Mining companies' rollup called a boost to efficiency

A bid to roll up five small gold companies with interests in a hot exploration area of central Nevada into a single outfit would increase their efficiency, says the company that set the wheels in motion.

U.S. Gold Corp., a Denver-based company, last week launched a bid to acquire White Resources Ltd., Nevada Pacific Gold Ltd., Coral Gold Resources Ltd. and Tone Resources Ltd. All four are based in Vancouver, British Columbia.

Along with their shared hometown, the four companies also share an interest in the Cortez Trend, an area between Eureka and Battle Mountain that some geologists think might rival the Carlin Trend as one of the world's largest gold producers.

If U.S. Gold is successful in acquiring the four other companies, it will control more than 160 square miles in the Carlin Trend, said Ian Ball, a spokesman for U.S. Gold.

That means, Ball said, that the geological and other technical expertise of the companies could be pooled, strengthening the possibility of a major gold discovery.

And because the exploration program would cover a larger area, he said the combined companies probably would benefit from economies of scale in contracts with drilling companies and other suppliers.

Publicly held U.S. Gold offered to buy the four other companies for stock in deals that provide a premium of 25 percent over the companies' share prices on March 3. The total value of the acquisitions would be about $256.9 million.

The stock of U.S. Gold is a powerful currency for acquisition. Trading for as little as 30 cents a share within the past year, the stock had risen to $6.40 a share in the over-the-counter market last week.

Rob McEwen, the chairman and chief executive officer of U.S. Gold, already owns substantial positions in the common stock of all four companies. He's the largest single shareholder of Tone Resources, for instance, and holds nearly 20 percent of the stock of Nevada Pacific Gold.

In light of those holdings by McEwen, the board of U.S. Gold created a special committee to evaluate the transactions.

McEwen is the founder of Goldcorp, one of the world's 10 largest mining companies. He stepped down as chief executive officer that company about a year ago after it merged with Wheaton River Minerals.

He pitched the proposed acquisition as a way to catch the eye of investors.

"The new combined company could provide the land package of a major, the balance sheet strength and market liquidity of an intermediate and the upside price leverage to discovery of a junior," McEwen said.

The boards of the four target companies said last week they're weighing the offer.


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