EDITORIAL & OPINION — FACTS ‘N’ FIGURES — The major-junior dynamic

At a time when the mining industry is suffering a downturn, some Canadian majors are finding that their relationship toward juniors is remaining largely unchanged, whereas others are entering into new arrangements.

Placer Dome has been committed to grassroots exploration, and has remained relatively active in acquiring junior projects in the past 18 months. Placer, like all large producers, has strict size and return criteria, and, as the price of gold has declined, the company has shed assets that are unlikely to meet those criteria. It sold its interests in Mt. Rawdon and Cerro Crucitas in 1998.

Acquisitions never figured largely in Placer’s growth plans, so it was a bit of a shock that the company bought a half-interest in the Western Areas mine for $235 million in November 1998 and announced a $1.1-billion merger with Getchell Gold.

Teck has developed a reputation for flexibility and a willingness to entertain agreements with juniors’ early-stage projects. Teck has active ventures with at least 20 juniors on gold projects around the world.

Teck bids conservatively for late-stage acquisitions and has a strong grassroots exploration program. It usually strikes early-stage deals with juniors, often making an equity investment related to participation rights. Nonetheless, Teck has been notably absent from the junior scene recently, and appears to have shifted it focus to its later-stage projects, Pogo and San Nicholas.

Barrick, like Placer Dome, is strictly a gold company, but it has not yet developed a strong grassroots exploration program. It is difficult to argue with success — Barrick has grown through acquisitions and will continue to do so. The company has a reputation for being an aggressive bidder and also for being an intimidating negotiator. The half-billion-dollar Sutton Resources acquisition in February 1999 is a perfect illustration of Barrick’s growth strategy.

— The preceding is an excerpt from Strategic Report, a publication of Halifax, N.S.-based Metals Economics Group.