Nerco’s Con gold mine at Yellowknife, N.W.T., is part of the

Major North American metals producer Kennecott is bidding for control of Nerco (NYSE).

Kennecott’s parent, international mining house RTZ (NYSE) of London, says Kennecott of Salt Lake City, Utah, is offering US$12 per share in a deal worth about US$470 million.

RTZ says its prime target is Nerco’s coal interests. Proposed is a merger of Nerco with a Kennecott subsidiary.

PacifiCorp Holdings, with an 82% stake in Nerco of Portland, Ore., has agreed to vote in favor of a merger. The acquisition is subject to regulatory and Nerco shareholder approval. A special shareholders’ meeting is expected to be called for April.

Kennecott, wholly owned by RTZ, explores for and produces copper, gold, silver and molybdenum from projects mainly in Canada, the U.S. and Mexico. The company is one of the few majors involved in the search of diamonds in the Northwest Territories.

RTZ is involved in mining activities around the globe but says more than half of its assets are in North America.

The principal business of Nerco is coal mining, but it has oil and gas interests and gold and silver properties in the U.S. and Canada. In 1992, Nerco produced 202,000 oz. gold and 2.9 million oz. silver. Nerco owns the Con gold mine at Yellowknife, N.W.T., a 100,000-oz. producer. Nerco has said its metal properties are for sale and RTZ says it will evaluate the bids that have been received and may choose to proceed with the sale of these assets.

RTZ also says it has retained Morgan Stanley to manage the orderly disposal of Nerco’s oil and gas assets because this business does not conform to RTZ’s strategic objectives.

In 1992, RTZ divested itself of its 51.4% interest in Toronto-based Rio Algom (TSE), a producer of copper and other metals.

Nerco reported a net loss of US$551.2 million for 1992 on revenues of US$577.6 million. The loss was caused mainly by oil and gas asset writedowns and loss from discontinued minerals business. At the end of 1992, Nerco’s net debt was US$692 million.

Nerco’s net assets (after the writedowns) at the end of 1992 stood at US$247 million which, RTZ says, does not reflect the underlying value of the company’s coal assets.

RTZ Chief Executive Robert Wilson says Nerco’s coal assets — two wholly owned mines and a 50% interest in a third mine in the Powder River Basin in Montana and Wyoming — are the reason for the purchase.

“The coal business is large and profitable and is our target in making this acquisition,” Wilson says. “We have been considering a move into the U.S. coal industry for some time and the acquisition of these mines is the first step in establishing the foundations for a new high-quality business for RTZ in the U.S.”

Regarding the financing of the transaction, RTZ says PacifiCorp is willing to fund, through a wholly owned subsidiary, US$225 million of the deal, that amount to be repaid from certain future contract revenues of Nerco. RTZ says PacifiCorp has also agreed to provide certain financial and other accommodations to facilitate the transaction.