAKTNHRS LlMIThl) By: R. A. Marceilo
;v \ M /xtvi't L i. (,: '
R A LAMBERT AND COMPANY, LTD. By R. A. Lambert
The only persons having an interest, directly or indirectly, to the extent of not less than 59fc in the capiUil of Davidson Partners Limited are: N. C. Brewster, j. C. Labbett, Allan V. Castlcdine. Brewster Securities Limited, Ci \. Wiley, R. A. Marceilo, R. W. Moody, D. li. Climo, W. K. Walker, Jalab Securities Limited;and of R. A. Lambert and Company, Ltd. is Russel! A. Lamben.
— 15 —Frlnfed In C*no4o
42B05NW0044 0022 RENNIE 030
KILEMBE COPPER COBALT LTD.
— and —
RENGOLD MINES LIMITED
INFORMATION CIRCULAR
lDEC 10 19T8
RESIDENT GEOLOGISTBAULT S TE. MAflIC
42B05NW0044 8822 RENNIE 030C
TABLE OF CONTENTS
AbbreviationsSolicitation of ProxiesRevocability o) ProxiesVoting Shares ard Principal Holders ThereofProxiesVoting of Shares
Kilembe Shareholders' Meetingnengold Shareholders' MeetingGeneral
Prior Property Interests of Kilembe Acquisition of Resources by Kilembe
Conditions of Rengotd AgreementProvisions of Rengold Agreement
Property Interests of ResourcesDescriptionLocation and AccessalnlityLocal FacilitiesHistory and Prior Development WorkPresent Plant and EquipmentCost Estimates ot Resuming ProductionOre ReservesMetallurgyOperation Costs and Cash Flow Pioi^rtioiWillroy AgreementLitigation
InsoVericy Proceedings Affecting the Rengold C.. "'pjnies
Re-sources ProposalRengold ProposalBank Indebtedness and Receive'shipFunding the ProposalsEffect o! Implementing the Proposals
Special Rights of Dissenting Kiiembe Shakehole-' Continuance of Kilembe under ine C maria
Business Correlations Act Confirmation of Kilembe s New Bv iav. No ' Dissolution of RengoldTaxation Implications
Taxation Impl cations 'o R Shareholders
Page t1112222223 3 J 33444
4
l 1
Taxation Implications to Dissenting Kilembe Shareholders
Management ot KilembeVoting Trust Agreement
Remuneration of ManagementManagement of RengoldPrincipal Holders of Kilembe Shares
Rengold's Acquisition of Shares in KilembeDissolution of Rengold
Principal Holders ot Kilembe Shares — Pro lorma Presentation
Description of Kitembe Shares Market for Shares of Kilembe Speculative Nature o' Kilembe Shares Kilembe Financing
Sale of Treasury Sti.vesSecondary DistributionSaie of Dissenters Sha'e 1,Closings
Use of P-oceeds
Capitalisation o! Kiiombc
Pro form,! Capitalisation ot Kiltrntw
Dividends
irtfr'est of Management and Others in Certain Transactions
Cf'tam Matters Relating to Rengold Interlocking yi Bo.ml:. o 1 Directors
Auditors T t.instt" Acjen' H 'nl R egistrar
Pro torri',1 Firianciai Statenr.cnts -- Kilembe
FinanrMl Si iten-cnts -- Resources
Fin.innai S'.iternonts - Ror-ijoid
K'lembi St ff ' i\' R esolution ami ArtiCies Of Cont"i ..i'.f.i.-
Claim Me- L-
Si'heOi.V A *. .['•.•f"'.*:.1 it Between Rengo'riKiiHinbe and Rpsouri c ', 4 3
B - New Proposed By-laws lor Kilembe 48
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INFORMATION CIRCULAR
This Information Circular is being furnished in connection with the solicitation of proxies by the managements of Kilembe and Rengold to be used at the Special General Meetings of their shareholders to be held on the date, at the time and in the place set forth in the respective notices of meetings sent to Kilembe and Rengold shareholders.
ABBREVIATIONSWhen used in this Information Circular the abbreviations set forth below have ihe meanings indicated in respect
thereof.
"Bank" refers to a Canadian chartered bank.
"Financing Group" refers to Williams Hudson Canada Limited. M A M Porcupine Gold Mines Limited and Bryan E. W. Gransden.
"Kilembe" refers to Kilembe Copper Cobalt Ltd., a company incor wrated under the Companies Act, 1934, of Canada
"Rengold" refers to Rengold Mines Limited, a company incorporated under the Canada Corporations Act.
"Resources" refers to Rengold Mines 4 Resources Ltd., a company incorporated under the Canada Corporations Act
"Rengold Agreement" refers to the agreement to be entered into between Rengold, Kilembe and Resources and a copy of which appears as Schedule "A" to this Information Circular.
"Rengold Companies" refers collectively to Rengold and Resources.
SOLICITATION OF PROXIESTHE ENCLOSED PROXY IS SOLICITED BY OR ON BEHALF OF THE MANAGEMENT OF THE COMPANY
WHOSE NOTICE OF MEETING ACCOMPANIES THIS INFORMATION CIRCULAR. In addition to the use of the mails, proxies may be solicited by personal interviews, telephone or telegraph by directors and officers and employees of such company. Arrangements may also be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of shares held of record by such persons If Kilembe completes the acquisition of the shares of Resources, the entire cost of the solicitation of proxies by both Kilembe and Rengold will be borne by Kilembe. otherwise such cost will be borne by the Financing Group.
REVOCABILITY OF PrtOXIESThere is enclosed herewith a form of proxy for use in connection with the meeting of shareholders called by the
accompanying Notice of Meeting A shareholder giving a proxy has the power to revoke it at any time before it is exercised A proxy may be revoked by instrumeni in writing executed by the shareholder or by his attorney authorized in writing or. if the shareholder is a corporation, under its corporate seal, or by an officer or attorney thereof duly authorized, and deposited either at the Head Office of the Company at any time up to and including the last business day preceding the day of the Meeting or any adjournment thereof, at which the proxy is to be used, or with the Chairman of the Meeting on t'ne date of the Meeting, or adjournment thereof
VOTING SHARES AND PRINCIPAL HOLDERS THEREOFKilembe has outstanding 3.877,027 shares of the par value of Si 00 each Rengold has 2.570.005 shares without
par value outstanding. Shareholders o) each company are entitled to one vote for each share held of record by them at the Meeting of the respective companies of which they are stockholders
So far as is known, the only person who beneficially owns or exercises control or direction over shares carrying more than '\Q'*o of the votes attached to shares of Kilembe is Rengold which owns, controls or directs 2.820.827 shares representing 72 8\ of Kilembe's issued shares Certificates representing these shares are held by the Bank as collateral security for Rengold's indebtedness to it and all but 5 of said shares are registered in the name of the Bank's nominee In view of the aforegoing, Rengold's beneficial ownership of shares of Kilembe and its ability to exercise control or direction thereover is affected In any event, these 2,820,827 shares of Kilembe will not be voted on any matters submitted to the Meeting of Shareholders of Kilembe or at any adjournment or adjournments thereof. See also "Interest of Management and Others in Certain Transactions — Certain Matters Relating to Rengold" and "Management ol Kilembe — Voting Trust Agreement"
So far as is known, the only persons who beneficially own or exercise control or direction over shares carrying more than 10**) of the votes attached to shares of Rengold are Norminco Developments Limited (formerly Rencan Resources Investments Limited) which owns, controls or directs 782.500 shares representing 27.7*^ of the Company's issued shares and Murray Watts who owns, controls or directs 337.500 shares representing 12\ of the Company's issued
•hares. See "Interest ol Management and Other? in Certain Transactions - Certain Matters Relating to Rengoid for particulars ol voting trust and other arrangements relating to shares of Rengoid
PROXIESShareholders unable to attend the meeting are requested to complete, sign, and return the accompanying proxy
form. Proxies deposited with the Secretary of the Company ai any time up until the opening ot the meeting will be voted 'l otherwise valid.
THE ENCLOSED PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE PERSONS NAMED THEREIN WITH RESPECT TO AMENDMENTS OR VARIATIONS THAT MAY PROPERLY COME BEFORE THE MEETING MANAGEMENT OF THE COMPANY FORWARDING THE ACCOMPANYING NOT'CE OF MEETING KNOWS OF NO SUCH AMENDMENTS, VARIATIONS OR OTHER MATTERS TO COME BEFORE THE MEETING IF AMENDMENTS. VARIATIONS OR OTHER MATTERS COME BEFORE THE MEETING, THE ENCLOSED PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSON VOTING SAME
A HOLDER OF SHARES HAS THE RIGHT TO APPOINT A PERSON TO REPRESENT HIM AT THE MEETING OTHER THAN THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY TO EXERCISE THIS RIGHT SUCH HOLDER SHOULD STRIKE OUT THE PRINTED NAMES AND INSERT THE NAME OF HIS NOMINEE IN THE SPACE PROVIDED.
VOTING OF SHARES
Shares represented by proxy forms in favour of Management will be voted (subject to any restrictions they may contain) as follows:
Kllembe Shareholders' MeetingShares will be voted to sanction a Special Resolution continuing Kilembe under the Canada Business
Corporations Act (see "Continuance of Kilembe under the Canada Business Corporations Act' below) to pass a resolution (tor such resolution to carry, same must receive approval from nol less than two-thirds of the votes cas! at the meet ing) confirming new By-Law No 1 (see "Confirmation ot Kilembe s new By-Law No l "j. to sanction a Special Resolution approving the Rengoid Agreement (see "Acquisition ol Resources by Kilembe below) and to approve the hnancial statements ol Kilembe for its liscal years ended December 31 1977 and December 31 1976 together with the reports ot Kilembe's auditors thereon. Each set of financial statements will DP volod on separately and a motion ol approval to carry must receive a majority ol the votes cast
MANAGEMENT OF KILEMBE. AT THE REQUEST OF THE BANK IS ADOPTING A NFUTHAL POSTURE RESPECTING THE RENGOLD AGREEMENT AND ACCORDINGLY MAKES NO RE COMMENDATIONS TO KILEMBE SHAREHOLDERS IN RESPECT THEREOF KILEMBF. SHAREHOLDF.RS SHOULD CAREFULLY READ THE CONTENTS OF THIS INFORMATION CIRCULAR WHEN DECIDING HOW TO VOTE THF.IR SHARES
Rengoid Shareholders' MeetingShares will be voted for the election o) directors unless the pro** provides !or withholding shares from voting and
will be voted to authorize Rengoid to be wound up voluntarily pursuant to the provisions ot the Wmdmg-Up Act and Section 10(b) thereof, to authorize the directors to approve a Proposal to be made by the Company under the Bankruptcy Act (to carry these resolutions must be approved by a mu]!"i',y ol the vot"b '.:ri?.t i jmd to sanction a Spec:al Resolution approving ol the Rengoid Agreement (see 'Acquisition tt M,..sources by * iiemnc ticujw) Rengoid wOi not be able to wmd-i.p voluntarily until its liabilities have oet-n discharged
GeneralFor any ol the Special Resolutions relt.'rrcd to at' we to pass Seif'*' rnus! r **cfv" - U'p'i.vn '"im r,-it less thari two-
thirds ol the votes casl at the particular me^'iOQ sioi'f^ 'ipon s.imo
PRIOR PROPERTY INTERESTS OF KILEMBE
For ? n umber ol ye.'i'S Kilembe held thr- .. o'Mrrihnr) s^arc ,:;torost in Kiiei'it.t- Mi 1 ,'.-s l.mitur) ("KML"). a Ugandan corporation KML leased and opj.TjU'il .1 copper mine ant) sirolter m wnat *i now tin'' Heputiiic ol Uganda On February 28 19/5 an agreement w,is signod between Kiiemoe and the Go.fmrrn-ri! ot "ir Hepubi.c ol Uqanda pursuant to which Kilembe's entire holdings in KMi w*v* so'd t' 1 IMP FlepuOm; of Uganda lo- SOT,e M 2 m illion Ugandan shillings, the equivalent ol 52,400,000 U S [Livable at ti'id enc.hanye M t e Provision was made lor the payment ot a portion of the purchase price on ciosi'.vj with the balance payable ir- increasing instalments over the next three years All pav'.onts have Deen made and the net amount received by Kiiembe me.'dental to the sale ol its 70*^ shareholding interest m KML expressed m Canadian funds, is S? 3/6 309 Since it agreed to sell its shares m KML Kilembe has been relatively inactive save tor 'he stating ol rrvn-nr) claims ;n 1^75 as rMt?rrod to under' Interest of Management and others in Certain Transactions
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ACQUISITION OF RESOURCES BY KILEM8EShareholders of Kitembs and Rengold wM be asked to sanctkxi Special Resolutions approving the Rengok)
Agreement. The Boards of directors of Kilembe. Rengold and Resources interlock at the present time and will interlock following the election of directors by the RengokJ shareholders (see "Interest of Management and Others In Certain Transactions"). The directors of Kilembe and Resources will accordingly be unable to pass resolutions approving the Rengold Agreements, but the execution, delivery and implementation of the Rengold Agreement will be binding on the three companies if approved by the shareholders of Rengold and Kilembe. The Rengold Agreement has been approved by the Resources shareholders.
Condition* of RengoW AgreementThe Rengold Agreement will be subject to and conditional upon fulfillment of the following conditions:
1. Approval thereof by the shareholders of Kilembe and of Rengold.2. Rengold making a proposal to its creditors under the Bankruptcy Act — see "Insolvency Proceedings Affecting the Rengold Companies — Rengold Propos^ ".3. The proposal referred to in 2 above and a proposal under the Bankruptcy Act made by Resources to its creditors being approved by the creditors of both companies, by the Supreme Court of Ontario and the terms of the two proposals being duly implemented.4. The acceptance for filing of a Prospectus of Kilembe by the Ontario Securities Commission5. The Bank entering into agreements extending the time for the payment of monies which will be due and owing to it following Kilembe's acquisition ot the shares of Resources from Rengold — see "Pro forma Capitalization of Kilembe".
Provisions of Rengold AgreementThe Rengold Agreement will basically provide a framework within which Kilembe will acquire Resources as a
wholly-owned subsidiary while providing for the settlement of the claims of the creditors of the Rengold Companies and collaterally enabling the Rengold shareholders to receive shares of Kilembe on a basis of one share of Kilembe for every three shares of Rengold held.
Kilembe will buy the shares of Resources from Rengold for the sum of 51 00 and also purchase, at its full amount, the amount receivable by Rengold from Resources, the purchase price therefor being payable to Rengold's bankers in reduction of Rengold's indebtedness. To the extent that such payment exceeds 13,650,000, Rengold's bankers will loan the amount of such excess to Kilembe. such loan to be repayable Dec smber 31, 1979 and to be guaranteed by Resources which will secure such guarantee by a first fixed and specific charge on the Mining Claims and a first floating charge on its assets The shares of Resources will be hypothecated by Kilembe as collateral security for the loan and. if required, Kilembe will issue a debenture to the Bank granting it a first floating charge on Kilembe's assets and a first fixed charge on the shares of Resources By virtue of an adjusting formula contained in clause 3 2(b) of the Rengold Agreement (see page 44 of this Information Circular), the indebtedness of Resources to Rengold at the time of closing will equal the amount then owed by Rengold to its bankers and estimated at approximately 55.300.000
PROPERTY INTERESTS OF RESOURCESThe information set forth below respecting the mining properties ot Resource1;, known as the Renabie Mine, is
compiled from the Report of Philip S Broadhurst. mining engineer, dated September 29. 1978 The complete Report is available for inspection during normal business hours at Suite 900. 302 Bay Street. Toronto. Ontario Mr Broadhurst, who owns 500 shares of Rengold. in commenting on his past associations with the Renabie mine states "In September 1973. the writer had prepared a report on the property tor Rengold Mines Limited and subsequently had continued as Consulting Engineer and initially as Acting Manager tor the Rengold companies In March 1976 through June 1976. the writer was employed by Price Waterhouse Limited, in its capacity as receiver and manager of the Rengold Companies, to manage the mining operations and since that date has been employed from time to time as a consultant to various parties interested m the property
DescriptionResources owns, subject to the provisions of the Witlroy Agreement referred to below. 29 contiguous
patented mining claims (the "Mining Claims") located in the Sudbury M"img Division. Ontario, comprising the surface and mineral rights to some 752 acres (1 01 acres of surface rights being excluded from claim S34328) The Mining Claims bear numbers S34306 to and including S34309. S3431T to and including S34318; S34328 to and including S34330. S34339. S34794 to and including S34796 m Leeson Township; S34310. S34311, S34319 to and including S34327 in Rennie Township and S50053 in Brackin Township Title to the Mining Claims is the usual title to patented mining claims enjoyed in Ontario, subject to the hen ol debentures issued by Resources, the mechanics liens referred to below under "Litigation" and the insufficiency of Resources'-License in Mortmain which lo only for an amount of S60.000.
A claim map is reproduced immediate.y preceding Schedule "A" to this Information Circular
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Lootton snd Acc*t*lbWtyThe Mining Claims lie within the bmits ol the Chapleau Game Reserve and are accessible by a grave! road. 11
miles in length, which provides connections to secondary Highway 651 The Town ol Missanabie is i m iles trom the junction with Highway 651 and 13 miles trom the property. The mine site is about 80 miles from the town of Wawa to the west or Chapleau to the east via Highway 651 and 101 The mam line ot CP Rail passes through Missanab-e which lies 250 miles west of Sudbury. At present a daily train service is available Air service via Noro"'air trom Wawa or Chapleau provides connections to Air Canada at Sault Ste Mane or Timmins Highway transport trucks provide services with truckload lots of explosives, chemicals, grinding l *Hs and groceries direct to the plant site Smaller shipments are picked up from Lakehead Freightway terminal at Wawa by truck
Local FacilitiesPower — Hydro-electric power is purchased from the Great Lakes Power Company and supplied over a 75-
mile line from Hollingsworth Generating Station at 44.000 volts The new transformer station at the property is equipped with 6-750 KVA transformers set up in 2 banks Total capacity is 4500 KVA which is double the capacity ol the original Renabiesta'. on. Distribution is at 2200 volts. 550 volts and 110-220 volts
Water — From the main supply at Campbell Lake water is pumped a distance o' some 7000 feet m a 6" ime An emergency supply is available from Smith Lake for mill operation and fire service if requited
Tailings — Tailings are disposed of through gravity-flow pipelines which cany the discharge from the mill to an area encompassing about 50 acres in the south-eastern section ot the property The lines are from 1000 to 4SOO feet in length depending on the specific location for the discharge lo 1975 authority was granted to use the original tailings pond with the specification that the area be divided into two parts separated by n dam with a decant system The dam requires additional buildup before the system can be activated
History and Prior Development WorkThe original discovery ot gold in the area was reported to have been made m Leeson Township in 1931 In
August 1939 a syndicate found gold m what became known as Ihe "A" vem o' the Renabie Mine initial development including the sinking ol a 3 compartment shaft on claim S34318 to a depth o' ?81 leet arid lateral exploration on the 125 and 250 toot levels, was carried out on the A. 8. C and D jones Work was terminated m 1942 because o: WOMU War II Today. No 1 shaft can be used as part of the escapeway system
Work was resumed m 1946 and No 2 shaft a three compartment vertical opening war. staged ri! a "oration near the southwest corner ot claim S34317 and 15CO (eel west of No 1 shaft By July 19*7 a 300 ton per da. "i,M was in operation Subsequently m 1957 the mil! was expanded to handle ,i maximum o) 5 r;0 tons per day to , omrirte with !he installation of a new hoist and 4 ton skips Production continued to Jusy 1970 During this peru o 3 633 386 tor,-, of ore were milled with an average recovery of O 2' 'l o: o f gold per ion Stoping operations had bet'-i carped to the 2625 level and preliminary stope development was being started on the l'9fi!- level w ion the mine was shu' dowr-
O! major importance m evaluating the property is the tact that in 1966 Ronahie M.nes Lir'nte'1 decided to smx the No 2 shift from below the 2725 loading pocket to open up levels .-"805 ?95S 3101; and 3/V-. A loaO'ruj pocket was cu! at ,'j.Vb ir'Ci the shaft was continued to the 3460 level where a sp'H pocket rmd pumping M, it mn we'e i r. 51 a i .\j The shaft was : ;.)'!omed at 3515 51 fee! After completing the slut! the co"ui.'i"v installed a qn/.'iy ch.j-rti.'r t;-^ow the 3255 level and equipped the 337fi loading pocket with contio 1 g.tl:-:-. ,\nd mp.-isurmq po' "Ms It 'Men drove ore md waste passes from i h e loading socket al 33 '5 to the *6?5 level and (.DI r pitted ;* vcn';'.-ti;.n r;iir,*- f T, p i r* ^ ?' 'if irm-; to Ihe 2b25 level In the dual 'ew months ot operation a crosscut A.*S ijnvrr, to '/ie ore /,'nt- on the ?'J 55 level and exp'orat'On m the form o l diamond drilling .ind si'ling out the ore tvjliTt- w,i s b' -vtKl At trif same time a r rosr-cut *rtS dnven 1600 feet on the 3105 level and was with:n 700 leet ot th^ projected c;in / o-MI a! the :ime ot c ! "Sure
Management of Rengoid and Rt-soi 1 ' .( s advise that m.lin,.j oper.it ons o r i the Mirnr.g r',v-7'S were co-nrnc'iced by Resources or, December '.'i, 19/5 with pioductiO'i subsequently reaci-ing "iO" tors [ e' O.iy '-(a o .-.iy a sriort tiint 1 Ore rec.overy was no! up to cxpectal'O.is and production neve; rt^ac I'fd the proji/r ted 500 Vjn per da, !.;v.'l since all neodod equipmenl had not been installed The problems le.ivlmy l:- RenfjoU! ;inj HesotnciT t.iof \; p 'acea in receivership were mamly attributable to cost over-runs, inflation under c ;if"!ali7.i!ion ami ir-ott.C'fciKips which coupled W'tn a tailing price for go'c! rendered mining and .'nniir^g opei.itions onprol'lafiir
Present Plant and Equipmentf h e mine 'S presently O" ,i care and mam'.cranc.': Da? 'S A *v,i!( iirriitn is or i 11'*' prope'ty and Surve:Hiince IS
mair.tamed tor the security -.t equipment ,md the sak y ot builrt'nys T'ie power MI i ' ro fn M'ssanatue to the pioperty has been kept "hot" Electric''y has been supplied to the carvlai-er s ti^nu-r ho^t: ar^d radio telephone service has also been Maintained Tne g r avf-i r nil from tne (unction ol HiqhA.'iy 651 ha c bfiv. maintained to Renn:e Lake a distance of G rr-.iles. by the P.'i.-K.'i '.".vpa'Jtni'nt The rema.nmg ^ m iles lo tie p'operty o rouijh but passat)ie the low pressure steam heating system is .T'fjrnf-ntiu 1 by propane or oil heaters m ccrta n (Holdings sue ri as the mam office.
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hofetroom and bookhouse*, it would therefore be possible, without activating the boiler plant, to get initial operations under way without the problem of starting up a complete system Until the permanent water supply can be connected from Campbell Lake to the site water lines, a temporary non-potable supply is available from Smith Lake tor fire protection and waste disposal purposes. Potable water would be hauled from a local well This would be a necessary procedure if operations started in the winter months
In summary, the electrical, heating, water supply and communication services can be placed on an operational basis for preliminary start-up without undue difficulty. A limited crew can be accommodated to start a dewatering programme.
In 1976 when the property was placed on a care and maintenance basis, the physical oiant and nooipmont was left in a condition to resume operations with a minimum of delay. The main complex comprises some 19 buildings with ancillary bunkhouse and cookery. Substantially all of the equipment for production at the rate of 500 tons per day is in place, particulars of additional equipment required being described under "Cost Estimates of Resuming Production". No insurance is currently carried on the buildings and equipment.
Mr. Broadhurst advises that an appraisal of plant and buildings was carried out in the summer of 1976 with new replacement cost being estimated in the vicinity of 57,000,000 It should be emphasized that the plant and equipment is not new and that this figure bears no relationship to the worth of these facilities if sold on a distress basis or even as a going concern since a substantially lower amount would be realized.
Cost Estimates of Resuming ProductionMr. Broadhurst has laid out a programme pursuant to which the mine could be brought back to full production
at an estimated cost of 52,500.000. Correlating programmes to local weather conditions and implementing certain stages during the currency of others it is believed that some nine or ten months would be required The cost estimates and related stages are as follows:
Phase l — PlanningElapsed time — 1 month
Management and engineering ...,. .......................................... .................................... S 20,000
Purchase of major equipment, buildings, supplies and rentals
rurnub.................. ............. .......................... 40.000Buildings............................................... .................. ............ 215.000Ventilation Fan ............................... ....... ................. ......... ......... 35.000
(with electrics)Dust Control System ................. ............... ....... ..... . . 35,000BallMill............................................ .... ....... ............. ... ... 170,000Underground Equipment ...... ......................... . 140.000Mine Supplies ............. ........... ....... ... . .......................... .... ... 30.000Mill Equipment............. ......... ................................. 50,000Mill Supplies........................ . ..................... .. 40.000 755.000
S 7 75.000
Phase II — DewateringElapsed time — 5 to 6 months
Supervision, labour, power, accommodation........ . . S 164.000Material and supplies .... .............. ...... 10.000
S 174.000Phase III — Surface Installations
Time — 3 months, integrated with Phase II and IV
Supervision, labour, accommodation S 73.000Material. ... . 63.000Contract...................... . _ ^2,000
S 158,000 Phase IV — Crusher House and Mill
Time — 3 months, integrated with Phase II and III
Supervision, labour, accommodation.................................... .... . . .................... S 86.000Material............ .................................................. .... .... .... ...... .... .................,... 52.000
S 138,000
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Elapsed time — 4 months Supervision, engineering, labour, power, assaying, accommodation S 387.000Development and mimng - 2955 levei
Raises and drawpomts .. . . . 14.000Drift............. ......... . . . . . . . . . 14,000Sub-drift.... ., . . 24.000Diamond drilling . . 16.000Sub-level sill.... . . . .. . . 56.700Stoping............................................ . ^6.800 471.500
Development — 3105 levelDriftSOO' . . . . 88.000Diamond drilling 5000' . . 40.000 128.000
5 986.500 SummaryPhase l- Planning .. .... .. . . S 775.000Phase II - Dewatering .. . .. .... . 174.000Phase III — Surface Installations 158.000Phase !V - Crusher and Mill 138.000Phase V - Underground 986.500
Total 2.231,500 Allowance for contingencies 268.500
Total Estimated Cost 52.500.000
Ore ReservesMr. Broadhurtt's Report contains detailed particulars as to his estimates of ore reserves He states that with
the advantage of sufficient shaft sinking and preliminary development work having been earned out. a block of four levels containing some 800.000 tons of "possible ore can be made available with a considerable saving in time and expense This would represent sufficient mill feed to operate at 500 tons per day tor lour ye irs
The mam ore reserves m the mine are located below the 2625 level as the ore zones m the mme had been sloped from surface to the 2625 level The mine averaged l .227 tons per slope foot from the surface pillar to the 2625 level Diamond drilling results from the 2625 level to the 3105 level, while incomplete, have indicated 311.799 tons with a grade of O 234 oz Au Ion It is considered very likely that this tonnage will be doubled as exploration and development progresses on these levels Although the deepest drill hole was only to a depth of 3,105 feel, there is no reason to doubt lhat the ore zone will continue below this level and below the present botlorr. level m 'he mine at 3.255 feet Good values and widths were obtained m the deepest drill hole Additional reserves exist on the i.pper teve's Drill indicated tonnage of some CO.000 tons, with a grade of O 18 oz AU ton are located m the 'C zood surface pillar arid in tho 'K' and ' '' zones above the 1700 to 2175 i :vels There me numerous other potential sources of ore in partially developed areas or indicated t*v exploration drill holes
MetallurgyThe ore from the Mining Claims oces not o'esent a dressing problem li crusnes easily and can be
satisfactorily treated by cyamdation to provide a 94 ;o 95\ recovery Tne mam consideration is that gnnjmg must be maintained in the range of 80 percent — 200 mesh T m: cyanide mill on the property is rated at 500-550 tons per day The crushing units are capable of handling 1 uOO tons pet day At the present tune the grinding circuit wi'l process a daily 300 tons but will be btought up to capar.'ty with the addition o ( a third ball mill
Operating Costs and Cash Flow ProjectionsMr BroaChursl estimates current openUirx; costs at S25 00 per ton as compiled below These operating costs
do not include amortization of the co-t of mining rUtims deleted production development administration and finance costs ne: depreciation on fixec' assets
Exploration and development 5 50 per tonMining 9 45 per tonMilling ! 2 5 per toriAdministration and marketing 2 75 per ton
Total 524 95 per ton
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Cash ttow projection has been based on a eric* for gold at 3210 U.S. with the Canadian dollar valued at 90* U.S. which means that the Canadian price for goM is tak-on at S231 per ounce. The operating cost has been fixed at 125.00 per ton as set forth above.
Using this data, the capital expense of returning tht mine to production will be recovered in the second year of operations and an operating surplus is forecast.
The price of gold and operating costs, the two variables, will have an effect on the surplus account With a recovery grade of 0.217 applied in all cases, the cost of producing an ounce of gold in relation to various operating costs is as follows:
Operating cost 125.00 per ton — cost per ounce (115 25Operating cost S30.00 per ton - cost per ounce 5138.30Operating cost S45.00 per ton — cost per ounce 1207.45
Management has instructed Mr. Broadhurst not to take into account the effect of taxes because of the uncertainties and difficulties associated with the determination of the taxation status of Resources. At July 31.1978 under the most favourable assumptions, deductions on a tax filing basis, assuming the reorganization contemplated by this information circular occurs, could be 55,400,000; however these deductions could be substantially less depending on when taxable incomes are earned and whether the many technical income tax problems are resolved.
On October 25, 1978, the Canadian dollar was valued at approximately S 843 U.S. and gold was quoted at about S233 U.S. per ounce.
Wllfroy AgreementRengold entered into an agreement dated January 17, 1974 (the "Wili'oy Agreement") with Willroy Mines
Limited ("Willroy"). 101 Richmond Street West, Toronto, Ontario, whereunder Rengold was granted the right to explore 28 of the Mining Claims. Having expended certain monies in carrying out exploration and development work as well as electing to bring the property into commercial production at a rate of not less than 300 to s per day. these 28 claims were transferred without charge to Resources as provided for in the Willroy Agreement Cash flow generated by future commercial production is to be applied to defray the cost of mining and concentrating operations and thereafter to reimburse Resources for prior outlays made in exploring and equipping the Mining Claims for commercial production. Thereafter cash flow is to be divided equally between Resources and Willroy. Cash flow is defined to mean all income of every nature from the sale of production from 28 of the Mining Claims (claim S50053 is excluded) less all cash expenses, but excluding items such as depreciation, depletion, or other non-cash write-offs, less the maintenance of reasonable reserves for working capital and contingencies
The Willroy Agreement was entered into to amend and supercede certain contractual relationships which had evolved as a result of prior agreements as follows. By agreement made as of December 4,1973. Sheridan Geophysics Limited (the "Assignor") assigned to Rengold all its interests under an agreement between the Assignor and Willroy dated March 15, 1973. As a result of Rengold subsequently entering into the Willroy Agreement, the said agreement dated March 15. 1973. was superceded. In consideration therefor Rengold issued to the Assignor 750.000 fully paid and non-assessable Common Shares of Rengold, 375,000 of which shares were sold to Murray E Watts In April, 1974, t,.e other 375,000 shares were transferred to Rencan Resource Investments Limited (now Normmco Developments Limited) (see "Interest of Management and Others in Cer'ain Transactions").
Se 'ar as is known, the only persons or companies beneficially owning, directly or indirectly, in excess of 5\ of the equity hares of Willroy are: Lake Shore Mines Ltd.. 101 Richmond Street West. Toronto, Ontario, and Wright- Hargreaves Mines Ltd., 101 Richmond Street West. Toronto, Ontario, both of which companies are listed on the Toronto Stock Exchange.
LitigationErnest Tremblay A Sons Inc. filed a mechanic's lien in February of 1976 against the Mining Claims claiming
S225.000 and costs A certificate ol action, in which Resources is defendant, has issued in the Supreme Court of Ontario The action is being defended and will not be tried before December of 1978 at the earliest, an earlier proposed trial having been adjourned
Harry Miller Construction Ltd. fileo a mechanic's lien in February ol 1976 against 5 of the Mining Claims claiming S5.974 and costs A certificate of action, in which Resources is defendant, has issued in the Supreme Court of Ontario. No steps have been taken to bring the action to trial
Action has been commenced by notice of motion dated May 25.1978 in the Supreme Court of Ontario by the Bank in which Rengold. Resources and others are named as defendants. Under these proceedings the Court is being asked to affirm the appointment of Price Waterhouse Limited as receiver and manager of the undertaking, property and assets of Rengold and Resources wi'h authority to sell the property and as. jts of Rengold and Resources.
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INSOLVENCY PROCEEDINGS AFFECTING THE RENGOLD COMPANIES
RetourcM PropotalResources made a proposal as amended (the '•Resources Proposal') lo its creditors under the Bankruptcy
Act. Resources' creditors last met on June 27.1978 to consider same and the meeting was adjourned sine die without a vote being taken with respect to the Resources Proposal
The main provisions of the Resources Proposal dealing with the satisfaction of creditors' claims may be summarized as follows:
(a) Secured claims will be paid in accordance with present arrangements existing between Resources and the holders of secured claims or as may be arranged between Resources and the holders of secured claims or the holders of secured claims will be permitted to realize upon their security
(b) Preferred claims without interest will be paid in full in priority to all claims of ordinary creditors
(c) All fees of the Trustee, including legal expenses incidental to the Proposal, shall be paid m priority lo the claims of preferred and unsecured creditors
(d) Ordinary creditors with claims of S250 or less and ordinary creditors who may elect to reduce their claims to S250 shall be paid in full
(e) All of the remaining ordinary creditors will receive one share of Krembe 'or each S? of their claim m full settlement of their claims
Following the June 27. 1978 meeting of i-editors, the Resources directors met and further amended the Resources Proposal, but without varying the provi -ions of clauses (a) to (e) above A meeting of the Resources creditors will be called to consider the Resources Proposal as further amended
Rengold ProposalRengold purported to make a proposal to its creditor identical, mutate mutandis, lo the Resources Proposal
In the opinion of counsel, such proposal was not duly adopted by the directors of Rengold To remedy this matter it is proposed that following the meeting of the Rengold shareholders, a meeting of the Renaold direct'"s will be held at which the Rengold directors will be asked to pass a resolution adopting a proposal under the Bankruptcy Act In order that Rengold shareholders may express their views m this matte' Rengold shareholders will be asked to pass a resolution authorizing the Rengold directors to approve a proposal under the Bankruptcy Act the main terms whereof will correspond wiih those set forth above m paragraphs (a) to (e) inclusive under 'Resources Proposal" To provide flexibility, such resolution will also authorize the Rengold directors lo amend such proposal (the Rengold Proposal") Irom time to time should they deem it appropriate H the resolution is not passed. Rengold will not make a proposal to its creditors and the sale o! the shares ol Resources to Kilembe pursuant to the Rengold Agreement will not be
- "t-ded wiUi It would also be open to a creditor of Rengold to file a petition m bankruptcy ; j jmst Rengold which is v : a nd ;he Bank would likely proceed to realize on its security
P'-nk Indebtedness and Receivershipr "igoid is indebted to Itie Bank to the eitent of some Sfi 300 000 This indebtedness is secured by
:, r - '.',.Tf r, m the principal amount o' S?.250 000 and a pledge of the ? 820 8?7 shares of Kifwnbe owned by Rengold ('o-.; -res delivered its debentures m principal amount ot S2 260 000 to the Bank arid gu.vantppu f ' n go'd s bank
, otedness jp lo S?.000 000 together with interest thereon f'O'" March 2 1970 A s turther security (o- "ieir o'.'hyations. each of Rengold and Resources gave to the Bank a genera! assignment of bonk debts and an assignment of .nventory under section 88 of the Bank Act The Bank rleamndeci payment from RengoiO on Mar: h 2. 1076 arid, on such date railed on Resources to tu noy its qu;*f3"tee and to also pay to the Bank the si;m of Sil/" 835 - wed by Resources to Uv Bank The debent ires created a f rs? coating charge on the assets of the respective Rengold Companies T ri r- shares of Resources ,*wned by Renqnki ,vo subject lo .1 lirst c^vgt; untict ihe Rengold debentures and 'he Mining Claims and related assets * ' Resources are subject to a t"sl c haiyi," under t^f- Resources debentures Pursuant to the debentures, the Bank appoirin ~" Price Waterhouse l imitcd as receiver ,r.o manager of the assets of !he Rengoid Companies An application lo the Si o.-eme Cou-1 of O'ta'io to 11 a ve Pncf Wau-r^ouso Limited affirmed as receiver and manager of the assets of the Re gold Compan-es ii.is bufn made and adjourned sine die — see "Property Interests of Resources -- lit^ahon"
Incidental to Rerjold's purchase of tht- '.hares of Kiiembe (for particulars respecting Rengold'S purchase thereof see Principal Holders ol Kiiembe Sriar t - - Hengoid s Ac yirsMion of Shares in Kilembf ) Kiiembe undertook to maintain funds on deposit with the Bark m an amount re'ated to but grt-aler than the amount of Rengold's indebtedness to the Bank In con|unc' p on with the appointment of a receiver and manager by Ihe Bank, management of Kilernbe agreed to maintain its cash funds in interest-bearing deposits a 1 the Bank and has further undertaken not to take any action wth respect to Kiiembe's assets without first consulting the receiver Section 17 of
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th* Canada Corporation*' Act states that a company shall not gtva. whether dlrectty or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of. or In connection with, a purchase made or to be made by any pereon of any shares In such company. The agreement made by Kitembe with the Bank when Rengold originally acquired its shareholdings in Kilembe was made in contravention of the aforementioned provisions of Section 17.
Funding the ProposalsAs referred to under "Kilembe Financing — Secondary Distribution", 600,000 shares of Kilembe held by
Rengold will be sold to produce the sum of S300.000. To the extent that such amount is not sufficient to discharge the cash payments to be made under the Rengold Proposal and the Resources Proposal, any deficiency will be made good by Kilembe loaning Resources sufficient monies for this purpose.
After providing for the sale of the 600,000 shares referred to above and segregating a further 856,668 shares of Kilembe held by Rengold and which will be distributed to the Rengold shareholders if Rengold is wound up — see "Principal Holders of Kilembe Shares — Dissolution of Rengold", there will remain 1,364,159 shares of Kilembe held by Rengold. These shares will be used in part to settle the claims of ordinary creditors of Rengold who are entitled to receive 1 share of Kilembe for every S2.00 of Indebtedness. Rengold will sell to Resources a sufficient number of shares of Kilembe to settle the claims of ordinary creditors of Resources who are entitled to receive 1 share of Kilembe for every 52.00 of indebtedness. Resources will pay Rengold the then book value for each share of Kilembe purchased and the amount of the purchase price will increase Resources' indebtedness to Rengold. If all of the 1.364,159 shares are not required to settle the claims of O'c nary creditors of Rengold and Resources, any shares remaining will be donated to Kilembe for its own use. To the extent that insufficient shares are available, the Financing Group (see "Kilembe Financing") will, without consideration, donate from their holdings such number of shares of Kilembe as may be required to make up any deficiency.
Any dealing with shares of Rengold as described herein Is subject to the removal of a cease trading order presently In effect and made by the Ontario Securities Commission.
Effect ol Implementing the ProposalsIf the proposals made by the Rengold Companies are fully implemented, the net result will be that the claims of
all creditors of the Rengold Companies will be deemed to have been settled (save for that of the Bank which will still be owed some 51,500,000 by Kilembe with payment of this amount to be guaranteed by Resources) See "Pro Forma Capitalization of Kilembe"
SPECIAL RIGHTS OF DISSENTING KILEMBE SHAREHOLDERSKilembe is presently subject to the provisions of the Canada Corporations Act and. if the acquisition of the
shares ot Resources from Rengold was completed prior to the continuance of Kilembe under the Canada Business Corporations Act (the "New Act") (see "Continuance of Kilembe under the Canada Business Corporations Act" below) no right of appraisal would be available to dissenting shareholders. The Bank, as a condition of Kilembe acquiring the shares of Resources from Rengold, has required that dissenting shareholders, other than Rengold. have the appraisal or dissenting rights which they would enjoy if Kilembe were subject to the provisions of the New Act prior to its acquisition of the shares of Resources. Both present management of Kilembe and the directors to be elected upon completion by Kilembe of its acquisition of the shares of Resources — (see "Management of Kilembe") — concur with and support this concept
As indicated in the Notice calling the meeting ot Kilembe Shareholders, if Shareholders approve of the continuance of Kilembe under the New Act. Kilembe Shareholders will be asked to approve an adjournment of the meeting in order that the necessary tilings can be made to obtain a Certificate of Continuance continuing Kilembe under the New Act. As also indicated in the Notice calling the meeting, when same reconvenes to vote on the special resolution authorizing Kilembe's acquisition of the shares of Resources, any dissenting Kilembe Shareholder is entitled to be paid the fair value of his shares in accordance with Section 184 of the New Act it he objects to the proposed acquisition of the shares of Resources by Kilembe but only if Kilembe completes the acquisition by it of the shares of Resources
The procedure to be followed by any dissenting shareholder is set out in Section 184 At the outset, he is required to send a written objection to Kilembe at or before the shareholders' meeting If the acquisition by Kilembe of the shares of Resources is approved by the shareholders. Kilembe must so notify the dissenting shareholder within ten days and he is required within twenty days to demand payment of the fair value of his shares from Kilembe. Notice is not required to be sent to any shareholder who has voted in favour of the acquisition or who withdraws his objection. Kilembe is then required to determine the fair value of the shares and to make a written offer to pay such amount to the dissenting shareholder. If such offer is not made or not accepted, either party may apply to Court to fix a fair value for the shares and both parties may appear in person or by counsel on the application. The dissenting
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sharthoktar will be entitled to be paid the amount fixed by the Court which may also, in its discretion, allow a reasonable rate of interest on such amount from the date Kilembe acquires the shares of Resources until the date of payment. No amount may be paid if there are reasonable grounds for believing that such payment would render Kilembe unable to pay its liabilities as they become due or that the realizable value of Kilembe's assets would, as a result of such payment be less than the aggregate of its liabilities In any such case, the shareholder may elect either lo withdraw his notice of dissent or to receive such amount as soon as Kilembe is lawfully able to make payment.
It should be noted that a dissenting shareholder may only claim with respect to all of the shares (not a part thereof) held by him on behalf of any one beneficial owner and registered in the name of the dissenting shareholder. As previously stated, the dissenting shareholder must send to Kilembe, at or before the meeting of shareholders, notice of which accompanies this Information Circular, a written objection to the special resolution authorizing the acquisition by Kilembe of the shares of Resources from Rengolci.
An instrument of proxy accompanies this Information Circular The return of such proxy with an Indication that tame Is to be voted against the special resolution doe* not constitute a written objection by a shareholder of Kilembe. If objection is to be made, it must be by separate instrument in writing sent to Kilembe
It is estimated 'iat the fair value of a share of Kilembe at the relevant time will be approximately 75C Any shares acquired by Kuen.^e from dissenting shareholders will be purchased by the Financing Group (see "Kilembe Financing — Sale of Dissenters' Shares") at a price per share equivalent to that paid by Kilembe to dissenting shareholders
CONTINUANCE OF KILEMBE UNDER THE CANADA BUSINESS CORPORATIONS ACTKilembe is presently governed by the Canada Corporations Act (Old Act) A New Act called the Canada Busi
ness Corporations Act (New Act) will replace the Old Act and Kilembe is required lo make application to be continued under the New Act no later than December 15. 1980 Failure to do so will result m automatic, dissolution ol Kilembe Its shareholders will be asked at the General Meeting to consider, and if thought fit. sanction with or without variation, a Special Resolution continuing Kilembe under the New Act The lull text o( the Special Resolution ^.id the Articles of Continuance referred to therein are reproduced in this Information Circular
The New Act amongst other things, is intended !o provide more flexible corporate procedures and to expand shareholders' rights and remedies
Some ol the more significant changes from the Old Act insMuled by the New Act as they rclato to Kilembe. are as follows
l Continuance and Capacity of CorporationsThe New Act provides that unless a federal company applies to be continued under the New Art Oy December
15,1980, it will automatically be dissolved The Old Act provides thnt a company has only those corporate powers set out in its Letters Patent and Supplementary Letters Patent togethe' with the ancillary powers contained in the Old Act Under the New Act. a company has all the capacity rights, powers and privileges of a n atural person and may pursue any lawlul object unless its powers or business activities are specifically restricted by its articles Tr.e proposed Articles ot Kilembe do not con'ain any such restriction!)
2 SharesUnder the (Jew Act. a company may have ana it is proposed that Kilembe shall have an unlit, itod number of
authorized shares, as opposed lo a fixed number, and rio limit to IMP consideration to be received by K'lembe upon issue of the shares Kilembe presently is hnwd to a total of 5.000 000 sh.ues o? a par v;ii'jc ot Si 00 each
As indicated in the Articles of Continuance 'l is proposed that the shaie capital of Kilembe consist only of common shares and that there be no limits on the number thereof nor on the consideration k' be reci- ved by Kilembe upon the issuance of such shares
Under the New Acl so long as Membe meets certain soivem y tests it will O e permitted to purchase O ' other wise acquire shares issued by it The O'd Ac l does not alio* any such purchases except m the case of redeemable shares
Under the New Act. shareholders ot ,i company have a pro fnptivf; 'ight to acquire share;- ol the company if its articles so provide The proposed Articles of Kilembe do riot so provide The Old Act *;is silent on the matter
3 DirectorThe New Act permits flexibility :n the number of Directors and ,is indicated in the Articles o' Continuance the
number of Directors ot Knembe win be such number, net less than live nor greater than nine as may be determined from time to time by the Directors The Old Act requires that a fined number ot Directors be statec'
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Under the New Act. a majority of the Directors present at any meeting of Directors must be resident Canadians and a majority of the Directors of any committee of the Directors of Kllembe must be resident Canadians.The Old Act contains no Canadian residency requirements.
4. ShareholdersUnder the New Act, if a company makes certain amendments to its Articles or takes certain other actions,
shareholders have the right to dissent and require the company to purchast their shares in the company for fair value. The Old Act does not provide for such a procedure. As well, the action of a company in approving an application for continuance of a company subject to the Old Act does not give rise to such dissent remedies. See also "Special Rights of Dissenting Kilembe Shareholders" above.
5. Indemnification and InsuranceUnder the Old Act, if the by-laws of a company so provided, the company was permitted generally to indemnify
Its directors and officers against all expenses and liabilities arising from the execution of their duties, other than expenses and liabilities arising from wilful neglect or default. The existing by-laws of Kilembe contain such a provi sion.
The New Act alters such indemnity provisions principally by (i) requiring Indemnification where the director or officer is successful or substantially sucessful in his defense of an action to which he is made a party by reason of his status as a director or officer and (ii) permitting indemnification where the director or officer acted honestly and in good faith with a view to the best interests o) the company, and, in the case of a criminal or administrative action enforced by monetary penalty, the director or officer had reasonable grounds for believing that his conduct was law ful.
Section 8 of the Proposed By-Law No. 1. which Is reproduced as Schedule "B" to this Information Circular, reflects the indemnification provisions of the New Act.
The New Act, in contrast v.,th the Old Act. has very specific provisions for the purchase of insurance for the benefit of its directors and officers against liability incurred as such. Kilembe's directors and officers are not currently covered by group liability insuiance.
It is therefore proposed that the Special Resolution authorizing the directors and officers of Kilembe to apply for continuance under the New Act and approving the Articles of Continuance be passed at the Special General Meet ing of the Shareholders of Kilembe. This Special Resolution must be passed by not less than two-thirds o) the votes cast by the holders of the issued shares at such meeting.
The Board of Directors of Kilembe recommends that the shareholders vote to sanction the Special Resolution.
CONFIRMATION OF KILEMBE'S NEW BY-LAW NO. 1New By-Law No. 1 reflects changes mainly designed to give effect to the New Act and to take advantage of
new and more flexible procedures available under the New ActThe Board of Directors of Kilembe recommends that the shareholders voto for confirmation of By-Law No 1
Confirmation requires the affiimative votes of not less than two-thirds of the votes cast at the meeting
DISSOLUTION OF RENGOLDRengold shareholders will also be asked to pass a resolution authorizing Rengold to be wound up under the
Winding-Dp Act if K.lembe acquires the shares of Resources If Pengold is so wound up. R- ioid shareholders will receive one share of Kilembe for every three shares of Rengold held
TAXATION IMPLICATIONS Taxation Implications to Rengold Shareholder*
The taxation consequences of Rengold dissolving fall into two main areas Firstly, the effect on Rengold and secondly, the effect on its shareholders. As regards Rengold. the tax consequences will depend on the fair ma-ket value of the shares of Kilembe immediately before the winding up. Calculations indicate that no income taxes will be paid by Rengold
As regards taxation implications to shareholders resident in Canada on Rengold's dissolution, shareholders will be deemed to h-we received a taxable dividend on each share in an amount equal to the excess, if any. of one- third of the fair market value of one share of Kilembe over the paid-up capital of each share of Rengold. and they will be deemed to have disposed of each share of Rengold for proceeds equal to the fair market value of '/j share of Kilembe less the amount, if any. of the deemed dividend per share as previously referred to The paid-up capital of each share of Rengold has been calculated at about 63.84 per share. The fair market value of a share of Kilembe will not be known until the time Rengold's shareholders pass a resolution authorizing its dissolution; however the present book value of shares of Kilembe is approximately 75C per share if Rengold is wound up and shares of Kilembe distributed to Rengold shareholders, more definitive information for taxation reporting will be furnished to the Rengold shareholders
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Rengolrt shareholders are advised to consult with their own tax advisors as to t 1 1 en particular income lax situations and In the case of non-residents consideration should be given to the tax laws of their respective jurisdictions.
Taxation Implications to Dissenting Kilembe ShareholdersUnder the Income Tax Act (Canada), a dissenting shareholder who sells his shares to the company will have
proceeds of disposition for Canadian income tax purposes equal to the lesser of the actual amount received and the paid up capital (S1 per share) of the shares. These proceeds of disposition will be used to determine the gain or loss on disposition for Canadian income tax purposes Should the amount received from the Company for the shares exceed their paid up capital, the excess would constitute a taxable dividend for Canadian income tax purposes. The taxable dividend would be included in the income of the Canadian resident shareholders, subject to the gross up and credit provisions in the case of individuals. Canrdian withholding tj^x would be applicable lo the taxable dividend paid to non-residents.
Prospective vendors ~re advised to consult with theii own tax advisors as to their particular income tax situations, and in the case of non-residents consideration should be given lo \he lax laws of their respective jurisdictions
MANAGEMENT OF KILEMBEThe names and home addresses of the directors and officers of Kilembe and the positions held by them in
Ktle-nbe are as follows:
Name Address Posilion
Murray Edmund Watts . . . R R .v t. Cobalt, President andOntario Director
Barnabas William Nixon Apple. O C R R s 3. Uxbridge Secretary-TreasurerOntano
Albert Charles Callow 87 Burnhamthorpe Road DirectorIslington Ontano
Charles Camsell. Jr Haileybury. Ontcno DirectorMurray Watts. Jr Bo* 7C Route 6. Director
Golden. Colorado
The principal occupation ot the directors and officers during the , asl five years is as followsMr Murray E Watts — Self-employed prospector and mining engineer
Mr Apple — Partner in the legal tirm cf Salter. Apple. Cousland and Ki'rbel. Toronto
Mr Callow - Retired
Mr Camsell. Jr — Retired
Mr Murray Watts, Jr — Contract diamond dnlli'r scll-employf ri
After KHombe acquires the shares of Rt-sou'ces fsee Acqu.sit'on 13) Resources by Kilembe") the present ofticers and four of the directors wli resign ant) the following have agrood to De p't.-cted directors ol K.iiemo* and to tne offices indicated
Name Andrews Position
David Valentine Apt 3fj/* 4900 Carin-r President and i ynch Odhams !i!ieet V tt;tcouvfi BC Director
Bryan Ewart Apt 76 494 Avenue Rd Vice-President Watts Grarisden, C A To-oa'o Ontario .i"d D-recto'
Bryan Edward Thirsk 4&SO McadowoanK Close. Secretary- North Vancouver R C Treasurer and
Director
David John Rowland 42 Avenue Fochp. DirectorParis 16. France
Or Myndert 2437 EdenhurM Drive Director Trevor Schollv Mississauga. Ontano
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The principal occupation of the above named during the past five years Is as follows:Mr. Odhams — Chairman and chief executive of Williams Hudson Canada Limited (formerly British Columbia
Wharves Limited) and subsidiaries. Williams Hudson Canada Limited is a holding company for corporations In the waterfront industry, its chief subsidiary being Vancouver Wharves Ltd.
Mr. Gransden — Self-employed financier.Mr. Thirsk — Director and financial executive of Williams Hudson Canada Limited.Mr. Rowland — Chairman and chief executive of Williams Hudson Group Limited of London, England, for the
past three years and prior thereto Chairman and chief executive of Williams Hudson America S.A. Williams Hudson Group Limited is a holding company for several other companies in the service industries and in manufacturing in the U.K., U.S.A. and Canada. Williams Hudson America S.A. was the hclding company of Williams Hudson Group Limited.
Dr. Scholtz — Chemical engineer employed by MER Company. Downsview, Ontario since December 1977 and prior thereto lecturer and associate professor of chemical engineering, University of Natal, South Africa.
Voting Trust AgreementMr. Gransden end Williams Hudson Canada Limited ("Hudson"), 199s West First Street, North Vancouver,
British Columbia, entered into an agreement dated August 24, 1978 pursuant to which they agreed that their shareholdings in Kilembe would be voted so that of a Board of 5 directors. 2 would be nominees of Hudson and 2 of Mr. Gransden, the 4 directors so designated to choose a fifth director, but failing agreement the fifth director would be designated by Hudson The agreement also provides that management of the affairs of Kilembe and of Resources shall be the prerogative of Hudson who shall be entitled to receive a reasonable management fee in respect of services provided or arranged for the restoration and operation of the Mining Claims
REMUNERATION OF MANAGEMENTNo remuneration was paid by Kilembe. Resources or Rengold during their last completed financial year to
their respective directors and senior officers, nor has any remuneration been paid to such directors and senior officers subsequent thereto.
MANAGEMENT OF RENGOLDRengold has a board of 5 directors of whom 3 constitute a quorum. Only 2 directors are in office, being Mr.
Murray E. Watts and Mr. Charles Camsell, Jr., who are also directors of Resources and Kilembe. Rengold shareholders will be asked to elect 3 directors to fill existing vacancies The following are the names of the proposed nominees, none of whom now are or ever have been directors of Rengold. their principal occupations during the past 5 years and the approximate number ot shares of Rengold owned or over which control or direction is exercised:
No of shares ofRongold owned.
controlled or directedas at the date of this
Name of Nominee Principal Occupation Information Circular
Bryan F W. Gransden. C A Self-employed financier H)
M T. Scholtz j2i Chemical engineer employed by MER Company. NilDownsview, Ontario since December 1977 and prior thereto associate professor of chemical engineering at Ihe University of Natal
Katherine B Wallace (2) Self-employed hotel representative Nil
(1) Mr Gransden beneficially owns and controls 145.000 shares of Rengo'd owned by Maiblogate Holdings Limited, a corporation wholly-owned by him See also "Interest of Management and Others in Certain Transactions" lor furthb.' particulars respecting shares of Rengold controlled by Mr Gransden who controls or directs the 78?.600 shares ol Rengold held by Norminco Developments Limited
(2) Both directors ot Norminco Developments Limited Or Scholtz owns 1.000 shares of that corporation and Ms Wallace 20,000 shares
If for some reason any of the above proposed nominees are unable to serve, the persons named in the proxy forwarded to Rengold shareholders will use their best judgment ir voting on alternate nominees.
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PRINCIPAL HOLDERS OF KILEMBE SHARESSo far as is known, the following is (he only person owning, directly or indirect!/, in excess of 101*, of the issued
shares of Kilembe:
Number of Percentage Name and Address Nature ol Ownership Shares Of Class (1)
Rengold Mines Limited.............. ........... (2) 2.820,827 72.8')bSuite 900. 302 Bay St.. Toronto. Ontario.(1) Calculated en the basis of thor* being 3.877.027 shares issued o.id outstanding(?) Certificates representing these shares are hypothecated to Rengoid's bankers as collateral security lor indebtedness and the
(wives are registered in the name ot the bank's nominee. See '•Voting Shares and Principal Holders Thereof"(3) See ' Insolvency Proceedings Affecting the Rengold Companies -- Funding the Proposals' and "Dissolution ol Rengold" below
lor particulars ot the proposer' 'isposition ol these shares
As at Iht! date ol this Information Circular, the directors and senior officers of Mombe owned about 001 Id of its issued shares
Rengold't Acquisition of Shares In KHembeBy agreement dated June 30. 1975. Falconbridge Nickel Mines Limited (Falconbridge"). P O Box 40,
Commerce Court West, Toronto, Ontario sold 2.820,827 shares in Kilembe (72 8ib of its issued shares) to Ftengold for the sum of S707.207 with provision being made that, as further payments 'Additional Payments") were received by Kilembe from the Government of the Republic ol Uganda, (see "Prior Proper!) Interests ol Kilembe') Rengold would pay Falconbridge additional amounts equal to approxim,; !ety 72.8\ ot all Additional Payment so received Althougn Additional Payments were received by Kilembe. no payments were made by Rengold to Falconbridge with the result thai Rengold is indebted to Falconbridge m the sum of S1.537.500 It the proposal? to CTditors (see 'Insolvency Provisions Aflectmg the Rengold Companies' ) are approved and tully implemented Falconbridge will receive 768 750 shares ol Kilembe Irom Rengoid s holdings
Dissolution of RengoldAs pre/iously stated Rengold sharer, jlders will be asked to authon/e. among othet things. Rengold to be
wound up voluntarily under the Windmg-Up Act The costs ol these proceedings will be borne by Kilembe On dissolution. 856.668 shares of Kilembe wili be di r 'nouted to the Rengold sharehotd s who will receive 1 share of Kilembe lor every 3 shares o' Rengold held
PRINCIPAL HOLDERS OF KILEMBE SHARES - PRO FORMA PRESENTATIONII the dpf.ncable conditions are satisfied (see "Acquisition o) Resources by Kilembe - Conditions ol Rengold
Agreement" on nage 3) and Kilembe acquires the issued shares o' Resources, the- following will be she only persons owning directly or indirectly, in excess ol 10'Vi ol the then 6.077 027 (1 ) issued shares ol Kilembe
o) Number ot Percentage Name and Address Ownership Shares of Class (1)
Falconbridge Nickel direct and beneficial 768.750 12 7Sb Mines Limited P O Box 40, Commerce Court West. Toronto, Ontario
Williams Hudson direct ana benefioai 1610833(3) 26 5\ Canada Limited. 1995 West First St . North Vancouver, British Columbia
Bryan E W Gransoen. direct and beneficial 70l.b67(?X 4 ) H 5\ 69 Forest Hill Road. indirect and beneficial 48333(3) 8\ Toronto Ontario(1) Assumes !hal none ot the shaies o* Kiicm'oe tit-id by Henqoid WHH do don.itcd tisct ! Kilpmbe (see Insolvency P'OCoedmgs
Affecting !hr Ren^olO Companies FuriOing the Proposals ) and fnat the Finjnorig 'iron;, is not : v j ired to donate sh.ires ol Kilembn a s r eferred to under "! isolvericy Proceedmgs Affecting the Renyold Comparves Funding the Piof'osa's SO thai there are 6.07?.0?7 shares ot Kilembe issued and outstanding
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(2) Comprises 600,000 shares purchased (see "Kllembe Financing — Secondary Distribution"), 48,333 shares of Kllembe which would be received by Marblegate Holdings Limited, a company wholly-owned by Mr. Qransden, on the dissolution of Rengold and a further 112,500 shares of Kllembe also to be received by Mr. Oransden on the dissolution of Rengold but subject to certain conditions. See "Interest of Management and Others In Certain Transactions" as well as the heading "Certain Matters Relating to Rengold" thereunder.
(3) Williams Hudson Canada Limited and Mr. Gransden agreed that if their respective shareholdings were not equal following the distribution of shares of Kllembe to Rengold's shareholders in connection with Rengold's winding-up. any difference would b* adjusted by a purchase and sale between them of shares at 50* per share to effect an equalization adjustment. For purposes of such calculation, the 260.833 shares ol Kilertibe to be received by Norminco Developments Limited (see "Interest of Management and Others in Certain Transactions") are deemed to be held by Mr. Qransden as are the 600,000 shares to be purchased by M 4 M Porcupine Ooid Mines Limited (see "Kilembe Financing") These shares when added to the shares referred to in note (2) above yield a total of 1.621.666 shares and accordingly Mr. Oransden will sell 10.833 shares of Kilembe to Williams Hudson Canada Limited.
(4) Mr Oransden proposes to transfer 112,500 shares ol Kllembe to his wife
DESCRIPTION OF KILEMBE SHARESEach of the present Kilembe shares ol a par value of SI.00 each carries one vote at all meetings of
shareholders, is entitled to dividends as and when declared by the directors and is entitled upon liquidation to a pro rata share of the assets of Kllembe distributable to the holders of shares. The shares carry no conversion or pre-emptive rights.
Following the continuance of Kllembe under the Canada Business Corporations Act. Kilembe will have a capital consisting solely of shares without par value and with no limitation on the number of shares which may be issued. Each issued share will carry one vote at all meetings of shareholders, be entitled to dividends as and when declared by the directors and be entitled upon liquidation to a pro rata share of the assets ol Kilembe distributable 10 the holders of shares. The shares will carry no conversion or pre-emptive rights. Upon completion of the transactions referred to herein, all issued and outstanding shares will be fully paid and non-assessable. Kilembe will be entitled to purchase 'ts shares in accordance with the provisions of the Canada Business Corporations Act. (See also "Continuance of Kilembe under the Canada Business Corporations Act").
MARKET FOR SHARES OF KILEMBEStatistics are not available to give an historical month by month trading range for shares of Kilembe during the
oast year On October 25, 1978 shares of Kilembe traded at 65C and were quoted at 604 bid and 70C offered
SPECULATIVE NATURE OF KILEMBE SHARESThe cost of bringing the Mining Claims into production is estimated at 52.500.000 (see "Property Interests of
Resources — Cost Estimates of Resuming Production") At the present time Kilembe does not have sufficient funds for this purpose and will accordingly be forced to seek financing. Any such financing may well entail the issuance of treasury scares which could dilute the equity of existing shareholders. Fluctuations in the price of gold will affect the profitability of operations on the Mining Claims As referred to under "Effect of Implementing the Proposals" on page 9. it the proposals of the Rengold Companies are fully implemented. Kilembe will be indebted to the Bank in the amount of some S1.500.000 and, as part of loan agreements proposed to be entered into with the Bank, such indebtedness will lall due December 31,1979 Kilembe does not presently have sufficient funds on hand to retire this indebtedness on the due date dven if Kilembe raises sufficient funds to place the Mining Claims in production, cash flow therefrom is not expected to be sufficient to retire the Bank indebtedness by December 31, 1979. Accordingly, Kilembe's ability tc retire such Bank indebtedness will be predicated on its future ability to secure funds for such purpose through either debt or equity financing
KILEMBE FINANCING Sale of Treasury Shares
Subject to the acceptance lor filing by the Ontario Securities Commission of a orospectue relating to Kilembe. it is proposed to raise additional funds for Kilembe through the sale of its treasury shares as follows Pursuant to an agreement dated October ?5. 1978 (the "Agency Agreement") between Kilembe, Rengold and Davidson Partners Limited ("DPI"). 25 Adelaide Street West. Toronto. Ontario. DPL has agreed to act as agent of Kilembe in the sale of 2,200,000 unissued shares for an aggregate puce of Si.100,000 Certificates representing the shares and future share certnicates issued in replacement thereof will bear the following legend "The shares represented by this certificate have not been registered under the United States Securities Ac' of 1933. as amended Such shares may not be offered lor sale. sold, delivered after sale, transferred, pledged or hypothecated to residents of the United S'atesof America or any of the territories or possessions thereof m the absence of an effective Registration Statement covering such shares under the Securities Act or an opinion of counsel satsifactory to the company that such registration \ ? not required" The said 2,200.000 shares will be purchased by Williams Hudson Canada Limited. 1995 West Firs' Street, North Vancouver, British Columbia as lo 1,600.000 shares and as to 600.000 shares by M A M
-15-
Porcupine Gold Mines Limited, P.O. Box 960. Postal Station "O". Toronto. Ontario. Bryan E. W. Gransden beneficially owns 30**. of the issued shares ol M ft M Porcupine Gold Mines Limited. See also "Use of Proceeds."
Kilembe will pay OPL a commission of 513.200 in connection with the sale of these 2.200.000 shares, and the purchasers thereof will also pay DPL a commission of Si 3.200. being at the rate of S 006 per share
Secondary DistributionTo provide funds required incidental to the Rengold Proposal and the Resources Proposal. DPL acting as
agent of Rengold pursuant to the provisions of the Agency Agreement, will sell 600,000 issued shares of Kilembe held by Rengold to Bryan E. W. Gransden for an aggregate price of 5300.000 No commission will be paid by Rengold to OPL Incidental to this transaction, but Mr. Gransden will pay DPL a commission of S 006 per share for a total of 53.600
Up to 1.364,159 Issued shares of Kilembe held by Rengold w'l be distributed to ordinary creditors of Rengold and Resources whose claims are not settled in full in cash on the basis of such ordinary creditors receiving one share of Kilembe for each 52.00 of their claim (see "Involvency Proceedings Affecting the Rengold Companies") As stated under "Funding the Proposals", if more than 1.364,159 shares ol Kilembe are required for this purpose, same will be donated without consideration by the Financing Group, half of such shares to be derived from the holdings of Williams Hudson Canada Limited and one quarter from the shares acquired by each of M A M Porcupine Gold Mines Limited and Mr. Gransden as hereinbefore set forth To the extent that less than 1.364.159 shares of Kilombe are required to settle claims of ordinary creditors as aforesaid, any remaining shares reouired will be donated by Rengold to Kilembe for its sole and only use
Sale ot Dlttenlen' Share*Any shares acquired by Kilembe Irom d.ssenling shareholders (see "Specuil Rights ol Dissenting Kilembe
Shareholders") will be sold by Kilembe at its acquisition cost thereof through DPL. acting as its agent, without remuneration therelor. to the Financing Group who will purchase such shares m the same proporhons as they will donate shares, i) required, as set forth under "Secondary Distribution' above
ClosingsThe purchase and sale ol the shares referred to above under 'Sale of T'^asury Shares" and "Secondary
Distribution" will only take place if the conditions set forth under Acquisition of Resources by Kiiembe — Conditions of Rengold Agreement" are fulfilled, and payment lor 'he shares bemg purchased will be made at the time when Kilembe acquires the shares ot Resources
USE OF PROCEEDSThe estimated not proceeds to be derived by Kiiembe from ti.e 2 ?')t).000 shares, lo be sold as referred to
under "Kilernbe Financing" will be S936.800 after deducting estimated issue expenses o' 5150.OJO These net proceeds will be added to and form part of Membe's working capita' After providing therefrom the net suni of S3.650.000 (see "Acquisition of Resources by Kilembe — Provisions o* Rengold Agreement") m connection with the purchase of Resources' indebtedness to Rengold the remaining balance ot some S32.000 will be i.sed ter general corporate purposes, payment of interest on bank indebtedness and may bo advanced as required lo Resources for its ,enera! corporate purposes and lor expenditures on '.he Mining Claims II. m the opinion of Kiiembe's management additional funds are required 'or Kilembe's general corporate purposes, the number o' shares to be sold !o Hie Financing Group at f.OC per sharo may bc increased ;il)ovc i1 200 000 shares See If.e Pro Forma Consolidated Balance Sheet of Kilembe on page 24 'or a pro form,) presi.-ntHi on of Kilembe s financial position following its acquisition of the shares uf Resources and ader giving ellert lo lin; notes accompanying such Pro Forma Conso' 1ated Balance Sheet
CAPITALIZATION OF KILEMBE
Amount Designation of Security ' Authoriznd Amount Outstanding
Shares ot 51 par value -shares 5.000000 3.877.027--ascribed value S3.877.027
Contributed surplus 58.193887Deficit................... . 5(9.211.485)
-16-
PRO FORMA CAPITALIZATION OF KILEMBEAmount to be Outstanding
After Giving Effect to Matters Designation of Security Referred to In this Information Circular
Bank indebtedness (1).......,............................................ 11,481,213Non-interest bearing debenture maturing December 31.
1979(2)..................................................................... S 100,000Shares without parvalue —number of shares ............... 6,077,027
-ascribed value.................... S4.977.027Contributed surplus......................................................... S9.708.826Deficit............................................................................... S(9,211.485)(1) To be secured by a debenture constituting a first fixed and specific charge on the shares of Resources owned by Kilembe and a
first floating charge on Kilembe's other assets. To be further secured by a general assignment of book debts and an assignment of Inventory under section 88 of the Bank Act given by both Kilembe and by Resources as guarantor to the Bank of Kilembe's Indebtedness to it. As further security. Resources will issue to the Bank, by way of guarantee of Kilembn's indebtedness, a debenture constituting a first fixed and specific charge on the Mining Claims and a first floating charge on Resources' other assets.
(2) To be secured by a floating charge on Kilembe's assets ranking after the debenture to be issued by Kilembe as referred to In note (1) above and ranking after any future advances to Kilembe by the Bank.
DIVIDENDSDuring the five fiscal years ended December 31,1977, Kilembe paid the following dividend:
Year ended Per Share 1973 15t
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONSIf Kilembe completes the acquisition of the shares of Resources, B ryan E. W. Gransden will be deemed to be
the "promoter" of Kilembe as sr^h term is defined in The Securities Act (Ontario).
In 19* Kilembe staked a number of mining claims in the Espanola area of the Province of Ontario at a cost to it of 530,194. m 1976 a company controlled by Mr. Gransden purchased these claims from Kilembe for S30.000 and 50,000 common shares of the purchasing company. Subsequently, at a time when Mr. Gransden no longer controlled such purchasing company, he purchased the 50,000 common shares aforementioned from Kilembe for the sum of 525,000. Mr. Gransden beneficially owns, directly or indirectly. 500 of its shares See "Principal Holders of Kilembe Shares — Pro Forma Presentation" as to shares of Kilembe to be beneficially owned by Mr. Gransden if Kilembe acquires the shares of Resources from Rengold.
The Financing Group, referred to under "Kilembe Financing", has advanced funds and incurred liabilities to enable the filing of a Prospectus, the convening of meetings of shareholders of Rengold and Kilembe and the undertaking of various ancillary matters relating thereto. These commitments on its part are included in the expenses estimated at 5150,000 See "Use of Proceeds" If Kilembe acquires the shares of Resources it will reimburse the Financing Group and pay such expenses; however, if such acquisition is not completed, the Financing Group will not receive any reimbursement from Kilembe and will be responsible for all expenses
Certain Matters Relating lo RengoldNorminco Developments Limited ("Norminco"), Suite 600. 407-8th Avenue S.W., Calgary, Alberta holds
782.500 shares of Rengold Bryan E W Gransden beneficially owns SS'/j 1*) of the issued shares of Norminco. Pursuant to agreement dated April 24, 1974. Norminco agreed that Murray E Watts would be the voting trustee in respect of 300.000 of these shares until January 15. 1979 provided Mr Watts stands for election as a director of Rengold. By further agreement of February 14,1974, Mr. Watts is entitled to vote the remaining 482,500 shares of Rengold held by Norminco so long as Mr. Watts is president of Rengold. In consideration of Mr Gransden endeavouring to settle the financial problems affecting the Rengold Companies and arranging for Kilembe to acquire the shares of Resources, all as more particularly outlined herein, Mr Watts by agreement dated August 10.1978 agreed with Mr. Gransden that the aforementioned voting trust arrangements are waived subject to automatic reinstatement if Kilembe does not acquire tne ;hares of Resources as outlined herein. Mr. Watts further agreed that if by August 31, 1979 Rengold's bankers release Mr Watts from his personal guarantee in the amount of 5200,000 given to such bankers with respect to Rengold's indebtedness to them (a) Mr. Watts will cause to be delivered to Mr. Gransden for his own use a debenture in principal amount of 5100.000, convertible into shares of Rengold, issued by Rengold to Bemans Limited. Incidental to the closing of the purchase of the shares of Resources by the Company, the liability under this debenture
-17-
win be assumed by Kilembe. arrears ot interest thereon and future interest will be waived, as will be the convertibility feature, and the debenture will mature December 31,1979. and (b) Mr. Gransden will be entitled to receive 112.500 shares of Kilembe arising from the distribution of its shares by Rengold on windinp-up. such entitlement to receive deriving from 225,000 shares of Rengold beneficially owned by Mr. Watts and from an additional 112,500 shares of Rengold which Mr. Watts controls.
Norminco has guaranteed 5200.000 of Rengold's indebtedness to its bankers. Mr. Gransden has collaterally guaranteed Norminco's observance of its guarantee. Mr. Gransden's commitment has in turn been collaterally secured by Mrs. Gransden. a trust for her children and by Mrs. Gransden's brother. The acquisition by Kilembe of the shares of Resources could ultimately result in Norminco, Mr. Gransden and those giving collateral security being released from the aforementioned commitments.
As a result of the insolvency of Rengold and Resources, should Kilembe not complete the acquisition of the shares of Resources and insufficient funds be available to ..atisfy the claims of preferred creditors. Mr. Watts. Mr Camsell (who owns 100 shares of Rengold) who are directors of both Rengold and Resources and Mr. J A Stephenson, a director of Resources and a former director of Rengold. may be liable, jointly and severally for payments which could aggregate some S152.000 in respect of monies not remitted by Resources and /or Rengold to departments of government.
Interlocking of Boards of DirectorsThe Boards of directors and the officers of Kilembe. Rengold and Resources interlock Set forth below are
particulars in this regard which also reflects directors who will hold olfice assuming Rengold shareholders elect the directors proposed for election (see 'Management of Rengold")
Name of Individual
B. Nixon Apple. Q C Albert C. Callow Charles Camsell. Jr Bryan E W Gransden M T Scholt2 James A Stephenson Katherine B Wallace Murray E Watts Murray Watts. Jr
KilembeDirector Officer
RengoldDirector O'ficer
ResourcesDirector Officer
x — office presently heldy — office to be held il elected director by the Hengold shareholders
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of Kilembe are Clarkson. Gordon 4 Co . Chartered Accountants. Box 2S' Toronto-Dominion Centre. Toronto. Onlario. M5K 1J7 The transit" agent and registrn' o( tne Company s shares is Crown Trus' Company. 302 Bay Streot. Toronto Ontario, M5H 2P3
The undersigned hereby certifies that the contents o* and the sending o' this information circular have been approved by Ihe directors ot Kilembe Copper Cobalt Ltd
MURRAY E V.ATTS October 25. 1978 President
The undersigned. President of Rengold Mines Limited, hereby certifies 'hat Ihp contents of and the sending ot this information circular have been approved by him as President ot Rengold Kmnes Li. -ited
MURRAY E WATTS October 25 1978 President
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KILEMBE COPPER COBALT LTD.(Incorporated under the Canada Corporations Act)
STATEMENT 1
BALANCE SHEET - JULY 31,1978(with comparative figures at December 31.1977)
ASSETS
Cash and short-term deposits (note 5) ........................................................................Amount receivable from the government of the Republic of Uganda (note 1) .. .... ... Due from parent company, Rengold Mines Limited .............................................. ....
Total assets ...................,..................................................................
July 31. 1978
S2.395.058577,034
52.972.092
December 31. 1977
52.288.774538.914
3.010
52,830.698
LIAB'i 'TIES AND SHAREHOLDERS' EQUITY
Liabilities:Accounts payable and accrued charges ................................................................. SIncome and other taxes payable ...............................,.............................................
33.66379.000
112,663
5 23.85150.00073.851
3.877.027 8,193.887
(9.314,067) 2,756.847
S2.830.698
Shareholders' equity: Capital —
Authorized5.000,000 sha'es of 51 par value each
Issued:3,877,027 shares . ................ .......................... .......... .................... 3.877.027
Contributed surplus (no change in the period January 1, 1974 to July 31. 1978) 8,193,887Deficit (statement 2) . ...... ............ . .... . (9,211.485)
Total shareholders'equity .... . ... 2.859.429
Total liabilities and shareholders' equity . . . . . 52.972.092 ^^^^^
On behalf of the Board:
MURRAY WATTS. Director
CHARLES CAMSELL Director
(See notes to financial statements)
AUDITORS 1 REPORT To the Directors ol
Kilembe Copper Cobalt LtdWe have examined the balance sheet ot Kilembe Copper Cobalt Ltd as at July 31.1978 and the statements of earnings and
deficit and changes m cash and short-term deposits lor the seven months then ended and for the four years ended December 31, 197? Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests and other procedures as we considered necessary in the circumstances
In our opinion, these financial statements present tairly the financial position ol the company as at July 31. 1978 and the results of its operations and the changes in cash and short-term deposits tor the seven months then ended and for the four years ended December 31, 1977 m accordance with generally accepted accounting principles applied on a consistent basisToronto. Canada.September 19, 1978.except for notes 1 and 7which are as ot CLARKSON, GORDON 4 CO.October 25.1978 Chartered Accountants
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STATEMENT 2
KILEMBE COPPER COBALT LTD.
STATEMENT OF EARNINGS AND DEFICIT
Earnings:Interest income ....... ................... . ... ......Gain on sale o) mining claims .......... .......
Expenses:Administration costs ............... .... .Loss (gain) on foreign exchangeCosts of collection of receivable from the
Government of the Republic of Uganda -ExpensesCommission fees
Severance pay and wages Share of subsidiary's loss (note 2(a))
Earnings (loss) before provision lor incometaxes and extraordinary 'V-ms
Provision for income taxos
Earnings (loss) before extraordinary items
Extraordinary itemsReduction in income taxes due to
application of loss carry forwardWrite-down in carrying value of
investment in subsidiary company (note 3)
Earnings (loss) for the period
Earnings (loss) per shareBefore extraordinary itemsExtraordinary items
For the period
Deficit, beginning of period Earnings (loss) for the period
Deficit, end of period
Seven months ended
July 31.1978 1977
Years ended1976
December 31
1975 1974
5 94,301 S 110,058 S 73.182 5 63.009 i 70,471
_______ ______ 24,806
110,05894,301 97,988
17,183 16,826 36.460
(71,379) (168.899) 52.771
63.009
76,132(67.595)
70,471
79.965
6.295
16,915
(37.281) (152,073)
131.582
45.000
86.582
16000
262.131
70.000
192 131
20.000
39,869252,777
381,877
(283,889)
(283.889)
(17.4C8) 370.000
1.587.293
(8,931) 2.043.553
71.940 (1973,082)
71.940 (1.973.082)
(4.326399)
S 102.582 S 212,131 5 (283.889) 5 71.940 5(6.299,481)
S 003 5 005 S (007) 5 002 S (050)
(1J2)
S 003 S 005 S (007) S O 02 5 ( 162)
S 9 314 067 S 9.526.198 S 9.242.309 S 9.314.219 53.014,768
102.582 212131 (283,689) 71.940 ^i9 4^)
59.211,485 59314067 59,526.198 59.242.309 59.314,249
(See notes to financial statements)
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KILEMBE COPPER COBALT LTD.STATEMENT OF CHANGES IN CASH AND SHORT-TERM DEPOSITS
STATEMENT 3
Cash was provided from: Funds from operations —
Earnings (loss) before extraordina y items ..............................,.............
Add (deduct) items not involving an outlay (receipt) of cash: Foreign currency (gain) loss on
amount receivable ................Write off of amount due from
parent company, Rengold Mines Limited .......................
Gain on sale of mining claims .... Provision for collection costs on
amount receivable . ..............Share of subsidiary's operating
results ...................................Provision for severance pay and
wages ...................................Total funds from operations
Reduction in income taxes due to application of loss carry forward ......
Increase in accounts payable, accrued charges and income and other taxes payable .................................. ............
Proceeds on disposal of temporary investments ................................... ....
Collection of amounts receivable on sale of subsidiary .............................. .
Collection of amount due from Falconbridge Nickel Mines Limited
Collection of accounts receivable Proceeds from sale of mining claims .
Total cash provided .
Cash was applied to: Increase in accounts receivable Payment of collection costs on amount
receivable ............... ............. .Purchase of temporary investments Decrease in accounts payable and
accrued charges.. .. Loan to parent company, Rengold Mines
Limited .................................. Mining properties and related
expenditures......................... Payment of severance pay and wages
Total cash applied ........
Increase (decrease) in cash and short term deposits .........................................
Cash and shorl term deposits, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and short term deposits, end of period
Seven months ended
Juty 31 ,1978 1977
S 86.582 S 19P131
(26.420) (86.470)
3.010
16,915
80,087 105.661
16.000 20.000
38.812 56.993
25.000
657.267
134.899 864,921
28.615 93.193
28.615 93193
106.284 771.728
2.288.774 1.517,046
S 2.395.058 S 2,288,774
Years ended December 311976
S (283,889)
45.877
(24.806)
292.646
29.828
561.203
55.000
646.031
24,452
25.000
14.839
5,000
2,000
71.291
574,740
942.306
S 1,517.046
1975 1974
S 71 940 5(1.973.082)
(36,237)
1.587.293
(17.468) 370,000
18,235 (15.789)
32.733
544,445
36,259 64.668
696.340 (15.789)
83.393
755
28.194 352532
380.726 84,148
315.614 (99,937)
626.692 726.629
S 942.306 S 626.692
(See notes to financial statements)
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KILEMBE COPPER COBALT LTD.
NOTES TO FINANCIAL STATEMENTS July 31,1978
Sal* of subsidiary companyOn February 28, 1975 an agreement was signed be 1 ween the company and the Government ol the Republic of Uganda under which the company's entire holding of the shares of Kilembe Mines Limited was sold to the Republic of Uganda. The purchase price, payable in U.S. currency, was 52,400.000 (172 million Ugandan shillings) and the agreement fixed the exchange rate between the Ugandan and American currencies The terms of the agreement specified the following payment schedule
Due date
Upon delivery of share certificates On or before March 31, 1976 On or before March 31. 1977 On or before March 31, 1978
As al July 31. 1978 the first three instalments had been received, m September. 1978 the fourth instalment was received
The Canadian dollar equiva.ent ol the receivable has been recorded net ol a provision lor collection costs as at July 31. 1978 as follows
Ugandanshillings
3.900,0004.200,0004,400.0004.700.000
USdollars
538.000582,555620,667658.778
Gross receivableProvision for collection cosls
Net receivable
S740.334 (163.300)
S577034
Accounting policiesThe lollowinc) is a summary ol significant accounting policies followed in the preparation of the financial statements The policies conform to generally accepted accounting principles and have been applied consistently
(a) Investment m subsidiary -On conclusion ol thj agreement lor the sale ol the 70\ interest m its subsidiary Kilembe Mines Limited (see note 1) :: was decided that it would not be appropriate lo prepare consolidated financial statements for the1974 fiscal year, and the company adopted equity accounting to* its investment in the subsidiary Under this method the company recorded its share o' the earnings or losses of the subsidiary through the earnings arid investment accounts, dividends received were credited to the investment account
(b) Foreign exchange —Accounts receivable and investments tn foreign currencies are translated at exchange rates prevailing at the end of l ne period At July 3'. 1978 U S dollar investment!, and accounts receivable were translated at Canadian il 1349 (Si 0944 at December 31 1977. S1 0092 at Decembei 3i 1976 SI 016 at December 31.1975 and Si 00 at December 31 '974;
Most of the income ol Kilembe Mines limited has been received m U S dollars and the e*pend'tures have been incuned m pounds sterling or in Ugandan cu'rency Revenues rind expenses in current os other than Canadian dollars are translated into Canadian 'unds at the average of monthly rates of exchange in effect during the relevant period
(C) Mining properties and related expenditures -The company expenses all general exploration costs incurred during the period f-ollowing the sale of the company's operating mine in 19 f4 (see note i j tne company adopted the policy ot capitalizing d'rec! costs related to staking or acquiring mining properties Upon disposal or abandonment ol mining properties, the related staking or acquisition costs ate charged to earnings and any resulting gain or loss is reflected in the income ol that period
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3. Extraordinary tomAs described In note 1 above, in 1975 the company sold its shares in Kllembe Mines Limited. The company has therefore written down its investment in Hs subsidiary company at December 31.1974 to the estimated reatizabte value of 52,400,000. This adjustment has been effected by making a charge against tha earnings of the 1974 year as an extraordinary item In the amount of S4.326.399.
4. Income taxesAt July 31,1978 the company has available approximately S2.400.000 of allowable net capital losses which nay be carried forward to offset any future taxable capital gains.
5. Commitments and undertaking*In 1975, Rengold Mines Limited ("Rengold") purchased 72.S1tt o f the shares of Kiiembe Copper Cobalt Lid. ("Kilembe") and pledged them to a Canadian chartered bank ("Bank") as collateral security for a loan of 5715,000 used to purchase the shares. As a part of this transaction Kilembe undertook to maintain funds on deposit with the Bank in an amount related to. but greater than the amount of Rengold's indebtedness to the Bank.
On March 2.1976, the Bank called for payment of all of its loans to Rengold and. on default, exercised its rights under certain fixed and floating charge debentures, appointed a Receiver and Manager of Rengold and seized all of Rengold's assets including its 72^ holding of the shares of Kilembe. In the circumstances, management has agreed to maintain Kilembe's cash funds in interest-bearing deposits at the Bank and has further undertaken not to take any action with respect to Kilembe's assets without first consulting the Rengold Receiver and Manager.
The Bank has applied to the Court for authority to sell Rengold's assets, including its Kilembe shares, under the auspices of the Court.
6. Transaction* with related partiesDuring 1976, the company sold certain mining claims to a related party, that had a cost of 530,194. and received proceeds of S30.00C cash and 50.000 common shares of the related party, to which management ascribed a value o! S25.000 In 1977. the company sold the 50,000 common shares receiving proceeds of S25.000. Management is of the opinion that each of these transactions with related parties was carried out at fair market value.
7. Subsequent events(a) The final payment of U.S. 5658,778 from the Government of Uganda described in note i was received in
September, 1978.
(b) In connection with the financial difficulties o' the parent company. Rengold Mines Limited (Rengold), a Financing Group is preparing a proposal, which il finally presented and ultimately approved and implemented, would result in Kilembe issuing 2,200.000 treasury shares and acquiring the shares of Rengold Mines 4 Resources Ltd. ("Resources") (a wholly-owned subsidiary of Rengold) While the Financing Group would like to have their proposal implemented in 1978, there are significant uncertainties that must be resolved, tne more important of which are:— Shareholder and federal government approval must be obtained for the continuation ol Kilembe under the
Canada Business Corporations Act— Agreement must be obtained from Kilembe shareholders (other than Rengold) to the issue 2.200,000
treasury shares for cash.— Kilembe must file a prospectus according to the rules and regulat.ons of the Ontario Securities
Commission, for a new issue of 2.200.000 treasury shares and a secondary distribution of 2,820,827 issued shares now held by Rengold
— Approval must be obtained from the KHembe shareholders (other than Hengold) to acquire Resource s— Agreement must be obtained to the proposal by creditors of both Rengold and Resources— Agreement must be obtained from a Canadian chartered bank to grant certain loans
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KILEMBE COPPER COBALT LTD.
PRO FORMA CONSOLIDATED BALANCE SHEET(After giving **ect lo Note 1)
July 31,1978
ASSETSCurrent.
Cash......................................................... ........................................ ............. ............ ... ....... ....... s 32.715
Accounts receivable.................................................... .......................................... ...... . ... 16.42649.141
Mining claims at cost (Note 4)....... . . . .... ,.. .............. . .. . . . . .. . ,. 50.000
Fixed assets at cost (Note 5)....................................................... ....... . ... . ... .. .... ........ ......... .. 2.095.281Deterred expenditure at cost (Note 6(a))
Preproduction and development .....,............. ...... ....... .............. ............... . 3.388.911Administration and finance .... . ....................... . . . .......... .. ....... ................... 1.421,711
Costs of refinancing proposal...... . . ........ ....... . .... ,. ... .... .... .......... .. .. ....... ........... 163.200
57.168.244LIABILITIES
Current:
BanKadvances 51,481,213 Accounts payable and accrued liabilities . 33.663
Income and other taxes payable 79.000
1.593.876 Non-interest bearing debenture payable — due December 31. 1979 (Note 6(b)) 100,000
1 693.876SHAREHOLDERS' EQUITY
Capital stock
Issued and fully paid6.077.027 shares 4.977.027
Contributedsurplus 9.708.626
Del.01 (9211.485)5474,368
57.108 244
AUDITORS' REPORTTo the Directors o! Kilembe Copper Cobalt Ltd
Wo have examined the pro foimij consolidated balance sheet ol K.u-mbe Copper Cobalt .id as at July 3V 1978 Ou' examination was made in accordance wth generally accepted auditing standards and accordingly nclt'ded such tests and other procedu'Oi as we considered necessary n. the circumstances We have fniipd on 'he report of Clarkson Gordon 4 Co Jated September 19 1978 who have examined tne 'manciai statements of H.ileTibe Copper Cobalt Ltd
!n our opinion the accompanying pro forma balance sheet presents fairly the financial position ot the company as at July 31. 1978 after giving efiect to Ihe changes set forth m Note 1 when read in conjunction with the no:es attached hereto and si'b|e?t to obtaining approval of the creditors and the shareholdeis to accept the proposalToronto. Canada HAR^INSON. GLOVER K CO Octobor 6, 1978 Chartered Accountants
-24-
KILEMBE COPPER COBALT LTD.
NOTES TO CONSOLIDATED PRO FORMA BALANCE SHEETJuly 31,1978
1. Pro forma Consolidated Balanc* Sh#*t:The pro forma consolidated balance sheet gives effect, as at July 31, 1978, to the following proposed transactions which are the subject of an agreement (the Acquisition Agreement) to be signed among Kiiembe Copper Cobalt Ltd. (Kiiembe), Rengold Mines Limited (Mines), and Rengold Mines 4 Resources Ltd (Resources) and an agreement dated October 25, 1978 (the Agency Agreement) between Kiiembe. Mines and Davidson Partners Limited.
Before any of these proposed transactions will be entered into all of the following more important conditions must be satisfied:(i) The required approval of the Acquisition Agreement must be obtained from the shareholders of Kiiembe.
Mines, and Resources and for the Agency Agreement the approvals must be obtained from all the parties thereto;
(ii) The proposals contemplated (see (d) and (e) below) shall have been made and approved by the creditors of both Mines and Resources, and,
(iii) The acceptance by a Canadian chartered bank (Bank) of applications for loans to be made to Kiiembe (see (c) below).
Toe doiails ri the proposed transactions and their effects, are as follows:
(a) Coiitinuonce under the Canada Business Corporations ActKiiembe will apply for, and be granted, continuance under the Canada Business Corporations Act as a result of which its authorized share capital will have no limit.
(b) Issue of Treasury SharesKiiembe will issue and sell, pursuant to the Agency Agreement 2.200,000 common shares for a net cash consideration of 5936.800 (51.100,000 less agent's commission of 513.200 and estimated expenses of issue 015150.000)
(c) Acquisition of ResourcesKilombe will acquire, as provided for in the Acquisition Agreement, all of the issued and outstanding shares of Resources from Mines for (i) S1.00 cash and (ii) the assumption by Kiiembe of the indebtedness of Resources to Mines estimated to be 55,487,756. such amount to be adjusted on closing to the amount of Mines' indebtedness to the Bank, (55.131,213 as at July 31, 1978). The purchase price of Mines' receivable from Resources will be paid to the Bank. To the extent that Mines' indebtedness to the Bank exceeds 53,650.000, Mines' bankers will loan the amount of such excess to Kiiembe. such loan to be repayable December 31.1979 and to be guaranteed by Resources which will secui e such guarantee by a first fixed and specific charge on the mining claims and a first fixed and specific charge on its assets
(d) Settlement with Resources' CreditorsResources will make a proposal under the Bankruptcy Act. which it is assumed will be accepted by the creditors, providing tor the settlement of the claims of all Resources' creditors (with the exception of the Bank see (c) above) as follows:
(i) A payment to all preferred creditors and unsecured creditors with claims less than 5250, of 5304,475.
-25-
()l) The purchase by Resources from Mines of 573,877 Kilembe shares at their book value at that time (estimated to be 74* per share) and the contribution by the financing group of 16.172 Kilembe shares, which shares will be distributed to the unsecured cred.tors of Resources with claims greater than S2SO on the basis of 1 Kilembe share for each S2 of debt then outstanding
(e) Settlement with Mines' CreditorsMines will make a proposal under the Bankruptcy Act. which it is assumed will be accepted by the creditors, providing for the settlement of the claims of all Mines' creditors (with the exception of the Bank see (c) above), as follows:
(i) The sale of 600.000 shares of Kilembe. pursuant to the Agency Agreement for 5300.000 and the payment to preferred, unsecured creditors with claims of less than 5250 and the receiver/manager, of 5225,361
(II) Distribution to certain unsecured creditors M Mines of 790.262 common shares of Kilembe, on the basis of one Kilembe share for each 52 of debt then outstanding.
(f) Assumptions about Creditors ClaimsThe accompanying pro forma consolidated balance sheet has been prepared on the assumption that the claims of creditors of both Resources and Rengold will be settled as outlined in (d) and (e) above. However, there are the following uncertainties associated with th^se transactions:
(i) Unsecured creditors whose claims are greater than 5250 will have the right to reduce these claims to 5250 and to receive cash, rather than Kilembe shares It has been assumed in the accompanying pro forma consolidated balance sheet that no creditors will exercise this right.
(ii) Certain creditors have claimed security of their indebtedness and filed Mechanics Lien actions against the title of the mining claims in the amount of 5231.361. In the accompanying pro forma consolidated balance sheet these claims have been accounted for as unsecured creditors, the settlement of which is one Kilembe share for each S2 of debt.
(iii) Creditors may file additional claims against either Resources or Rengold It has been assumed in the accompanying pro forma consolidated balance sheet that no such additional claims will be maoe.
The effect of any change m creditors claims on the accompanying pro forma consolidated balance sheet would be as follows
(iv) If any additional claims are settled in cash, either by Rengold or Resources. Kiiembe would make a request to the Bank to increase its bank loan
(v) There is an apparent deficiency of 16.172 Kilembe shares for distribution to creditors The financing group have agreed to contribute any shares to the treasury that are required The number of shares will vary depending on the election set out in (i)
(g) Subsequent event effectedSubsequent to the balance sheet date, the final payment due from the Government of The Republic of Uganda 5577.034 Canadian net ol collection costs is deemed to have been received
(h) Dissenting Rights of Minority ShareholdersUnder Section 184 of tho Canada Business Corporations Act subject to certain conditions, any existing shareholders of Kilembe who dissent from the approval of the proposed tfansacticns. are entitled to be paid the fair value ol their shares at that time No provision has been made in the accompanying pro forma consolidated balance sheet for any such payments
(i) Indebtedness to MinesThe indebtedness of Kilembe lo Mines resulting from the acquisition of Resources would be settled as follows
indebtedness originally assumed (see (c. above) . 55.487.756Amount satisfied by payment of Mines Bjnk indebtedness (see (c) above) . (5.131,213)Cost of Kilembe shares purchased from Mines (see (d(ii)) above) . 423,234Transfer of note payable by Mines to Resources (100,000)Cash transferred from Mines to Resources . . . . 78.296
Interest adjustment on inter-ro.npany account (see (c) above) . 5 758.075
-26-
Q) KUembe ShareholdingsSet out below is the effect of the proposed transactions on the shareholdings In Kilembe.
Before the proposedtransactions ...........................
Issue of Treasury Shares (see (b) above) ....................................
Settlement with unsecured creditors of Resources (see (d) above) ..............................
Settlement with unsecured creditors of * as (see (e) above) ....................................
Sale by Mines of Kilembe shares (see (e) above)......,..............
Contribution from Financing Group to Resources of remaining shares (see (f) above) for settlement to unsecured creditors
Mines (or Mines Shareholders
rt Mines is Financing Wound Up) Group2.820.627
(72^)
Following the proposed transactions ...........
2.200,000
(573.877)
(790.282)
(600.000) 600.000
(16.172)
(14.1*,)
856.668 2.783.828
UnsecuredCreditors ofMines andResources Other
1.056.200 (27.2*,)
Total
3.877.027 (IOG.0%)
2.200.000
573.877
790.282
16.172
(458*))
1.380.331
(2279b)
1.056.200
(17.4*,)
6.077.^27
(IDO.0%)
2 Sale of subsidiary company:On February 28, 1975 an agreement was signed between the company and the Government of the Republic of Uganda under which the company's entire holding of the shares of Kilembe Mines Limited was sold to the Republic of Uganda The purchase price, payable in U.S. currency, was S2.400.000 (17.2 million Ugandan shillings) and the agreement fixed the exchange rate between the Ugandan and American currencies. The terms of the agreement specified the following payment schedule:
Due dateUgandan shillings
3,900,000 4,200.000 4,400.000 4,700,000
U.S. dollars
538,000 582,555 620.667 658,778
Upon delivery of share certificates On or before March 31, 1976 On or before March 31. 1977 On or before March 31, 1978
As at July 31. 1978 the first three instalments had been received, in September, 1978 the fourth instalment was received
The Canadian dollar equivalent of the receivable has been recorded net of a provision for collection costs as at July 31,1978, as follows:
Gross receivable..................... .............Provision lor collection costs .....
Net (eceivable ...... ... ... ..... .. . .....
5740,334 063.300)
5577.034
3 Accounting policies:The following is a summary ol significant accounting policies followed m the preparalion of the financial statementsa) Foreign exchange:
Accounts receivable and investments in foreign currencies are translated at exchange rates prevailing at the end of the period. At July 31. 1976, U.S. dollar investments and accounts receivable were translated at Canadian S1.1349.
-27-
'•f?
Revenues and expenses in currencies other than Canadian dollars are translated into Canadian funds at the average monthly rates of exchange in effect during the relevant period
b) Mining properties and related expenditures:The company expenses all general exploration costs incurred during the period. Following the sale of the company's operating mine in 1974 the company adopted the policy of capitalizing direct costs related to staking or acquiring mining properties. Upon disposal or abandonment of mining properties, the related staking or acquisition costs are charged to earnings and any resulting gam or loss is reflected in the income of that period.
c) The fixed assets and deferred expenditures are carried at cost which is not intended to reflect present or future value.
d) No depreciation on fixed assets or amortization of deferred expenditures has been recognized in the accounts as the Company has not maintained a commercial production level.
e) Rengotd Mines Limited ("Mines") and its wholly-owned subsidiary Rengold Mines 4 Resources Ltd. ("Resources") were placed in receivership by a Canadian Chartered Bank ("Bank") on March 2.1976 and Price Waterhouse Limited was appointed receiver for the Bank The fixed assets are pledged to the Bank as security for bank loans. In the event of liquidation, it is anticipated that there would be no residual value available for the benefit ol unsecured creditors or shareholders Generally accepted accounting principles would require the consideration of reporting the net realizable value of the assets However, in these special circumstances the cost values are considered appropriate because these values would be earned forward in the event of the refinancing proposal - see note 1
Mining claims:The mining properties consist of 29 patented mining claims in Lesson. Rennie ana Brackin Townsmps in the Sudbury Mining District, 28 of which were originally optioned to "Mines" in consideration of the ailotment and issue ol 750,000 fully paid and non-assessable shares to which the directors asrntx 1 a value ol SSO.OOO "Resources" acquired the claims from Wiilroy Mines Limited and is to share equally with Willroy the cash flow from production ader "Mines" and "Resources" have recovered their cosis and adequate provision has been made for working capital The Company was obligated to bring the mine to commercial production of at least 300 tons per day by March 31, 1976
5 Fixed assets:July 31,
1976^
Mmeplant . S 445.558 Equipment 1.649,723
S2.095.281
6 Agreements:(a) "Mines" entered into an agreement with Great Lakes Power Company Limited wherein Great Lakes Power
agreed to purchase the Company's power transmission line at its cost of S132.P04 Trie line became the properly ol Great Lakes Power under the agreement as all miring operations were abandoned tor one yeai
(b) Should the refinancing proposal be accepted, the 5100.000 convertible debenture due lo a shareholder shall be conversed to an interest tree debenture payable, secured by a second floating charge on the assets to mature December 31. 1979.
7 Litigation:a) Certain creditors have claimed security of their indebtedness and filed Mechanic s Lion Actions against the
title to mining claims in the amount of S231 361
b) Wilkoy Mines Limited, vendor of the mining claims, has made a claim against the Bank regarding their interest in the claims Willroy has registered a caution against title to the mmmg claims regarding their property interest — see note 4
-28-
b. Commitment* and undertaking*:In 1975, "Mines" purchased 72.8* of the common shares of "Kllembe" and pledged them to the Bank as | collateral security for a loan of 5715,000 used to purchase the shares. As a part of this transaction "Kilembe" \ undertook to maintain funds on deposit with the Bank In an amount related to. but greater than the amount of j "Mines" Indebtedness to the Bank. i
On March 2,1976 the Bank called for payment of all of Its loans to 'Mines" and, on default, exercised Its rights sunder certain fixed and floating charge debentures, appointed a Receiver and Manager of' 'Mines'' and seized allof "Mines" assets Including Its 72.8'*. holding of the shares of "Kilembe." In the circumstances, management has ;agreed to maintain "Kllembe's" cash funds In Interest-bearing deposits at the Bank and has further undertakennot to take any action with respect to "Kilembe's" assets without first consulting the "Mines" Receiver.
The Bank has applied to tho Court for authority to sell "Mines" assets, Including Its "Kilembe" shares, under the j auspices of the Court. '
9. Subsequent event:The final payment of U.S. 5658,778 from the Government of Uganda described In Note 2 was received In September'978. j
10. Income taxes:(a) For the parent company, Kilembe:
At July 31,1978 the company had available approximately 52,400,000 of allowable net capital losses which may be carried forward to off-set any future capital gains.
(b) For the subsidiary company. Resources: Based on the assumptions that(i) the fair market value of Kilembe shares is 74C per share when those shares are used for settlement of
Mines' and Resources' liabilities (reference is made to notes 1(d)and 1(e)),the eventual mine operation is a "new mine', for tax filing purposes, andthere are no significant losses on a tax filing basis (which would have the effect of limiting the deductibility to five years) but rather substantially all of the costs of fixed assets, deferred expenditures, and mining claims (approximately 56,900,000) represent potential income tax deductions s'.ould significant taxable income be earned.
then it is expected the reduction of liabilities by settlements with creditors will reduce deductions on a tax filing basis by approximately 51.500.000 ;o 55.400,000
-29-
RENGOLD MINES 8* RESOURCES LTD.BALANCE SHEET
as at July 31,1978ASSETS
Jotes1.2and5). ... .... ..........,... .
Mes 1 and 3) ...................................... .....
July 31. 1978
. . . 5 16,426.. .... ....... ....... . 50.000
. ..................... 2095281
March 1 1976
S 16.426
50.0002284028
Current:Accounts receivable
Mining claims — at cost ( Fixed assets — at cost (h Deterred expenditure at cost net of gold proceeds (Note 1)
Preproduction and development............. . ..........Administration and finance .... .........................
LIABILITIESCurrent:
Accounts payable and accrued liabilities
Notepayable
Due to Rengold Mines Limited
Capital stock
Authorized:50,000 Shares of no par value
Issued and fully paid 3 Share;,
SHAREHOLDERS' liQUITY
3,388,913
56,972.331
51.484,5/2
1.484,572
5.487.756
2,450.773
230.491
55.031.718
51.553,104
100.0001.653.104
3,378,611
56.972,331 55.031.718
The ac ;ompanymg notes are an integral part o) these financial stalemerts
AUDITORS'REPORTTo the Directors otRengold Mines S Resource 1. L!o
We have eiaminea ' te bai.inre sheet ol Rengo'd Mines (l flesojrres l Id .is at July 31 1978 a''d ir.f statements ol deferred B'pend'ture and changes in financial position lor the period December 1 1H74 u July 31 197B Our enAnnnation *,is made m iccordance witn generally iccepted auditing standards and accordingly .ni 'jcled such tt-sis nnc) nthor p.ocedu,res :is w e considered necessary in the 'ircumslances
The accompanying mancid 1 statements have not teen prepared - n a ccordance w.th generally accepted accounting princ-piC'S. and are appropnat? only lor prusentation lo the shareholders ot Re-igoid Mines A resources, t.le' and Kilemoe Copper Cobalt ltd and the creditors ol Rengoid Mines 4 Rc-souice* ltd lo consider the retinanrmg propof..ii Note t describes the a:ccun'mg principles Ihe rea ion why tins h.isii ol accounting is considered ainvopna!" and the nature ol the dillprenr.e from g-jnerali/ accepted accountmt, pnnc-pies
In our opinion theso financial statements presenl the ti'i.mcial position ot the company as .1! Jui* 3! 1978 and the results o! its operations and the i hanges n its financial position tor t"e period Decemhe' ' iy'i to July 31 1978 .'i accordance with tne basis oi accounting desontx 3 . n Not* l applied consistently
Toronto, Canada HARBINSON. GLOVER ft CO October 6. 1978. Chartered Accountants eicept lor note 6 which is as at October 25 1978
-30-
RENGOLD MINES * RESOURCES LTD.
STATEMENT OF DEFERRED EXPENDITURE For the Period December 1,1974 to July 31,1978
Preproduction and development: Mine dewatering ........................................,..................Mine development and preparation ............................Mill preparation ......,............ ........................................Underground development ............... ..........................
Surface services...........................................................Mine administration ....................,...... .........................,
Transfer of power line costs from fixed asset (Note 4)Other........................ .....................,............... .............
Less: Proceeds, on sale of gold ...................................Net expense for period ................................................
Administration and finance: Interest and finance costs .........................................,.
Receivers' fees and related costs ...............................
12 months ended
November 30. 1975
5 155.282
153.53844,101
266.573
369.591
315.246
37.836
1,342.167
51.342.167
5 197,541
5 197.541
3 months enoed
March 1 1976
S228.726
227.223
173.857
269,194
209.606
1.108.606
S 1.1 08.606
S 32.950
5 32.950
29 months ended
Julv31. 1978
5349.760
223.236
257,546
413,884
122,359
28,000
1.394,785
456,645
5 938.140
S 891.919
299,301
51,191,220
Total
5 155,282
732,024
494,560
440,430
896.331
938.736
122.359
65,836
3.845.558 456.645
53.388,913
51.122,410
299.301
51.421.711
The accompanying notes are an integral part of these financial statements.
-31 -
RENGOLD MINES A RESOURCES LTD.
STATEMENT OF CHANGES IN FINANCIAL POSITION For the Period December 1,1974 to July 31,197a
Funds were provided by:Issue of treasury shares ............. ...................Borrowing on long term debt . ............ .Advances from parent company . ...... ....... ....Proceeds on sale of gold ....... ...........
Funds were applied toPurchase (repossession) of fixed assets (net) Acquisition of mining claims . . Preproduction and development Administration and finance Long-term debt retired
Increase (decrease) in deficiencyDeficiency of working capital beginning of periodDeficiency of working capital end o* period
Deficiency of working capital is represented by Current assets Current liabilities
12 months ended
November 30. 1975
S 3143.626
2.81B.387-
2.962.016
2.057.84650.000
1.342 167
212.275
97508
3.759.796
797.780
-
S 797.780
S 180.024
977.804
S 797.780
3 months ended
March l. 1976
S100.000
560.224
-
660.224
226.182-
1.108606
16.216
146.118
1.499.122
' 838.898
797.780
SI. 636.678
S 16.426
1.653.104
1 1 636.678
29 months ended
July 31. 1978
S-
2,109.145
456.645
2.565.790
(66.388)-
1 272426
1,191.220
-
2397.258
(168.532)
1 636,678
SI 468.146
S 16.426
1,484.572
S1.4C8.146
Total
S 3243.626
5.487.756
456 645
6.188.03C
2.217,640
50,000
3,723 199
1.421. '11
243.626
/.656.U6
1.468.146
-
51.468,146
The accompanying notes are an integral part of these financial statements
-32-
RENGOLD MINES 4 RESOURCES LTD.NOTES TO FINANCIAL STATEMENTS
July 31,19781 . Accounting principle*:
a) The company was placed In receivership by a Canadian chartered bank (Bank) on March 2, 1976 and Price Waterhouse Limited was appointed receiver and manager by the Bank. The fixed assets are pledged to the Bank as security for the bank loans of Rengold Mines Limited ("Mines"). In the event of liquidation. It is anticipated that there would be no residual value available for the benefit of unsecured creditors or shareholders. Generally accepted accounting principles would require the consideration of reporting the net realizable value of the assets. However, in these special circumstances the cost values are considered appropriate because these values would be carried forward In the event of the re-organization described in Note 6.
b) The fixed assets and deferred expenditure are carried at cost which is not intended to reflect present or future value.
c) The accounting records of "Mines" and Rengold Mines A Resources Ltd. ("Resources") were consolidated Consequently it Is not possible to accurately determine the creditor position of r -^ eh company. The directors have resolved that "Resources" commenced operations on December 1. 1974 lo complete the mine development and to act as property owner/operator. Creditors have benn allocated to the company which received the goods or services.
d) The accounting has been divided into three oeriods which are not strictly comparable but have been determined to coincide with important dates in the company's history The period endc - November 30, 1 975 is the first fiscal year. March 1, 1976 is the termination of the broken period before receivership. The period Irom March 2. 1976 to July 31. 1978 is the receivership period.
e) No depreciation on fixed assets or amortization of deferred expenditure has been recognized in the accounts as the Company has not maintained a commercial production level
2 Mining claims:The mining properties consist of ?9 patented mining claims in l eoson Rennie and Brackin Townships in the Sudbury Mining District. 28 of which were originally optioned to "Minos" in consideration of the allotment and issue of 750.000 fully paid and non-assessable shares to which the directors ascribed a value of S50.000 "Resources" acquired the claims from Willroy Mines L mited and is tc share equally with Willroy the cash flow from production after "Mines" and "Resources" have recovered t' eir costs and adequate provision has been made for working capital. The Company was obligated lo ^ing the mine lo comm*j,cial production of at leasl 300 tons per day by March 31 . 1976
3 Fixed assets: July 31. March 1,1978
Mine plant , S 445.558 S 445.558Equipment........... . .... 1,649.723 1,716.111Power transmission line (Note 4) — 122.359
52.095.281 52.284.028
Agreement:Rengold Mines Limited entered into an agreement with Great Lakes Power Company Limited whereiii Great Lakes Power agreed to purchase the company's power transmission line at its cost of S132.204 The line became the property of Greal Lakes Power under the agreement, as all mining operations were abandoned for one year
Litigation:o) Ceitain creditors have claimed security of their indebtedness ano filed Mechanic s Lien Actions against the
title to mining claims in the amount of S2o1.361b) Willroy Mines Limited, vendor of the mining claims, has made a claim ^ga^st the Bank regarding their
interest in the claims. Willroy has registered a caution against l:'le !o tiie mining claims regarding their property interest (See Note 2)
Subsequent event:The Company proposes to enter into an agreement (the Acquisition Agreement) along with Kilembe Copper Cobalt Ltd. (Kilembe) and Rengold Mines Limited (Mines) Mines and Kilembe will enter into tin agreement dated October 25,1978 (the Agency Agreement) with Davidson Partners Limited
-33-
Before any ot those proposed transaction? will be entered into all of the following more important conditions must be satisfied.
(O The required approval of the Acquisition Agreement must be obtained from the shareholders of Kilembe. Mines, andResources and lor the Agency Agreement the approvals must be obtained from all the parties thereto,
(ii) The proposals contemplated (see (d) and (e) below) shall have been made and approved by the creditors of bothMines and Resources, and.
(ill) The acceptance by a Bank ol applications for loans lo be made to Kilembe (see (c) below)
The details of the proposed transactions and their effects are as follows
(a) Continuance under the Canada Business Corporations ActKilembe will apply for, and be granted, continuance under the Canada Business Corporations Act as a result of which its authorized share capital will have no limit
(b) Issue of Treasury SharesKilembe will issue and sell, pursuant to the Agency Agreement ? 200.000 common shares lo the Financing Group lor a net cash consideration of S936.800 (SI.100.000 less agents commission of S13.200 and estimated expenses of issue of 5150,000).
(c) Acquisition of ResourcesKilembe will acquire, as provided for in the Acquisition Agreement, all of the issued and outstanding shares of Resources from Mines for (i) Si 00 cash and (ii) the assumption by Kilembe ol ''.e indebtedness of Resources to Mines estimated to be J5.487.756. such amount to be adjusted on closing lo the amount of Mines' indebtedness to (he Bank, (55.131,213 as at July 31. 1978) The purchase price of Mines' receivable from Resources will be paid to Ihe Bank To the extent that Mines indebtedness lo the Bank exceeds 53.650,000, Mines' bankers will loan the amounl of such excess lo Kilembe. such loan to be repayable Deceribcr 31.1979 and to be guaranteed by Resources which will secure such guarantee by a first fixed and specific charge on the mining claims and a first fixed and specific charg*? on its assets
(d) Settlement with Resources CreditorsResources will make a proposal under the Bankruptcy Act. which it is assumed will be accepted by (he creditors, providing tor (he settlement of the claims of all Resources' creditors (with the exception i. the Bank see (c) above) as follows(i) A payment to all preferred creditors and unsecured creditors with claims less than 5250. of 5304.47b.
(ii) The purchase by Resources from Mines ot 573 877 Kilembe shares at their book value at thai lime (estimated to be 74C per share) and the contribution by the financing group of 16.17? Kilembe shares which shares will be distributed to the unsecured creditors of Resources with claims greater than 5250 on the basis of 1 Kilembe share lor each 52 ot debt then outstanding This settlement represents a forgiveness of debt ol 5744 937
(e) Settlement with M.'ir-s' CreditorsMines will make a proposal under the Bankruptcy Act. which it is assumed will bt accepted by t t-f c reditors, providing lor the settlement of the claims of all Mines creditors (with the exception of the Bank see (c) above), as follows(i) The sale of oOO.OOO shares of Kilembe. pursuant to the Agency Agreement for 5300 000 and the payment
to preferred, unsecured creditors with claims ol less than 5250 and the receiver manager of 5225.381
(ii) Distribution to certain unsecured creditors of Mines of 790.281' common shares ot Kilembe. on the basis of one Kilembe share for each S? of debt then outstanding
(f) Indebtedness \ * M inesThe indcDtedness ol Mernbe to Mines, lesuitmg Irom the acquisition ol Resources would be settled as follows
Indebtedness originally assumed (see (c) above; 5 5.487.756Amount satisfied by payment o! Mines bank indebtedness i sue (c) abov) (5.131,213)Cost of Kilembe shares purchased from Mines i see (d(nij above) 423.234Transler of note payable by Mines to Resources (100.000)Cash transferred from Mines to Resources 78,298
Interest adjustment on inter-company account (see (c) above) S 758,075
- 34-
RENGOLD MINES LIMITEDand to Subsidiary
CONSOLIDATED BALANCE SHEET July 31.1978
ASSETS
Current:Cash and short-term deposits . Accounts receivable...............
Equny in Kllembe Copper Cobalt Ltd. (Note 1).....,...............Mining claims — at cost (Notes 1, 2 and 7)...........................Fixed assets — at cost (Nctes 1, 3 and 4).............................Deferred expenses — at cost net of gold proceeds (Note 1):
Reproduction and development...........,.........................Administration and finance..............................................Organization.....................................................................
Current: L IABILITIESBank advances (Note 1)...................................................................Accounts payable and accrued liabilities (Notes 1 and 7(a)) Debenture payable (Note 5)..............................................................Note payable ............................................................................. .. .
July 31, March 1. 1978 1976
S 3,678 S -16.426 16.42620.104 16.426
2.080.522 2.020.37150.000 63.188
2.095.281 2,284.028
3,673.969 2.735,8292.041.219 657,820
- 16.267
S 9.961.095 57.793.929
SHAREHOLDERS' EQUITYCapital stock:
Authorized:5,000,000 shares, no par value, aggregate value not to exceed S5.000.000
Issued and fully paid (Note 8):2,570.005shares................................................................. ................. ...
Deficit: (Note 6)....................... ,. ................................ .................
S 5.131,213 53,045.3643.290.517 3.139.896
100.000 100.000_ - 100,000
8,521.730 6,385.260
1.641.005 (201,640)
1.439.3JB5
S 9.961.095
1.641,005(232.336)
1.408.669
17.793,929
The accompanying notes are an integral part ol these financial statements
AUDITORS' REPORTTo the Directors o) Rengold Mines Limited
We have examined the consolidated balance sheet ol Rengold Mines Limited as at July 31 1978 and the consolidated statements of deterred expenditure and changes in financial position for the period August 28. 1973 (date of incorporation) to July 31. 1978 Our examination was made m accordance with generally accepted auditing standards, and accordingly included sur.h tests and other procedures as we considered necessary m the circumstances
The accompanying linancial statements have not been prepared m accordance with generally accepted accounting principles, and are appropriate only lor presentation to the shareholders of Rengold Mines Limited lo consider the refinancing proposal Note 1 describes the accounting principles, the reason why this basis of accounting is considered appropriate and the nature of the difference from generally accepted accounting principles
In our opinion, these financial statements present the financial position of the company as at July 31. 1978 and the results of its operations and the changes in its financial position for the period August 28 197.1 to July 31. 1978 in accordance with the basis of accounting described m Note 1 applied consistentlyToronto. Canada. HARBINSON, GLOVER ft CO October 6. 1978. Chartered Accountants except for note 9 which is as at October 25. 1978
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RENGOLD MINES LIMITED
CONSOLIDATED STATEMENT OF DEFERRED EXPENDITUREFor the Period August 28,1973 (Date ol Incorporation)
to July 31,1978
Pnproduction and development:
Mine dewatering .........................................Mine development and preparation
Mill preparation ......... .................................
Underground services Surface services ........ ............ ....... .
Mine administration ............. .............. .Transfer of power line costs from fixed
assets (Note 4) ... .......... Other ........ . .... . . ............. .Total expenses for period .
Less proceeds Irom sale o' gold
Net expenses for period
Administration and finance:Interest and finance cosls
Office salaries, supplies and servicesShareholders' information .Legal and audit .Receiver's lees and related cosls
August 23, 1973to
November 30, 1974
. S 77,424
27,050
43.393 73.707
63,482
285.056
-
S 285.056
S 57,066
15.315
1 1 .933
53.138-
S 137.452
12 Months Enued
November 30. 1975
S 155,282
153.53344,101
266.573 369.591315.246
378361,342.167
-
S 1.342.167
S 237.675
10?. 268
?5?I8
49 179
-
t 414.340
3 Months Ended
March 1. 1976
S228.726
227.223
173.857
269.194
209.606
1.108.606
S 1.108.606
S 38716
51,?13
2 711
13388-
S 10602H
29 Months Ended
July 31, 1978
S349.760
223,236
257.546
413.884
122.359 ?B.OOO
l.j.,4.785
456.645
S 938,140
S 1.088.219-
(5.400)
1.279
299.301
S 1 383.399
Total
S 232.706
732.024
521.610
483.823
970.038
1,002.218
122.359 65.836
4.130.614
456.645
S 3.673.969
S 1,421.676
168796
34.462
116.984
299.301
J 2.041.219
The accompanying notes are an integral part of these financial statements
-36-
RENGOLD MINES LIMITEDCONSOLIDATFD STATEMENT OF CHANGES IN FINANCIAL POSITION
For the Period August 28,1973 (Date ol Incorporation)to Jury 31,1978
Funds were provided by:Issue of treasury shares .............................. 5 1.200.005Proceeds on sale of gold ............................
Amounts charged to deficit:Mining properties written-off................
Organization expenses written-off.......Excess of cost of shares in subsidiary
company over net book value at date of acquisition net of share of earnings (losses) to date ..............
August 23,1973 to
November30. 1974
5 1 .200.005—
12 MonthsEnded
November30. 1975
5 325.000—
3 MonthsEnded
March 1,1976
5 116,000—
29 MonthsEnded
July 31.1978
5456.645
Total
S 1.641
456
.005
.645
(194,705) (37.631)
(13,188) (16,267)
60,151
Items not affecting working capital:
Mining properties written-off................Organization expenses written-otf......,Excess of cost of shares in subsidiary
company over net book value a! date of acquisition .........................
Funds were applied to:Purchase (repossession) of fixed assets
(net)......Less Amount (inanced by long-term debt
Investment in subsidiary .......................... ...
Acquisition of mining claims .......................
Organization expense ........... . .......Preproduction and development . ....Administration and finance .................... ....
Long-term debt retired ...................... .........
Increase (decrease) in working capital . .
Working capital (deficiency), beginning ofperiod ... ........................................ ........ ,.
Working capital (deficiency), end of period .
Working capital (deficiency) is represented by:Current assets ............................ ................
Current liabilities....................... ............
(13,188) (16,267)
(172.185)
13.188
16.267
172.185
2.097^650
2,217,640
250.0001,967,6402,252.707
63.18816.267
4.008.2552,041,219
250.00010.599.276
(8.501.626)
. — (6^68.834) S 155,350 5(5.044.018) 1(6.368.834) 5(8.501.620 5(8.501.626)
1.200.005
701,459
250.000
451.459
54.421
16.267
285.056
137.452
100.000
1.044,655
155.350
194.705
325.000
1,356,387
1 .356.387
2.252.707
8.767-
1.342.167
414.340
150.000
5.524.368
(5.199.368)
37.631
116.000
226.182
226.182
-
-
-
1.108.606
106,028
-
1.440.816
(1.324.816)
13.188
16.26,-
(60.151)
456.645
(66,388)
-
(66.388)-
-
-
1.272.426
1 .383.399
-
2.589.437
(2.132.792)
S 260.729 S 180.024 S 16.426 5 20,104
-J 1i5JL3L9) (5.224.042) J6JJ85.260) J8.521730)S 155.350 5(5,044,018) 5(6.368,834) 5(8.501.626)
The accompanying notes are an integral part of these financial statements.
-37-
RENGOLD MINES LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJuly 31,1978
Accounting principles:a) Rengold Mines Limited ("Mines") and its wholly-owned subsidiary Rengold Mines A Resources Ltd
("Resources") were placed in receivership by a Canadian chartered bank ("Bank") on March 2. 1976 and Price Waterhouse Limited was appointed receiver lor the bank The fixed assets are pledged to the Bank as security lor bank loans. In the event of liquidation, it is anticipated that there would be no residual value available lor the benefit of unsecured creditors or shareholders. Generally accepted accounting principles would require the consideration of reporting the net realizable value of the assets However, in these special circumstances the cost values are considered appropriate because these values would be carried forward in the event of the re irganization described in Note 9
b) These financial statements are consolidated to include the wholly-owned subsidiary Resources " The investment in Ktlembe Copper Cobalt Ltd. ("Kilembe"). a 72 8* owned subsidiary, is carried at equity value (cost net ol earnings (losses) to date) because ol the proposed re-organization described in Note 9 and because the shares are pledged to the Bank as collateral security
c) The fixed assets and deferred expenditures are carried at cost which is not intended to reflect present or future value
d) The accounting has been divided into four periods which are not strictly comparable, but have been determined lo coincide with important dates in the company's history The periods ended November 30. 1974 and 1975 are the first fiscal years March 1. 1976 is the termination of the broken period before receivership The period from March 2. 1976 to July 31. 1978 is the receivership period
e) No depreciation on fixed assets or amortization of deferred expenditure has been recognized in the accounts as the Company has not maintained a commercial production level
Mining claims:The mining properties consist of 29 patented mining claims in Leeson. Rennie and Brackin Townships m the Sudbury Mining District. 28 of which were originally optioned to 'Mines m consideration of the allotment and issue of 750.000 fully paid and non-assessable shares lo which the directors ascribed a value of S50.000 "Resources" acquired the claims from Willroy Mines Limited and is to share equally with Wiliroy the cash flow Irom production ader "Mines" and "Resources have recove.ed Iheir costs and adequate provision has been made for working capital Tne Comoany was obligated to bring the mine lo commercial prof'-ir.tion ol at least 300 ions per day by March 31 1976
Fixed asset*:
Mine plant Equipment Power transmission line
July 31 1071
S 445558 1 649 723
52 095 281
March 1, 1976
S 445,558 l./ If '11 122 )59
S2, 284 028
Agreement:"Mines" ente.ed into an agreement with Great Lakes Power Company Limited wherem Great Lakes Power agreed to purchase the Company's power transmission line al its cost of S132.204 The tine became the property ol Great Lakes Power under the agreement, as all mining operations were abandoned lor one year
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5. Debenture payable:The 5100,00013* debenture is secured by a second charge on Rengold assets and Is convertible Into shares of Rengold.
6. Deficit:1978 1976
Cost of mining claims abandoned ............................................................................... S 29.455 S —Excess of cost of shares of Kilembe Copper Cobalt Ltd. over equity value ............ 172.165 232.336
S 201.640 S 232.336
7. Litigation:a) Certain creditors have claimed security of their indebtedness and filed Mechanic's Lien Actions against the
title to mining claims in the amount of S231.361.b) Witlroy Mines Limited, vendor o? the mining claims, has made a claim regarding their interest in the claims.
Willroy has registered a caution against title to the mining claims regarding their property interest (See Note 2).
8. Since Incorporation the company has Issued the following shares:No. ofShares Value
For option on mining claims ................,..............................................................,...... 750,000 S 50,000For services in period ended November 30, 1975 ..................................................... 25,000 25,000For cash during:
Period ended November 30. 1974 ....................................................................... 1,400,005 1.150,005Period ended November 30. 1975 .. .................................................................. 250,000 300,000Period ended March 1, 1976 ............................................................................... 145,000 116.000
2,570.005 S 1.641.005
Subsequent event:The Company proposes to enter into an agreement (the Acquisition Agreement) along with Kilembe Copper Cobalt Ltd. (Kilembe) and Rengold Mines ft Resources Ltd. (Resources). The Company and Kilembe will enter into an agreement dated October 25, 1978 (the Agency Agreement) with Davidson Partners Limited
Before any of these proposed transactions will be entered into all of the following more important conditions must be satisfied:(i) The required approval ot the Acquisition Agreement must be obtained from the shareholders ol Kilembe. Mines, and
Resources and for the Agency Agreement the approvals must be obtained from all the parties thereto;(ii) The proposals contemplated (see (d) and (e) below) shall have been made and approved by the creditors of both
Mines and Resources, and.(iii) The acceptance by a Canadian chartered bank (Bank) of applications for loans to be made to Kilembe (see (c)
below)
The details o( the proposed transactions and their effects are as follows:
(a) Continuance under the Canada Business Corporations ActKilembe will apply for, and be granted, continuance under the Canada Business Corporations Act as a result of which its authorized share capital will have no limit
(b) Issue of Treasury SharesKilembe will issue and sell, pursuant to the Agency Agreement 2.200,000 common shares to the Financing Group fur a net cash consideration of S936.800 (51,100.000 less agent's commission of 513.200 and estimated expenses of issue of 5150,000)
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(c) Acquisition of ResourcesKllembe witt acquire, as provided for in the Acquisition Agreement, all of the issued and outstanding shares of Resources from Mines for (i) St .00 cash and (ii) the assumption by Kilembe of the indebtedness of Resources to Mines estimated to be S5.487.756, such amount to be adjusted on closing to the amount of Mines' indebtedness to the Bank. (S5.131.213 as at July 31.1976) The purchase price of Mines' receivable from Resources will be paid to the Bank. To the extent that Mines' indebtedness lo the Bank exceeds S3.650.000. M-nes' bankers will loan the amount of such excess to Kilembe. such loan to be repayable P Kember 31.1979 and to be guaranteed by Resources which will secure such guarantee by a first fixed and specific charge on the mining claims and a first fixed and specific charge on its assets
(d) Settlement with Resources' CreditorsResources will make a proposal under the Bankruptcy Act. which it is assumed will be accepted by the creditors, providing for the settlement of the claims of all Resources' creditors (with the exception of the Bank see (c) above) as follows:(i) A payment to all preferred creditors and unsecured creditors with claims less than 5250, of S304.475;(ii) The purchase by Resources from Mines of 573.677 Kilembe shares at their book value at that time
(estimated to be 744 per share) and the contribution by the financing group of 16.172 Kilembe shares which shares will be distributed to the unsecured creditors of Resources with claims greater than 5250 on the basis of 1 Kilembe share for each 52 of debt then outstanding This settlement represents a forgiveness of debt ol 5744.937
(e) Settlement with Mines' CreditorsMines will make a proposal under the Bankruptcy Act. which it is assumed will be accepted by the creditors, providing for the settlement of the claims of all Mines' creditors (with the exception of the Bank see (c) above), as follows
(i) The sale ot 600,000 shares of Kilembe. pursuant to the Agency Agreement for 5300.000 and the payment lo preferred, unsecured creditors with claims of less than 5250 and the receiver 'manager, of J225.381
(ii) Distribution to certain unsecured creditors of Mines of 790.282 common shares of Ktiembe. or the basis of one Kilembe share for each 52 debt then outstanding
(f) Indebtedness to MinesThe indebtedness of Kilembe to Mines, resulting from the acquisition of Resources would be settled as follows
Indebtedness originally assumed (see (c) above) 55.487.756Amount satisfied by payment of Mines bank indebtedness (see (c) above) (5,131.213)Cost of Kilembe shares purchased from Mines (see (d(n)) above) 423.234Transfer of note payable by Mines to Resources (100.000)Cash transferred Irom Mines to Resources 78.298Interest adjustment on inter-company account (see (c) ;tbove) 5 758.075
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SPECIAL RESOLUTION
KILEMBE COPPER COBALT LTD.continuing th* Company under th* provisions of th* Can ada Business Corporations Act and authorizing th* direc
tors to apply tor a Csrtiflcat* of Continuance.
WHEREAS the Company was incorporated pursuant to the Companies Act of Canada by Letters Patent dated September 17,1952 (which Letters Patent is referred to as the "Charter");
RESOLVED as a Special Resolution that:
1. The Company apply for a Certificate of Continuance continuing the Company under the Canada Business Corporations Act pursuant to Sections 181 and 261 thereof, and the Directors are authorized to make such application.
2. Subject to the issuance of such Certificate of Continuance and without affecting the validity of the incorporation and existence of the Company by and under its Charter, and of any act done thereunder, its Charter is hereby amended by deleting all of the provisions thereof and substituting therefor the provisions set out in the Articles of Continuance submitted to the meeting and initialled tor identification by the Chairman,
3. The Directors and proper officers of the Company be and they are hereby authorized to do all things and execute all instruments and documents necessary or desirable to carry out the foregoing.
1 — Name ol Corporation
KILEMBE COPPER COBALT LTD.
— T he place in Canada where (he registered office is to be situated
The Municipality of Metropolitan Toronto.
3 — The clashes and any maximum number of shares that the corporation ts authorized to issue
The capital of the corporation shall consist of common shares.
4 — Restrictions it any on share transfers
Not applicable.
5 — Number (or minimum and maximum n umber) of directors
Minimum of 5 and maximum of 9.
6 — Restrictions i f any on businesses the corporation may carry on
Not applicable.
7 — 11 change of name effected, p revious name
Not applicable
8 - Other provisions it any
For the purposes of the special corporate powers act of the province of Quebec and without in any way limiting the powers conferred upon the corporation and its directors by section 183 or any other provisions of the Canada Business Corporations Act the corporation may, for the purpose of securing any bonds, debentures or debenture stock which it is by law entitled to issue, hypothecate, mortgage or pledge, and cede and transfer, any property, movable or immovable, present or future, which it may own in the province of Quebec.
Date Signature l Description of Office - Description du posle
-41 -
S34320 S343?6 S34323
ExCtPT TRANSFER 1 96382 OlO A C -
STOVER TWP.
H B 80. ENGINEERING LIMITEDRENGOLO MINES A RESOURCES LTD.
PLAN OF CLAIMSMINE
SUDBURY MINING OIST.-ONTARIOli,nn [ Fioun
J___
Schedule "A"
MEMORANDUM OF AGREEMENTBETWEEN:
RENGOLD MINES LIMITED, a companyIncorporated under the laws ofCanada.(hereinafter referred to as "Rengold")
OF THE FIRST PART;— and —
KILEMBE COPPER COBALT LTD., a company also incorporated under the laws of Canada, (hereinafter referred to as "Kilembe")
OF THE SECOND PART;— and —
RENQOLD MINES 8, RESOURCES LTD., a company also incorporated under the laws of Canada, (hereinafter referred to as "Resources")
OF THE THIRD PART
WHEREAS Rengold owns all of the issued and outstanding shares of Resources subject to the lien of Rengold's bankers;
AND WHEREAS Rengold holds, subject to the lien of its bankers. 2,620,827 shares in the capital of Kilembe:
AND WHEREAS Rengold and Kilembe deem it desirable and advantageous in their interests and in the interests of their respective shareholders that Kilembe should acquire the shares of Resources from Rengold, so that Resources will become a wholly-owned subsidiary of Kilembe. all upon the various terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the mutual covenants and agreements herein contained it is hereby agreed by and between the parlies hereto as follows:
I Representations and Warranties of RengoldII Rengold hereby represents and warrants to Kilembe as follows:
(a) Rengold is a valid and subsisting company duly incorporated and organized ui.der the Canada Corporations Act;
(b) Rengold will make a Proposal (the "Rengold Proposal") to its creditors under the Bankruptcy Act in which Thorne Riddell Inc. will be named as Trustee;
(c) Resources is a valid and subsisting company duly incorporated and organized under the Canada Corporations Act with an authorized capital o) 50,000 common shares without par value of which three shares are issued and outstanding and which are beneficially owned by Rengold subject to the lien of Rengold's bankers (the "Bank").
(d) Resources has made a Revised Amended Proposal (the "Resources Proposal") to its creditors under the Bankruptcy Act in which Thorne Riddell Inc is named as Trustee and that Resources' creditors met on June 27, 1976 to consider the Resources Proposal, such meeting having been adjourned sine die. Following the June 27. 1978 meeting of creditors, the Resources directors met and further amended the Resources Proposal;
(e) Price Waterhouse Limited has been appointed receiver and manager of both Rengold and Resources under the terms of debentures held by the Bank Application has been made to the Supreme Court of Ontario to affirm the appointment of Price Waterhouse Limited in such capacities pursuant to Order of the Court with authority to sell the property and assets of Rengold and Resources, but such application has been adjourned sine die;
(f) Resources is the recorded holder of 29 patented mining claims located in the Townships of Leeson, Rennie and Brackin, the same being recorded in the Land Titles Office at Sudbury as Parcels 11321. 22177 "A" and 24623, District of Sudbury West Section. Resources ownership extending to the surface and mineral rights of said mining claims save and except for an area of 1.010 acres excluded from the surface rights attaching to mining claim 34328. the mining claims being more particularly described as
-43-
S34306 to and Indudirtg S34309. S34313 to and inr uding S34318. S34328 to and including S34330; S34339. S34794 to and including S34796 in Leeson Township. S34310; S34311; S34319 to and including S34327 in Rennie Township and S50053 in Brackin Township, the same being hereinafter referred to as the "Mining Claims";
(g) Rengold owns, 2.820.827 shares of Kilembe which have been hypothecated to the Bank as collateral security lor Rengold's indebtedness to the Bank
2. Representations and Warranties of KilembeKilembe hereby represents and warrants to Rengold that Kilembe is a v.'.u and subsisting company duly
incorporated and organized under the laws ot Canada with a share capital ol 5.000.000 shares of the par value of Si each of which 3,8""',027 shares are issued and outstanding as fully paid and non-assessable
3. Purchase and Sale ot Shares of Resources3.1 Subject to the terms and conditions hereof and to compliance with the provisions of clause 4, Rengold covenants and agrees to sell, assign and transfer to Kilembe. and Kilembe covenants and agrees to purchase from Rengold:
(a) all (but not less than all) of the issued and outstanding shares in the capital of Resources, and(b) the indebtedness of Resources to Rengold.
the purchase price payable therefor to be as provided in clause 3.2,
32 The purchase price payable by Kilembe to Rengold for the assets referred to in clause 31 shall be as follows
(a) with respect to the shares ol Resources, the sum f - f S'. and(b) with respect to the amount receivable by Reng^id from Resources, the lull amount thereof (the
"Resources Indebtedness"), determined as hereinafter provided, as at the time of closing provided lor in clause 6 The amount ol the Resources Indebtedness shall be determined by Messrs Harbinson. Gtover 4 Co . chartered accountants, whose determination shall be final and binding upon all of the parties hereto In calculating the amount of the Resources Indebtedness, same shall include interest on amounts advanced to o' on behalt of Resources by Rengold. such interest, save as hereinafter provided, to be at the rate charged by the Bank to Rengold and such -nterest shall be calculated from the respective dates Irom which the Bank charged Rengoid interest on monies loaned by the Bank to Rengold, provided that if. before making any provisions lor the payment of interest by Resources to Rengold as aforesaid (1) the Resources Indebtedness is less than the amount of Rengold's indebtedness to the Bank (the 'Bank Indebtedness"), the rate ol interest charged by Rengold to Resources shall be reduced, il necessary, so that the Resources Indebtedness equals the Bank Indebtedness, and (?) the Resources Indebtedness is greater than the Bank Indebtedness then (i) no interest shall be charged by Rengold to Resources, and (n) at the time of closing provided tor m clause 6. Rsngold shall forgive Resou'cos from the payment of a portion of the Resources Indebtedness, the amount so forgiven lo equal Hie amount by which the Resources Indebtedness exceeds the Bank Indebtedness so that at the time of closing the Resources Indebtedness and the Bank indebtedness will be equal m amount
4 Conditions to be SatisfiedThis agreement is subiect to and conditional upon all ot the following conditions having been complied with
and which failing this agreement shall at the option ot Kilembe or Rengold. be null and void whereupon the parties hereto shall not be under any obligation to each other whatsoever
(a) this agreement shall have been approved by not less than two-thirds of the votes casr at a special a eetmg of (lie Rengold shareholders doly called for considering the same.
\b) this agreement shall have been approved by not less tt-an two-thiros of the votes cast at a special rru-eting of If e K ilembe shareholders duly called tor considem i the same
(c) the Fteogold Proposal m form satisfactory to Kilembe shai. '- we been made by Rengold lo its creditors
(d) the Rengold Proposal and the Resources Proposal shall have been approved by the respective creditors ot Rengold and Resources and by the Supreme Court of Ontario, and all creditors of Rengold and Resources paid in accordance with the terms ol the respective Proposals or appropriate arrangements, satislaclory to Kilembe. made m respect thereof
(e) Kilembe shall have filed a preliminary prospectus and a prospectus with the Ontario Securities Commission and obtained receipts th^rctor and such Orders if any. that are required shall have been obtained from the Ontario Secun;ies Commission to enable the closing of the '-ansactions referred to herein
- 44 -
(O *uct) agreements as the Bank and Kilembe approve shall have been entered into respecting monies owed by Resources and/or Kilembe to the Bank and guarantees given by Kilembe and/or Resources to the Bank respecting the settlement of such indebtedness:
(g) the closings of the purchase and sale ol assets referred to in clause 6 shall have occurred.
5. Acknowledgements Between Kllenibe and RengoM5.1 Rengold acknowledges to Kilembe that:
(a) Rengold has had full access to all financial and accounting records of Kilembe, is fully conversant with the financial status of Kilembe and confirms that Kilembe makes no representations or warranties to Rengold in respect thereof; and
(b) Rengold has hao Full access to the minute books and corporate records of Kilembe, is satisfied as to the corporate status of Kilembe and confirms that Kilembe makes no representations or warranties to Rengold as to its corporate status or otherwise save as set forth in clause 2.
5.2 Kilembe acknowledges to Rengold that:(a) Kilembe has had full access to all financial and accounting records of both Rengold and Resources, is
fully conversant with the financial status of both Rengold and Resources and confirms that neither Rengold nor Resources makes any representation or warranty to Kilembe in respect thereof;
(b) Kilembe has had full access to the minute books and corporate records of Resources, is satisfied as to the corporate status of Resources and confirms that neither Rengold nor Resources makes any representation or warranty to Kilembe as to the corporate status of Resources save as set forth in clause 1.1 f c);
(c) Kilembe has made such searches of title respecting the Mining Claims as it deems necessary, accepts the titie that Resources has to the Mining Claims, which title is subject to the various encumbrances and restrictions relating thereto, and confirms that neither Rengold nor Resources makes any representation as to Resources' title to the Mining Claims to Kilembe
6. Closing Arrangements6.1 The transactions contemplated by this agreement shall be closed at Suite 900. 302 Bay Street, Toronto. Ontario at 10:00 o'clock in the forenoon on the seventh business day next following the date, or the later of the dates as thn case may be, (hereinafter referred to as the "Approval Date") upon which the Supreme Court of Ontario shall have approved the Rengold Proposal and the Resources Proposal; provided that such closing shall take place on such earlier or later date following the Approval Date, but in any event not after February 28.1979. as may be notified to the parties hereto by Messrs. Salter, Apple, Cousland A Kerbel.
6.2 At the time of closing:(a) the Board of Directors of Kilembe shall be reconstituted and there shall be elected to Kilembe'S Board
three nominees of Williams Hudson Canada Limited and two nominees of Bryan E. W Gransden (the two said parties being referred to hereafter as the "Financing Group").
(b) after giving effect to the reconstitution of Kilembe'S Board of Directors as referred to in the preceding sub- paragraph (a)(i) the Board of Directors of Resources shall be reconstituted and there shall be elected to Resources'
Board nominees designated by Kilembe. and(ii) the issued shares of Resources shall be transferred to Kilembe or as it may m writing direct.
(c) Kilembe shall
(i) pay to Rengold the sum of 51 00 m satisfaction of the purchase price of the shares of Resources as referred to in clause 3 2(a).
(ii) pay to Rengold the amount of the Resources' Indebtedness to Rengold which Rengold hereby authorizes and directs Kilembe to pay to the Bank.
(iii) to the extent that Rengold's indebtedness to the Bank exceeds S3.650.000. Rengold shall ca'ise the Bank to loan the amount of such excess to Kilembe on such terms as the Bank may decide.
7 Disposition of Shares of Kilembe held by RengoldThe 2,820.827 shares of Kilembe owned by Rengold sha!' be dealt with as follows
(a) 856,668 shares shall be distributed to the Rengold shareholders so that a Rengold shareholder will receive one share of Kilembe for every three Rengold shares held.
-45-
(b) Renqold sftafl saW to tha f (nanetrxg Group 600.000 shares of Kilembe at SOt per thare to provide fund* required to implement the provisions of the Rengold Proposal and the Resources Proposal Monies received from such sale of Kilembe shares shaH first be applied in settlement of claims under the Rengold Proposal. To the extent that monies are disbursed under the Resources Proposal, the amount thereof shall increase the amount of the indebtedness of Resources to Rengolc at the time of closing:
(c) Rengold shall, after using such number of Kilembe shares as may be required under the Rengolc) Proposal, sell to Resources, and Resources shall purchase from Rengold such number of Kilembe shares as shall be required to settle, under the Resources Proposal, the claims of Resources' ordinary creditors whose claims are not settled by cash payment. The price to be paid by Resources shall be the book value of the Kilembe shares calculated on the day preceding the closing of the transactions provided for in clause 6. and such book value shall be determined by Messrs Harbinson, Glover t, Co. whose decision shall be final and binding upon the parties to this agreement;
PROVIDED, that if(i) the sum of 5300.000 referred to in (b) above is not sufficient for the purposes set forth therein, any
monetary deficiency shall be made up by Kilembe loaning the required monies to Resources, and(ii) if, after giving effect to the provisions of (c) above, any shares of Kilembe are retained by Rengold,
same shall be donated by Rengold to Kilembe for Kilembe's sole and only use If the number of shares of Kilembe sold by Rengold to Resources under (c) above is not sufficient for the purposes of the Resources Proposal, any deficiency shall be made good by the Financing Group who shall not be entitled to receive any consideration therefor from Kilembe, Rengold or Resources.
8 Special Agreements of ResourcesResources has become a party and entered into this agreement to facilitate the consummation of the
transactions between Kilembe and Rengold contemplated hereby. Resources acknowledges the validity and sufficiency of the consideration received and accruing to it hereunder since the implementation of the provisions of this agreement and the closing ol the transactions contemplated hereby will enable Resources to discharge its commitmenls under the Resources Proposal and Ihus be placed in a position lo re-activate operations on the Mining Claims, all to the betterment ol and in the best interests ol Resources and its shareholders Resources agrees to be bound by the terms of this agreement as they relate to Resources and. without m any way limiting the t enerality ol the foregoing, to accept and be bound by all calculations to be made by Harbinson. Glover i Co as jrovided lor m clauses 3. 7 and 10
9 Special Agreement of RengoldRengold agrees, at the time ol closing, to transfer, assign and set over unto Resources all o) Rengold's
entitlement and right to be repaid monies expended by it prior to its making of a commercial product) jn decision as provided for in paragraph 7 of an agreement between Rengold and Wiliroy Mines Limited dated janua: y 17. 1974 (the "Willroy Agreement"), all lo the intent that such monies stated to be payable to Rengold under paragraph 9 of the Wiliroy Agreement shall be payable to and/or recoverable by Resources instead of Rengold from cash flow generated by future production from the Mining Claims
10 Advances by Rengold lo Resource*Resources was incorporated at the instigation of Rengold and as contemplated by the terms o' the Wiliroy
Agreement pursuant to which Wiliroy Mines Limited transferred 28 of the Mining Claims to Resources Rengold and Resources acknowledge and agree that au monies expended or advanced incidental to the exploration and development of !he Mining Claims, the equipping same for production the bringing of same into production and the working thereof from and including December l 1974 * re tor the account of Resources and m making the calculations provided for m this agreement. Harbinson, Glover 4 Co shall give effect to the foregomg
11 further ActsThe parties hereto agree lo do and execute rill such additional deeds and documents as may be necessary or
desirable to mve lull force and ellect lo the true intent and meaning of this agreement
i? NoticeAny notice Of other communication to be given to any of the parties hereto shall be sufficiently given i)
delivered to an adult person at Suite 900, 302 Bay Street Toronto. Ontario
13 EnurementThis agreement shall enure to the benefit and be binding upon the parties hereto and their respective
successors and assigns
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(N WITNESS WHEReOP the partie* hereto have cauted this agreement to be executed.
SIGNED. SEALED AND DELIVERED
In the presence of:
RENOOLD MINES LIMITED
By:........................................................................................President
c/s
Secretary
KILEMBE COPPER COBALT LTD.
By:................................,.........................,............................President
c/s
Secretary
RENGOLD MINES A RESOURCES LTD.
By:...................................................... ...... .............,..... .President
c/s
Secretary
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SCHEDULE "B"
KILEMBE COPPER COBALT LTD.
BY-LAW NO. l
a by-law relating generally to the transaction of business and the conduct of the affairs of the Corporation.
INDEX
TITLE Page
Section One Interpretation................... . . .... . . lSection Two Business of the Corporation.............. 2Section Three Borrowing and Securities................. 5Section Four Meetings of Shareholders................. 5Section Five Directors - Election, Qualification
and Mertings..................... . ....... 10Section Six Committees........................ . . . . . . . 13Section Seven Officers.......................... . . . .. . . 14Section Eight Protection of Directors, Officers and
Others........... ....... ............. . . . . lgSection Nine Shares and Transfers..................... 17Section Ten Dividends and rights............ . . . . . , . .. \9Section Eleven Notices.................................. 20Section Twelve Repeal of existing by-laws............... 22
BE IT ENACTED as a by-law of
KILEMBE COPPER COBALT LTD.
SECTION ONE
INTERPRETATION
1.01 DEFINITTONS. In this by-law and all other bylaws and special resolutions of the Corporation, unless the context otherwise requires:
(a) "Act." means the Canada Business Corporations Act, and any statute that may be substituted therefor, as from time to time amended;
(b) "articles" means the article;-, of continuance or any other instrument by which the Corporation is; incorporated, as from time to time amended or re.s tat cd ;
(c) "Hoard" means the board of directors of the Corporation;
(d) "by-law?," mean i; this by-lav; an-l all other by-laws of the Corpora t, i o r. from time to tiro in force and o f feet;
(e) "meeting of shareholder r," includes an annual or special or an.iual and special meeting of shareholders;
(f) "non-business day" means Saturday, Sunday and any other day that i?; a holiday as defined an the Int crpretcition Act (Canada) ;
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(gj "personal representative" means an executor, administrator, guardian ,tutor, trustee, receiver or liquidator or committee of or curator to a mentally incompetent person;
(h) "recorded address" means in the case of a shareholder his address as recorded in the securities register; and in the case of joint shareholders the address appearing in the securities register in respect of such joint holding or the first address so appearing if there are more than one; and in the case of a director, officer, auditor or member of a committee of the Board, his latest address as recorded in the records of the Corporation, but where no address is so recorded, then the last address of such director, officer, auditor or member of a committee of the Board known to the Secretary of the Corporation;
(i) "registrar" includes one or more branch registrars;
(j) "resident Canadian" means an individual who is
(i) a Canadian citizen ordinarily resident in Canada
(ii) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or
(iii) a landed immigrant within the meaning of theImmigration Act and ordinarily resident in Canada, except a landed immigrant who has been ordinarily resident in Canada for more than one year after the time at which he first became eligible to apply for Canadian citizenship;
(k) "transfer agent" includes one or more branch transfer agents;
(1) "signing officer" means, in relation to any instrument, any perron authorized to sign the same on behalf of the Corporation by section 2.04 of this by-law or by a resolution passed pursuant thereto;
(m) save as the context may require, words and expressionsdefined in the Act have the same meaning when used herein; and
(n) words importing the singular include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders; and words importing persons include individuals, bodies corporate, partnerships, trusts, unincorporated organizations and governmental bodies.
SECTION TWO
BUSINESS OF THE CORPORATION
2.01 CORPORATE SEAL. Until changed Ly resolution of the Board, the corporate seal of the Corporation shall be in the form impressed hereon.
(Seal)
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2.02 REGISTERED OFFICE. Until changed in accordance with the Act, the registered office of the Corporation shall be at the City of Toronto , in the Province of Ontario and at such location therein as the Board may from time to time by resolution determine.
2.03 FINANCIAL YEAR. The financial year of the Corporation shall terminate on the 31st day of December in each year or on such other day as the Board may from time to time by resolution determine.
2.04 EXECUTION OF INSTRUMENTS. Contracts, documents or instruments in writing requiring the signature of the Corporation may be signed by any two of a director, the President, the Executive Vice-President, a Vice-President, the Treasurer, the Secretary or the Comptroller, and all contracts, documents or instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. In addition, the Board may from time to time by resolution direct the manner in which and the person or persons by whom any contracts, documents or instruments in writing generally or specific contracts, documents or instruments in writing may or shall be signed and delivered on behalf of the Corporation.
The seal of the Corporation is not required to be affixed to contracts, documents or instruments in writing signed as aforesaid.
The: term "contracts, documents or instruments in writing" as user', in this by-law shall include deeds, mortgages, hypothecs, charges, conveyancer;, transfers and assignments of property, real or persona], immovable or movable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, stocks, bond.i, debentures, rights, warrants or other securities and all paper writings.
In particular, without limiting the generality of the foregoing any two of ; director, the President, the Executive Vice- president, the Treasurer, the Secretary or the Comptroller shall have authority to sell, assign, transfer, exchange, convert or convey any and all shares, stocks, bonds, debentures, rights, warrants or other securities owned by or registered in the name of the Corporation arid to sign, with or without the s;eal of the Corporation, and deliver all assignments, transfers, conveyances, powers of attorney and other instrument?, that may be necessary for the purpose of selling, assigning, transferring, exchanging, converting or conveying such sharer,, stocks, bonds, debentures, rights, v/arrant.s or othej securities.
2.05 BANKING AKKANGEMl^Tr.. The banking business of the Corporation, or any part therr-of. shall he transarti'd with such banks or '.rust companies or other bodies corporate or organizations as the Hoard may by resolution fro;-, tine to time deiorm ; ne.
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All such banking business, or any part thereof, shall be transacted under such agreements, instructions and delegations of power as the Board may from time to time prescribe or authorize.
2.06 LOANS TO EJ'PLOYEES. The Corporation may from time to time give financial assistance by means of a loan, guarantee or otherwise to employees of the Corporation or any of its affiliates
(i) to enabl . or assist thera to purchase or erectliving accommodation for their own occupation, or
(ii) in accordance with a plan for the purchase ofshares of the Corporation or any of its affiliates to be held by a trustee.
2.07 CUSTODY OF SECURITIES. All securities owned by the Corporation shall be lodged in the name of the Corporation with a chartered bank or a trust company or in a safety deposit box, or, if so authorized by resolution of the Board, with such other depositories or in such other manner as may be determined from time to time by the Board.
Ali share certificates, bonds, debentures, debenture stock certificates, notes or other obligations belonging to the Corporation may be issued or held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship) and shall be endorsed in blank with signatvire guaranteed in order to enable transfer to be completed and registration to be effected.
2.08 WITHHOLDING INFORMATION FROM SHAREHOLDERS. No shareholder shall bc entitled to discovery of any information respecting any details or conduct of the Corporation's business which, in the opinion of the Board, it would be inexpedient in the interests of the shareholders or the Corporation to communicate to the public. The Board may from time to time determine whether and to what extent and at what time and place and under what conditions or regulations the accounts, records and documents of the Corporation or any of them shall be open to the inspection of sha 3holders and no share holder shall have any right of inspecting any account, record or document of the Corporation except as conferred by the Act or authorized by the Board or by resolution passed at a special meeting of shareholders.
2.09 VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officers of the Corporation may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the officers executing such proxies or arranging for the issuance of voting certificates or such -jther evidence of the right to exercise such voting rights. In addition, the Board may from time to time direct the manner in which and the person or persons by whom any particular voting rights or class or voting rights may or shall be exercised.
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SECTION THREE
BORROWING AND SECURITIES
3.01 BORROWING POWER. Without limiting the borrowing powers of the Corporation u^ set forth in the Act, the Board may from time to time:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedress or guarantee o L the Corporation, whether secured or unsecured;
(c) charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable property of the Corporation, including book debts, rights, powers, franchises and undertakir'js, to secure any such bonds, debentures, notes or other evidences of indebtedness or liability of the Corporation: and
(d) subject to the restrictions in the Act, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person.
Nothing ,n this section limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf cf the Corporation.
3.02 DELEGATION. The Board ra* y froni tin.e to time delegate to a committee of directors or to t r. y two of a director, the President, the Executive Vice-President, a Vice-President, the Treasurer, the Secretary or the Comptroller all or ar.y of the- powers conferred on the Board by section 3.01 or by the Act. to such extent and in such, manner as the Board shall deterr.ir.e at the tine of each such delegation, subject to any rest r ictions in the Act in respect thereof.
SECTION FOUH
. IEETINGS or sn;-.R::HOL:j;: : -.i,
4.01 ANNUAL MEETINGS. Th'. an r. i: a l no c . i ne of shareholders shall be held at such time in each \.-r iinti, rub., ci., t to section 4.03, at such place as the Hoard may -"i time to time determine, for the purpose of hearing and rece i .- .i: : ;.:.o ; r.'^'.irvr; .T ri d statements required by the Act to be read or lair befor*- the shareholders at an annual meeting, electing directors, apyoint. ir.r: the auditor and fixing or authorizing the Board to fix i t i, r emu r. e''a t ion and for the :rans- action of such other business a:- ray proper l y be brought before the- meeting .
4.C2 SPECIAL MEETING. The Board ;v -.y at any time call a special meeting of the share-no l ccrs for the transaction of any business, the general nature of wh'eh is specified in the notice
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cajling the meeting.
4.03 PLACE OF MEETING. Meetings of shareholders shall be held at the registered office of the Corporation or elsewhere in the municipality in which the registered office is situate or, if the Board shall by resolution so determine, at some other place in Canada.
4.04 NOTICE OF MEETINGS. Notice of the time and place ofeach meeting of shareholders shall be given in the manner provided .in section 11 not less than 21 nor more than 50 days before the ldate of the meeting to the auditor of the Corporation and to each |director and to each shareholder of the Corporation who at theclose of business on the record date for notice is entered in thesecurities register as the holder of one or more shares carryingthe right to vote at the meeting. Notice of a meeting ofshareholders called for aoy purpose other than consideration ofthe financial statements and auditor's report, election ofdirectors and reappointment of the incumbent auditor shall statethe text of any special resolution to be submitted to the meeting.A shareholder and any other person entitled to attend a meetingof shareholders may in any manner waive notice of or otherwiseconsent to a meeting of shareholders.
4.05 LIST OF SHAREHOLDERS ENTITLED TO NOTICE. For every meeting of shareholders, the Corporation shall prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder entitled to vote at the meeting. If a record date for the meeting is fixed pursuant to section 4.06, the shareholders listed shall be those registered at the close of business on such record date. If no record date is fixed, the shareholders listed shall be those registered at the close of business on the day immediately preceding the day on which notice of the meeting is given, or where no such notice is given, the day on which the meeting is held. The list shall be available for examination by any shareholder during usual business hours at the registered office of the Corporation or at the place where the central securities register is maintained and at the meeting for which the list was prepared.
4.06 RECORD DATE FOR NOTICE. The Board may fix in advance a date, preceding the date of any meeting of shareholders ty not more than 50 days and not less than 21 days, as a record data for the determination of the shareholders entitled to notice of the meeting, and notice of any such record date shall be given not less than the minimum number of days prescribed therefor by the Act or 7 days, whichever is greater, before such record date by newspaper advertisement in the manner provided in the Act and by written notice to each stock exchange in Canada on which the shares of the Corporation are listed for trading. If no record date is fixed, the record date for the determination of the shareholders entitled to notice of the meeting shall be at the close of business on the day immediately preceding the day on which the notice is given or, if no notice is given, the day on which the meeting is held.
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4.07 REPORTS TO SHAREHOLDERS. 21 days or more before the date of the annual meeting of shareholders a copy of the comparative financial statement and a copy of the auditor's report, as prescribed by the Act, shall be sent by prepaid postage to each shareholder at his recorded address.
4.08 CHAIRMAN, SECRETARY AND SCRUTINEERS. The Chairman of any meeting of shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: President, Managing Director, Chairman of the Board, or Executive Vice-President. If no such officer is present within 15 minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be Chairman. If the Secretary of the Corporation is absent, the Chairman shall appoint some person, who need not be a shareholder, to act as Secretary of the meeting. If desired, one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the Chairman with the consent of the meeting.
4.09 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to attend a .'ceting of shareholders shall be those entitled to vote thereat, the directors and the auditor of the Corporation and others who, although not entitled to vote, are entitled or required und^r any provision f the Act or articles or by-laws to be present at the meeting. Any other person may bc- admitted only on the invitation of the Chairman of the meeting or with the consent of the meeting.
4.10 QUORUM. A quorum for the transaction of business at any meeting of shareholders shall be two persons present in person, each being a shareholder entitled to vote thereat or a duly appointed proxyholder for an absent shareholder so entitled, and together holding or representing by proxy not less than 101 of the outstanding shares of the Corporation entitled to vote at the meeting. If a quorum is present at th- opening of any meeting of shareholders, the shareholders present or represented by proxy may proceed with the business of the meeting. If a quorum is not present, at the opening of any mooting of shareholders, the shareholders present or represented by proxy may adjourn the meeting to a fixed time and place but. may not t ransact any other business.
4.11 RIGHT TO VOTE. Subject to the provisions of the Act as to authorized representatives of any other body corporate or association, at any meeting of shareholders for which the Corporation lias prepared the list referred to in section 4.05 every person who is named in such list shall be entitled to vote the shares shown opposite his nar;:.- except to the extent thzt, where the Corporation has fixed a record dat.e in respect of such meeting pursuant to section 4.06, such person has transferred any of his shares after such record date and the transferee, having produced properly endorsed certificates evidencing such shares or having otherwise established that he; owns such shares,
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has demanded not later than 10 days before the meeting that his name be included in such list. In any such case the transferee shall be included in such list and shall be entitled to vote the transferred shares at the meeting. At any meeting of share holders for whi^h the Corporation has not prepared the list referred to in section 4.05, every person shall be entitled to vote at the meeting who at the time is entered in the securities register as the holder of one or more shares carrying the right to vote at such meeting.
4.12 PERSONAL REPRESENTATIVE. Where a person holds shares as a personal representative, that person or his proxyholder is the person entitled to vote at all meetings of shareholders in respect of the shares so held by him. If the shares are held by more than one personal representative, the provisions as to joint shareholders shall apply.
4.13 MORTGAGE OR HYPOTHECATION OF SHARES. Where a person mortgages or hypothecates his shares, that person or his proxyholder is the person entitled to vote at all meetings of shareholders in respect of such shares unless, in the instrument creating the mortgage or hypothec, he has expressly empowered the person holding the mortgage or hypothec to vote in respect of such shares, in which case, subject to the articles, such holder or his proxyholder is the person entitled to vote in respect of the shares.
4.14 JOINT SHAREHOLDERS. Where two or more persons hold the same share or scares jointly, any one of such persons present at a meeting of shareholders has the right in the absence of the other or others to vote in respect of such share or shares, but, if more than one of such persons are present or represented by proxy and vote, they shall vote together as one on the share or shares jointly held by them.
4.15 PROXIES. Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder, or one or more alternate proxyholders, who need not be shareholders, to attend and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the shareholder or his attorney and shall conform with the requirements of the Act.
4.16 TIKE FOR DEPOSIT OF PROXIES. The Board may specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting by not more than 48 hours exclusive of non- business days, before which time proxies to be used at such meeting must be deposited with the Corporation or its ayent. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice or, if no such time is specified in such notice, it has been received by the Secretary of the Corporation or by the Chairman of the meeting or any adjournment thereof prior to the time of voting.
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4.17 VOTES TO GOVERN. At any meeting of shareholders every question shall, unless otherwise required by the articles or by laws or by law, be determined by the majority of the votes cast on the question. In case of an equality of votes either upon show of hands or upon a ballot, the Chairman of the meeting shall be entitled to a second or casting vote.
4.18 SHOW OF HANDS. Subject to the provisions of the Act, any question at a meeting of shareholders shall be decided by a show of hands unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the Chairman of the meeting that the vote upon the question has been carried or carried by a particular majority or not carried and an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the said question, and the result of the vote so taken shall be the decision of the shareholders upon the said question.
4.19 BALLOTS. On any question proposed for consideration u t Q meeting of shareholders, and whether or not a show of hands has been taken thereon, any shareholder or proxyholdcr entitled to vote at the meeting may require or demand a ballot. A ballot so required or demanded shal] be taken in such manner as the Chairman shall direct. A requirement or demand for a ballot may bc withdrawn at any time prior to the taking of the ballot. If a ballot is taken each person present shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that number of voter, provided by the Act or the articles, and the result of the ballot so taken shall bc the decision of the shore- holders upon the said question.
4.20 ADJOURNMENT. If a mooting of shareholders is adjourned for less than 30 days, it shall not bo necessary to give notice of the adjourned meeting, other than by announcement ci t the earliest meeting that is adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate- of 30 days or more, notice of the adjourned meeting shall bc givon as for an original meeting.
4.21 SUBMISSION' OF CONTRACTS OR TRANSACTION'S TO SHARLHOLDKRS FOR APPROVAL.
The Board in its discretion ray subnit any contract, act or transaction for approval or rot i f i rv i inn at any r.pecial meeting of the shareholders called for the purpor,' of considering the same and, subject to any additional ruquirc:a-vnts of the Act, the articles or the by-laws, any contract, act or transaction that shall be approved or ratified by a resolution passed by a majority of the votes cast at any such meeting shall be as valid and as binding
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upon the Corporation and upon all the shareholders as though ithad been approved or ratified by every shareholder of the Corporation.
SECTION FIVE
DIRECTORS - ELECTION, QUAMFICATION AND MEETINGS
5.01 NUMBER OF DIRECTORS AND QUORUM. Until changed in accord ance with the Act, the Board shall consist of not fewer than 5 and not more than 9 directors. Subject to section 5.08, the quorum for the transaction of business at any meeting of the Board shall consist of 3 directors or such greater number of directors as the Board may from time to time determine.
5.02 QUALIFICATION. No person shall be qualified for election as a director if he is less than 18 years of age, he is of unsound mind and has been so found by a court in Canada or elsewhere, he is not an individual or he has the status of a bankrupt.,
A majority of directors shall be resident Canadians. At least 2 directors shall not be officers or employees of the Corporation or its affiliates. A director need not be a shareholder.
5.03 ELECTION AND TERM. The election of directors shall take place at each annual meeting of shareholders and all the directors then in office shall retire but, if qualified, shall be eligible for re-election. The number of directors to be elected at any such meeting shall, if a maximum and minimum number of directors is authorized, be the number of directors then in office unless the directors or the shareholders otherwise determine or shall, if a fixed number of directors is authorized, be such fixed number. The election shall be by ordinary resolution. If an election of directors is not held at the proper time, the incumbent directors shall continue until their successors are elected.
5.04 REMOVAL OF DIRECTORS. Subject to the provisions of the Act, the shareholders may by ordinary resolution passed at a special meeting called for such purpose remove any director from office and the vacancy created by such removal may be filled at the same meeting failing which it may be filled by the directors.
5.05 VACATION OF OFFICE. A director ceases to hold office when:
(a) he dies;
(b) he is removed from office by the shareholders;
(c) he ceases to be qualified for election as a director; or
(d) his written resignation is sent or delivered to the Corporation, or, if a time is specified in such resignation, at the time specified, whichever is later.
5.06 VACANCIES. Subject, to the Act, a quorum of the Board may fill a vacancy in the Board, except a vacancy resulting from an increase in the number or minimum number of directors or from a failure of the shareholders to elect the minimum number of directors.
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11-In t-he absence of a quorum of the Board, or if the vacancy has arisen from a failure of the shareholders to elect the minimum number of directors, the Board shall forthwith call a special meeting of shareholders to fill the vacancy. If the Board fails to call such meeting or if there are no directors thc.i in office, any shareholder may call the meeting.5.07 ACTION BY THE BOARD. The Board shall manage the business and affairs of the Corporation. Subject to sections 5.08 and 5.09, the powers of the Board may be exercised by a meeting at which the quorum is present or by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the Board. Where there is a vacancy in the Board, the remaining directors may exercise all the powers of the Board so long as a quorum remains in office.
5.08 CANADIAN MAJORITY. The Board shall not transact business at a meeting, other than filling a vacancy in the Board, unless a majority of the directors present are resident Canadians, except where
(a) a resident Canadian director who is unable to bepresent approves in writing or by telephone or other communications facilities the business transacted at the meeting; and
(b) a majority of resident Canadians would have beenpresent had that director been present at the meeting.
5.05) MEETING BY TELEPHONE. If all the directors of the Corporation consent, a director may participate in a meeting of the Board or of a committee of the Board by means of such telephone or other communications facilities as permit all persons particip ating in the meeting to hear each other and a director participating in such a meeting by such means is deeded to be present at the meeting. Any such consent shall be effective whether given before or after themeeting to which it relates and may be given with respect to all meetings of the Board and of cornmittes of the Board.
5.10 PLACE OF MEETINGS. Meetings of the Hoard may be held at aiy place in or outside Canada.
5.11 CALLING OF MEETINGS. Meetings of the Board shall be held from time to tine and at such plc'ice ac the Board, the Chairman of the Board, the Managing Director, the Pi es ident or any two directors may determine.
5.12 NOTICE OF MEETING. Notice of the tine and place of each meeting of the Board shall be given to e;ich director not less than 48 hours before the time when the r,,eet i TKJ i?, to be held. A notice of a meeting of directors need not specify thi: purpose of or the business to be tranf^ctod at the meeting except where the Act requires such purpose or business to bo r, pec i f .i or*.
5.13 WAIVER OF NOTICE. A director rvjy in any manner waive notice of or otherwise consent to a mc-etir.g of the Board.
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5.14 FIRST MEETING OF NEW BOARD. For the first meeting of the Board held immediately following the election of directors at an annual or special meeting of the shareholders or for a meeting of the Board at which a director is appointed to fill a vacancy in the Board, no notice of such meeting shall be necessary to the newly elected or appointed director or directors in order legally to constitute the meeting, provided that a quorum of the Board be present.
5.15 ADJOURNED MEETING. Notice of an adjourned meeting of the Board is not required if the time and place of the adjourned meeting is announced at the original meeting.
5.16 REGULAR MEETINGS. The Board may appoint a day or days in any month or months for regular meetings at a place and hour to be named. A copy of any resolution of the Board fixing the place and time of regular meetings of the Board shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the busiiess to be transacted thereat to be specified.
5.17 CHAIRMAN. The Chairman of any meeting of the Board shall be the first mentioned of such of the following officers as have been appointed and who is a director and is present at the meeting: Chairman of the Board, Managing Director, President or Executive Vice-President. If no such officer is present, the directors present shall choose one of their number to be Chairman.
5.18 VOTES TO GOVERN. At all meetings of the Board every question shall be decided by a majority of the votes cast on the question. In case of an equality of votes the Chairman of the meeting may be entitled to a second or casting vote.
5.19 CONFLICT OF INTEREST. A director or officer who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or proposed material contract with the Corporation shall disclose the nature and extent of his interest at the time and in the manner provided by the Act. Any such contract or proposed contract shall be referred to the Board or shareholders for approval even if such contract is one that in the ordinary course of the Corporation's business would not require approval by the Board or shareholders, and a director interested in a contract so referred to the Bo.ird shall not vote on any resolution to approve the same except as provided by the Act.
5.20 ENFORCEABILITY OF CONTRACTS. A material contract between the Corporation and ono or more of its directors or officers, or between the Corporation and another person of which a director or officer of the Corporation is a director or officer or in which he has a material interest, is neither void nor voidable by reason only of that relationship or by reason only that a director with an interest in the contract is present at or is counted to determine the presence of a quorum at a meeting of directors or committee of
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directors that authorized the contract, if:
(a) the director or officer disclosed his interest in accordance with the Act;
(b) the contract was approved by the directors and the shareholders; and
(c) it was reasonable and fair to the Corporation at the time it was approved.
5.21 REMUNERATION AND EXPENSES. The directors shall be paid such remuneration for their services as the Board may from time to time determine. The directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred by them in attending meetings of the Board or any commitment thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor.
SECTION SIX
COMMITTEES
6.01 COMMITTEE OF DIRECTORS. The Board may appoint a committee of directors, however designated, and dolerite to such committee any of the powers of the Board except those which pertain to items which, under the Act, a committee of directors has no authority to exercise. A majority of the members of such committee shall be resident Canadians.
6.02 TRANSACTION OF BUSINESS. Subject to the provision of section 5.09, the powers of a committee of directors may be exercised by a meeting at which a quorum ir, present or by resolution in writing signed by all members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetir.gr, of such committee may be held at any place in or outside of Canada.
6.03 AUDIT COMMITTEE. At the first meeting of the Board after each election of directors at an annual meeting of share holders of the Corporation, the director:; shall elect from among their number an audit committee to be composed of not fewer than three directors, of whom a majority 5;hall not be officers or employees of the Corporation or an affiliate of the Corporation, to hold office until the next annual meeting of the- shareholders. The members of the audit coi:u:u t tee shall f l or; t d chairman from among their number. The audit commit t'-r i;hall perform the functions required of it pursuant to the Act and sue-h other functions as may from time t.o time be assignee! to i i. by the Board.
6.04 PROCEDURE. Unless otherwise determined b y the Board, each committee shall have power to fix i 11; quorum at not less than a majority of its members, to elect its Chairman and to regulate its procedure.
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SECTION SEVEN
OFFICERS
7.01 APPOINTMENT. The Board may from time to time appoint a President, m Executive Vice-President, Vice-Presidents, a Secretary, a '.treasurer and such other officers as the Board may determine, including one or more assistants to any of the officers so appointed. The Board may specify the duties of and, in accord ance with this by-law and subject to the provisions of the Act, delegate to such officers powers to manage the business and affairs of the Corporation. Subject to sections 7.02 and 7.03, an officer may but need not be a director and one person may hold more than one office.
7.02 CHAIRMAN OF THE BOARD. The Board may from time to time also appoint a Chairman of the Board who shall be a director. If appointed, the Board may assign to him any o e the powers and duties that are by any provisions of this by-." assigned to the Managing Director or to the President, and he shall, subjoct to the provisions of the Act, have such other powers and duties as the Board may specify. During the absence or disability of the Chairman of the Board, his duties shall be performed and his powers exercised by the Managing Director, if any, or by the President.
7.03 MANAGING DIRECTOR. The Board may from time to time also appoint a Managing Director who shall be a resident Canadian and a director. If appointed, he shall be the chief executive officer and, subject to the authority of the Board, shall have general supervision of the business and affairs of the Corporation; and he shall, subject to the provisions of the Act, have such other powers and duties as the Board may specify. During the absence or disability of the President, or if no President has been appointed, the Managing Director shall also have the powers and duties of that office.
7.04 PRESIDENT. If appointed, the President shall be the chief operating officer and, subject to the authority of the Board, shall have general supervision of the business of '-he Corporation; and he shall have such other powers and duties as the Board may specify. During the absence or disability of the Managing Director, or if no Managing Director has been appointed, the President shall also have the powers and duties of that office.
7.05 EXECUTIVE VICE-PRESIDENT. The Executive Vice-President shall have such powers and perform such duties as are assigned to him from time to time by the Board or by the chief executive officer. During ti.."j absence or inability of the President his duties may be performed and hi r, powers may bc exercised by the Executive Vice-President. If the Executive Vice-President exercises any such duty or power, the- absence or inability of the President shall be presumed with reference thereto.
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7.06 VICE-PRESIDENT. A Vice-President shall have such powers and duties as the Board or the chief executive officer may specify.
7.07 SECRETARY. The Secretary shall attend and be the Secretary of all meetings of the Board, shareholders and committees of the Board and shall enter or cause to be entered in records kept fer that purpose, minutes of all proceedings thereat; he shall give or cause to be given, as and when instructed, all notices to shareholders, directors, officers, auditors and members of committees of the Board; he shall be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation and of all books, papers, records, documents and instruments belonging to the Corporation, except when some other officer or agent has been appointed for tnat purpose; and he shall have such other powers anri duties as the Board or the chief executive officer may specify.
7.08 COMPTROLLER. The Comptroller shall keep full and accurate books of account in which shall be recorded all receipts and disbursements of the Corporation, and, under the direction of the Board or the chief executive officer, shall perform such duties of a financial planning nature and such other duties as may from time to time be required of him; he shall render to the Board, whenever required of him, an account of the financial position of the Corporation.
7.09 TREASURER. The Treasurer shall, under the direction of the Board or the chief executive officer, control the deposit of money, the safekeeping of securities and the disbursements of the funds of the Corporation; he shall render to the Board, whenever reouired of him, an account of all his transactions as Treasurer; and he shall perform such other duties as may from time to time be required of him.
7.10 OTHER OFFICERS. The duties of all other officers of the Corporation shall be such as the terms of their engcigement shall call for or the Board or the chief executive officer requires of them. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by r,uch assistant, unless the Board or the chief executive officer otherwise directs.
7.11 TERM OF OFFICE AND REMUNERATION. If the Chairman of the Board or the Managing Director ceases to be a director, his term of office shall expire. The torn of office of other officers shall not expire by reason only of the election of a ncv; Board and failure to re-appoint such officers. In t ho absence of written agreement to the contrary, the Board may remove at its pleasure any officer of the Corporation. The terms of employment and remuneration of officers elected or appointed by it shall be settled from time to time by the Board.
7.12 VARIATION OF DUTIES. From time to time the Board may vary, add to or limit the powers and dut i os of any officer.
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7.13 AGENTS AND ATTORNEYS. The Board shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with such powers of management or otherwise (including the powers to sub-delegate) as may be thought fit, subject to any restrictions under the Act.
7.14 FIDELITY BONDS. The Board may require such officers, employees and agents of the Corporation as the Board deems advisable to furnish bonds for the faithful discharge of their duties, in such form and with such surety as the Board may from time to time prescribe.
7.15 CONFLICT OF INTEREST. An officer shall disclose his interest in any material contract or proposed material contract with the Corporation in accordance with section 5.19.
SECTION EIGHT
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
8.01 LIMITATION OF LIABILITY. Every director and officer of the Corporation in exercising his powers and discharging his duties shall act honestly and in good faith with a view to the best interests of the Corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, no director or officer shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee, or for joining in any receipt or other act for conformity, or for any loss, damage o - : expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Corporation shall be placed out or invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person, firm or Corporation with whom any of the moneys, securities or effects of the Corporation shall be lodged or deposited, o*- for any loss, conversion, misapplication or mis- appropriati( of or any damage resulting from any dealings with any moneys, curities or other assets belonging to the Corpor ation, or for any loss, occasioned by any error of judgment or oversight on his part, or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto; provided that nothing herein shall relieve any director or officer from the duty to act in accordance with the Act and the regulations thereunder or from liability for any breach thereof.
8.02 INDEMNITY. Subject to the limitations contained in the Act, the Corporation shall indemnify a director or officer, a former director or officer, or a person who acts or acted at the Corporation's request as a director or officer of a body corporate at which the Corporation is or was a shareholder or creditor, and his heirs and legal representatives, against oil costs, charges and expenses, including an amount paid to settle an action or
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lsatisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or such body corporate, if
(a) he acted honestly and in good faith with a view to the best interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.
The Corporation shall also indemnify such person in such other circumstances as the Act permits or requires.
8.03 INDEMNITY OF OTHER PERSONS. Every other person who has undertaken or is about to undertake any liability on behalf of the Corporation or any body corporate controlled by it and his heirs, executors, administrators, and other legal personal representatives may, as the Corporation shall see fit, be indemnified and saved harmless out of the funds of the Corporation from and against any liability, costs, charges and expenses which he sustains or incurs in respect of or in relation to the affairs of the Corporation.
8.04 INSURANCE. Subject to the Act, the Corporation may purchase and maintain insurance for the- benefit of ciny person referred to in sections 8.02 and 8.03 against such liabilities and in such amounts as the Board may fro time to time determine and are permitted by the Act.
SECTION N INE
SHARES AND TRANSFERS
9.01 ALLOTMENT AND ISSUANCE. The Board may front time to time allot or grant, options t.o purchase shares or fractions thereof of the Corporation at such time and to i;uch persons or class of persons JIM d for such consideration as the Board shall by resolution determine, provided that no share shall be issued until it is fully paid as provided by the Act.
9.02 COMMISSIONS. The Board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation whether from the Corporation or from any other person, or procuring or agreeing to procure; purchasers for any such shares.
9.03 REGISTRATION OF TRANSFERS. Subject to the provisions of the Act., no transfer of securities shall be reg i s ter cd in a securities register except upon presentation of the certificate representing such securities with an endorsement, which complies with the Act, made thereon or delivered therewith duly executed by an appropriate person as provided by the Act, together with such reasonable assurance that, endorsement is genuine and effective
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as the Board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the Board.
9.04 TRANSFER AGENTS AND REGISTRARS. The Board may from time to time appoint one or more agents to maintain, in respect of each class of securities of the Corporation issued by it in registered form, a central securities register and one or more branch securities registers. Such a person may be designated as transfer agent or registrar according to his functions and one person may be designated both registrar and transfer agent. The Board may at any time terminate such appointment.
9.05 NON-RECOGNITION OF TRUSTS. Subject to the provisions of the Act, the Corporation may treat as absolute owne. of any security the person in whose name the security is registered in the securities register as if that person had full legal capacity and authority to exeicise all rights of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the security certificate.
9.06 SECURITY CERTIFICATES. Every holder of one or more securities of the Corporation shall be entitled, at his option, to a security certificate, or to a non-transferable written acknowledgement of his right to obtain a security certificate, stating the number and class or series of securities held by him as shown on the securities register. Security certificates and acknowledgements of a security holder's right to a security certificate, respectively, shall be in such form as the Board shall from time to time approve. Any security certificate or acknowledgement of a security holder's right to a security certif icate shall be signed by two of any director or officer who is a signing officer of the Corporation, but need not be under the corporate seal; provided that, unless the Board otherwise determines, certificates representing securities in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar l he signature of one of the signing officers or, in the da^e of security certificates which are not valid unless countersigned by or on behalf of a transfer agent and/or registrar, the signatures of both signing officers, may be printed or mechanically reproduced in facsimile upon security certificates and every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose signature it reproduces and shall be binding upon the Corporation. A security certificate executed as afore said shall be valid notwithstanding that one or both of the officers whose facsimile signature appear?.; thereon no longer holds office at the date of issue of the certificate.
9.07 REPLACEMENT OF SECURITY CERTIFICATES. The Board or any officer or agent designated by t..o Board may in its or his discretion direct the issue of a new security certificate in lieu of and upon cancellation of a security certificate that has been mutilated or in substitution for a security certificate claimed to have been lost, destroyed or wrongfully taken on payment of such
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fee, not exceeding $2, and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the Board may from time to time prescribe, whether generally or in any particular cari.
9.08 JOINT HOLDERS. If two or more persons are registered as joint holders of any security, the Corporation shall not be bound to issue more than one certificate in respect hereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such security.
9.09 DECEASED HOLDERS. In the event of the death of a holder, or of one of the joint holders, of any security, the Corporation shall not be required to make any entry in the securities register in respect thereof or to make payment of any dividends thereon except upon production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents.
SECTION TEN
DIVIDENDS AN'D RIGHTS
10.01 DIVIDENDS. Subject to the provisions of the Act, the Board may from time to time declare dividends, payable to the shareholders according to their respective rights and interest in the Corporation. Dividends may be pa i H in money or property or by issuing fully paid shares of the Corporation.
10.02 DIVIDEND CHEQUES. A dividend payable in cash shall bo paid by cheque drawn on the Corporation's bankers or one of them to the order of each registered holder of share:; of tho class or series in respect of which it has boon declared and nailed by prepaid ordinary mail to each registered holder at h i i; recorded address, unless mie h holder othorwi se d i reel:',. In the case of joint holders the c'-.oquo shall, unless such joint holders otherwise direct, be made payable to the order of all such joint holders and mailed to then at the address appearing on the securities register in respect of such joint hold i ne;, or to the; first address so appearing if there is more than on.--. The moiling of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy ..jnd discharge t h r.- liability for t ho dividend to the extent of the sui.i represented thoroiiy plur; the amount of any tax which the Corporation ir. require- to tj;;d does withhold.
10.03 NON-RKCi:il'T OF CHEOA'ES . Ir; the event of non-receipt of any dividend cheque by the persr.-:. to whom it is sent as aforesaid, the Corporation shall issue to si;: h ^rson a replacement cheque for a like amount on such teri-s ,--:', to indemnity, reimbursement of expenses and evidence: of non--roc:oii--t tt:icl of title- as the Board may from time to time prescribe, whether generally or in any particular case.
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10.04 RECORD DATE FOR DIVIDENDS AND RIGHTS. The Board may fix in advance a date, preceding by not more than 50 days the date for the payment of any dividend or the date for the issue of any warrant or other evidence of the right to subscribe for shares of the Corporation, as a record date for the determination of the persons entitled to receive payment of such dividend or to exercise the right to subscribe for such shares, and notice of any such record date shall be given not less than 7 days before such record date in the manner provided by the Act. If no record date is so fixed, the record date for the determination of the persons entitled to receive payment of any dividend or to exercise the right to subscribe for shares of the Corporation shall be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the Board.
10.05 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of 6 years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation.
10.06 PURCHASE OF BUSINESS AS OF PAST DATE. Where any business is bought by the Corporation as from a past date (whether such date be before or after the incorporation of the Corporation) upon terms that the Corporation shall an from that date take the profits and bear the losses of the business, such profits or losses as the case may be shall, at the discretion of the directors, be credited or debited wholly or in part to revenue account, and in that case the amount so crecited or debited shall, for the purpose of ascertaining the fund available for dividend, be treated as a profit or loss arising from the business of the Corporation.
SECTION ELEVEN
NOTICES
11.01 METHOD OF GIVING NOTICES. Any notice (which term includes any communication or document) to be given, sent, delivered or served pursuant to the Act, the regulations thereunder, the articles, the by-laws or otherwise to a shareholder, director, officer or auditor or member of a committee of the Board shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to his recorded address or if mailed to him at his recorded address by prepaid air or ordinary mai], or if sent, to him at his recorded address by any means of prepaid transmitted or recorded communication. A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch. The Secretary may change or cause to be changed the recorded address cf any share holder, director, officer or auditor in accordance with any information believed by him to be reliable.
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11.02 NOTICE TO JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, notice to one of such persons shall be sufficient notice to all of them. Any notice shall be addressed to all of such joint holders and the address to be used for the purposes of section .11.01 shall be the address appearing on the securities register in respect of such joint holding, or the first address so appearing if there is more than one.
11.03 UNDELIVERED NOTICES. If any notice given to a share holder pursuant to section 11.01 is returned on three consecutive occasions because he cannot be found, the Corporation shall not be required to give any further notices to such shareholder until he informs the Corporation in writing of his new address.
11.04 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW. Every person who, by operation of law, transfer, death of a security holder or any other means whatsoever, shall become entitled to any security of the Corporation shall be bound by every notice in respect of such security which shall have been duly given to the security holder from whom he derives his title to such security prior to his name and address being entered on the securities register (whether such notice was given before or after the happening of the event upon which he became so entitled) and prior to his furnishing to the Corporation the proof of authority of evidence of his entitlement prescribed by the Act.
11.05 SIGNATURE TO NOTICES. The .signature to any notice or demand may be written, stamped, typewritten or printed or partly written, stamped, typewritten or printed.
11.06 COMPUTATION OF TIME. In computing the? date when notice must be given under any provision requiring a r. pec i f .led number of days' notice of any meeting or other eve:it , the date: of giving the notice shrill be excluded and the date of the meeting or other event sahll bc included.
11.07 DECEASED SHAREHOLDER. Any notice delivered or sent by post, to or left at the latest recorder! /icklresr. of any shareholder shall notwithstanding that such shareholder be then deceased and whether or not the Corporation has notice of hi r, decease be deemed to have been duly served in re:;-t 'oc t of the shares held by such shareholder (whether held solely or with other persons) until some other person be entered in his stoad on the securities register of the Corporation as the h nick-r or one of the holders thereof and such service shall for all purpose:; be deemed a sufficient service of such notice on \ i: h eir:., executors or administrators and all persons, if any, i n. to r or; t eel with him in such shares.
11.08 PROOF OF SERVICE. A certificate of the President, a Vice-President, the Secretary or the Treasurer or of any other officer of the Corporation in office at. the time of the making of the certificate or of any transfer officer or any transfer agent of share.1 ; of any class of the Corporation as to facts in relation to the mailing or delivery of any notice to auy shareholder, director,
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officer, auditor or member of a committee of the Board or in relation to the publication of any notice shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer, auditor or member of a committee of the Board of the Corporation as the case may be.
11.09 OMISSIONS AND ERRORS. The accidental omission to give any notice required by the Act or otherwise or the non-receipt by any person of any such notice or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon.
11.10 WAIVER OF NOTICE. Any shareholder (or his duly appointed proxyholder), director, officer, auditor or member of a committee of the Board may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the articles, the by-laws or otherwise and such waiver or abridgement, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of shareholders or of the Board or of a committee of the Board which may be given in any manner.
SECTION TWELVE
REPEAL OF EXISTING BY-LAWS
12.01 EFFECTIVE DATE. This by-law shall not come into force until confirmed by the shareholders of the Corporation and until a Certificate of Continuance has been issued under the Act.
12.02 REPEAL. All previous by-laws of the Corporation are repealed as of the coming into force of this by-law provided that such repeal shall not affect the previous operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under or the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All officers and persons acting under any by-law so repealed shall continue to act as if appointee", under the provisions of this by-law and all resolutions of the share holders or Board with continuing effect passed under any repealed by-law shall continue to be good and valid except to the extend inconsistent with this by-law until amended or repealed.
MADE by the Board the 12th day of October, 1978.
President Secretary
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