Metall attempts to shed `holding company’ image

When Placer Dome Inc. (TSE) announced recently that it was selling a 25% stake in Falconbridge Ltd. (TSE), one of the most likely buyers appeared to be Metall Mining(TSE).

The newly created mining wing of West German metals giant Metallgesellschaft AG, had a couple of important attributes which seemed to make it an obvious candidate. They included $157 million cash in the bank and a desire to make a major base metal acquisition somewhere in North America.

But at Metall’s recent annual meeting in Toronto, vice-president finance Robert Morgan said his company hadn’t made a bid and probably wouldn’t be making one.

“At $22-$23 per share, the Falconbridge stock is fully priced and I don’t see any possible gain for Metall in buying the Placer Dome shares,” said Morgan.

Instead, Metall will attempt to rid itself of its holding company image by acquiring a direct joint venture interest in a North American or Australian metals project.

Metall already holds a 49% interest in Temagami Mining Co., the company which effectively controls Vancouver-based Teck Corp. (TSE) Through a 25% interest in Nunachiaq Inc., Metall also has a 8.3% stake in Cominco Ltd. (TSE) of Vancouver. Quarterly results

While those assets reflected well on Metall’s first quarter results — net income for the 3-month period ended March 31 was $7.1 million or 19 cents per share after extraordinary items including a $1.9-million tax recovery — the company wants to have a greater say in managing the projects it acquires.

As part of that strategy, Metall recently spent $10.7 million to increase its interest in a Cayeli Bakir Isletmeleri A.S. from 24.5% to a controlling 49% interest. Based in Turkey, Cayeli’s chief asset is a large copper/zinc deposit which is scheduled to go into production in 1989.

With reserves at Cayeli standing at 8.3 million tons grading 4.54% copper and, 7.79% zinc and 1.05 oz silver per ton, operating costs are expected to be 38 cents (US) copper lb and 45 cents zinc per lb.

“We are now the largest shareholders at Cayeli and we will play a clear leadership role in bringing the project to production,” said Metall President Klaus Zeitler.

Meanwhile, a more simplified mining plan and the elimination of cyanidation has solved most of the problems at the Ok Tedi mine which produced 30.5 million lb copper and 165,000 oz gold during the first three months of 1988. Located in Papua New Guinea, the huge project is held 7.5% by Metall. Operating profit for the three months ended Dec 31, was $104 million compared with $37.5 million a quarter earlier. Highland Valley

Metall holds a 10% interest in Highmont Mining Co. which recently offered its mine and mill to Highland Valley Copper (a partnership involving Cominco and Lornex Mining (VSE)) in exchange for a 5% interest in the partnership’s cash flow. The transaction increased Metall’s interest in Highland Valley Copper — a low-cost copper producer capable of producing 400 million lb copper annually — to 8%.

Production decreased slightly at the Afton copper/gold mine at Kamloops, B.C., where Metall owns a 17% joint venture interest with Teck (73%). Due to a changeover from the main zone to the Pothook zone, Metall said, gold and copper production was decreased from the previous quarter to 11,800 oz and 4.1 million lb respectively from 12,800 oz gold and 10.3 million lb copper.

As a result, operating profit was down to $6 million in the first three months of 1988, compared to $11.3 million in the previous quarter. Kalgoorlie area

Production is under way at the Callion gold mine in Australia where Metall holds a 25% interest. One of 175 gold mines in the Kalgoorlie area it is expected to produce around 30,000 oz annually from a combined open pit and underground operation.

Earlier this year, the Callion joint venture bought a 50% interest in the Broad Arrow mill. Located 100 km from the mine site, Metall said it improves the economics of the project despite the additional costs of transporting ore.

The Metall issue was trading recently on the Toronto Stock Exchange at $10.63 in a 52-week range of $17.50 and $8.75.