Minorco bids to unite west’s largest metal mining assets

Minorco SA’s South African- backed bid for the outstanding shares of Consolidated Gold Fields PLC is expected to spark one of the biggest takeover battles in mining history.

But even though it will be fought inside boardrooms in England and Europe, the protagonists strong ties to the United States and Canada mean that Consgold’s attempt to ward off the unwanted advances of Minorco will be monitored closely in North America.

Already, Consgold has responded to Minorco’s initial $6.6 billion bid (which could unite the western world’s largest mining interests into one unrivalled conglomerate) by asking the British Government to investigate possible insider trading in its stock before the bid was announced.

As the world’s second largest gold mining finance company and largest outside South Africa, Consgold’s interests stretch all the way to the Carlin gold trend in Nevada where the gold mining arm of Consgold’s 49.7% owned subsidiary Newmont Mining of New York is expected to produce 1.6 million oz by 1991.

The fact that Minorco could sell off parts of debt-ridden Newmont to finance the Consgold acquisition is likely to spark a certain amount of curiosity in the executive suites of some of North America’s largest mining companies. Carlin deposits

With 302.6 million tons of average 0.049 oz gold per ton in 16 Carlin deposits, 90%-owned Newmont subsidiary Newmont Gold, would represent a prime acquisition target if it was ever offered for sale.

One of the most promising deposits in Newmont Gold’s Carlin inventory — the Post claims at the northern end of the 45-mile Carlin trend — is adjacent to American Barrick Resources’ (TSE) Goldstrike mine.

Toronto-based Barrick acquired a 4.9% holding in Consgold two years ago, but its stake in the British conglomerate has since been whittled down to about 2.9 million shares which represents a 1.5% equity interest.

“We are watching Consgold’s share price each day but we are not playing an active part in the takeover bid,” said Robert Wickham, Barrick’s treasurer. In the days after the bid was announced Consgold’s share price rose to #13 from about #10 which makes Barrick’s stake in the company much more valuable. But Wickham said his company will continue to hold on to the asset. Anglo American Corp.

Although it is based in Luxembourg, Minorco too has strong connections to the U.S. and Canada. A 60%-owned subsidiary of Anglo American Corp. of South Africa and De Beers Consolidated Mines, Minorco already has a foothold in Nort h America by virtue of a 29% equity stake in Consgold.

Regarded as Anglo America’s overseas investment arm, Minorco had been attempting to strengthen its exposure to the North American gold industry, prior to the Consgold bid.

In partnership with its 56%- owned subsidiary Inspiration Resources of New York, Minorco is spending $12 million this year to finance the activities of Western Gold Exploration and Mining Co. which was officially launched earlier in January.

With $160 million in its treasury, Westgold plans to boost its gold production to 200,000 oz in the early 1990s from around 65,000 oz last year. Westgold’s assets include an offshore placer mining project near Nome, Alaska and a 72.5% stake in the Austin mine and mill in Nevada. Manitoba gold

The company’s 100% owned subsidiary Mingold Resources is currently attempting to bring a couple of Manitoba gold and polymetallic projects into production in a joint venture with Golden Range Resources. Mingold’s assets are expected to be added to Westgold at some time in the future.

Inspiration Resources’ wholly owned subsidiary Hudson Bay Mining and Smelting, (TSE) also gives Minorco indirect exposure to the 186 million lb zinc, 150 million lb copper and 69,000 oz of byproduct gold which HudBay produced last year. At a time when the outlook for base metals appears to be good, HudBay is planning to spend $7.5 million a year over the next 10 years in the Flin Flon, Man., region.

Regardless of the outcome, Minorco appears to be well equipped for the takeover battle that lies ahead. It recently reported a year- end cash position of $890 million and after ridding itself of investments in U.S. bankers Salomon Inc. and Anglo American Investment Trust an extraordinary gain of $513 million(US) lifted 1988 earnings to $775 million or $4.55 per share. That compares to $122 million or 72 cents per share last year.

Consgold, on the other hand, has been weakened by Texas raider T. Boone Pickens’ recent bid for Newmont. To defeat the bid, Consgold recently raised its stake in Newmont to 49.7% from 26% while the latter company incurred a debt load of $1.9 billion.