Malartic being transformed, looks for gold acquisitions

Since 1983 Malartic Hygrade Gold Mines (Canada) has taken pride in its record of common stock dividends, putting it among a select group of dividend-paying gold producers. It didn’t have to do much to generate those dividends. American Barrick Resources mines the deposit Malartic owns, brings the ore up a shaft on the property next door to Malartic and mills the ore before turning over 60% of operating profits to Malartic.

For example, in 1987 the Malartic side of the mine accounted for 17,053 oz of gold. After mining costs are deducted, Malartic gets 60% of the revenue from that gold, Barrick gets 40%.

Malartic has remained fairly quiet during its dividend-paying years, although it has developed a second mine, the Orion mine, in the centre of the same Malartic Twp. property in northwestern Quebec. The president of the company is based in England and is rarely seen in Canada. The company’s affairs here have been handled largely by a corporate secretary.

Now, however, things may be changing. Malartic Hygrade is about to become a much more aggressive company. Three people — two vice-presidents and one director — have been assigned to work fulltime on acquisitions with the goal of producing 100,000 oz of gold annually by 1989. The board of directors has also set up an acquisitions committee which will meet twice each month.

The company came close to its first acquisition in the past month, The Northern Miner has learned, when it made a bid to buy control of Roddy Resources, a Vancouver company with a small producing heap leach gold mine in Arizona. Belmoral Mines bid higher, and Malartic walked away from the deal rather than get involved in a bidding war.

Malartic has $14 million in cash and liquid assets at the moment which it plans to use toward acquisitions. It is also debt-free which, combined with existing cash flow, gives it considerable borrowing power.

In 1987 its net income amounted to $3,638,146 on revenue of $6,900,232 compared with 1986 earnings of $1,896,478 on revenues of $6,931,017. While earnings per share rose to 99 cents in 1987 compared with 54 cents in 1986, the 1987 results include an extraordinary tax refund of 45 cents per share.

The Orion mine, however, will double Malartic’s gold output in 1988. The company expects Orion will also double per-share earnings in 1988, given a gold price of $450(US)

Malartic plans to concentrate on U.S. heap leach producers or near producers as it looks for acquisitions, but Canadian candidates are also being considered.

A long-standing dispute between Malartic and securities regulators in Quebec and Ontario regarding debentures and warrants issued in 1974 was settled in 1986. Malartic is now seeking a listing on the Toronto Stock Exchange. The company laready trades on the Vancouver Stock Exchange, the American Exchange and the Exchange in London, England.