Pegasus Has Hand In Merger
Spokane’s Pegasus Gold Inc. had its hand in a mining merger Monday along with marking a milestone at its most important gold mine.
Denver-based Dakota Mining Corp. agreed to acquire USMX Inc., also of Denver, for about $24 million. The deal is not as large as some of the recent mega-mergers in the consolidating mining industry.
Pegasus owns about 30 percent of USMX, and will own a portion of the new company created by the merger if the deal gets approved, said John Pearson, director of investor relations for Pegasus.
The USMX investment was worth $7.2 million after Monday’s closing for USMX stock. Pegasus’ share was worth as much as $12 million in 1994, when USMX’s stock price was higher.
The merger would make Dakota a middle-sized gold producer, having about 200,000 ounces of production. Pegasus produces about 500,000 ounces each year from mines domestically and in Australia.
The largest of those mines for Pegasus, Mt. Todd, poured the first gold from its new milling facility. The mine represents a tremendous investment for Pegasus, but the rewards should be great: the mine is projected to produce 260,000 ounces of gold each year.
The new facilities started up on schedule and the mine should be in full production by the second quarter of this year, Pearson said.
Mt. Todd is the fifth-largest gold mine in gold-rich Australia. Pegasus finished buying the entire mine project in 1995.
Pegasus, like other gold mining companies, has seen its stock drop dramatically at the end of 1996.
The stock finished unchanged at $7.19 a share Monday, but has dropped more than 30 percent in the last month. The stock traded at $28.13 in 1993, and has lost three-fourths of its value since then. Pegasus stock last traded below $8 in 1986.
A proposed merger between Pegasus and Dayton Mining of Vancouver, British Columbia, collapsed last year after Dayton shareholders rejected the deal. Pegasus mines have faced higher costs than in other years, which has affected margins.
A large institutional shareholder of Pegasus sold 1.5 million shares of the stock in a single day in December, which created an oversupply of the stock, lowering its price.
“They just got completely out of the gold business,” Pearson said. “That didn’t help us.”
The price of gold has hit three-year lows, which has also depressed gold stocks, Pearson said.
, DataTimes