Pine Point raises interest in Cominco’s Polaris mine

With zinc prices at record levels, Pine Point Mines (TSE) has exercised its option to purchase a further 12% interest in Cominco Ltd.’s (TSE ) Polaris mine. Located on Little Cornwallis Island in the Northwest Territories, Polaris produces about 250,000 tonnes of zinc and lead concentrate per year which is shipped to European smelters.

The Pine Point mine, which is also located in the N.W.T., began operating in 1963. Mining activities were curtailed in June, 1987, and concentrate production ceased three months ago. However, concentrate sales are expected to continue until 1991.

With its only mining operation closed down, Pine Point’s board considered the option of winding up the company or investing in some other project so they opted for Polaris. The purchase will be financed through further drawdowns under revolving loan facilities previously arranged with two chartered banks, the company states.

A 33% interest in the Polaris mine was acquired earlier this year for $67.7 million so the recent purchase will raise that to 45% for an additional cost of $26 million. Pine Point will also assume 12% of related liabilities.

In announcing the purchase, Pine Point noted that investment dealer Richardson Greenshields of Canada had concluded that the “exercise of the option is fair, from a financial point of view, to the shareholder’s of Pine Point.” Cominco has a 50.1% interest in Pine Point and many shareholders questioned what they perceived as being a “non-arms’ length” deal between the two companies.

Ore reserves at the Polaris mine total some 15.1 million tonnes grading 14.4% zinc and 3.9% lead which at the current production rate constitutes a mine life of approximately 15 years. In 1987, the mine reported an operating profit of $21 million.

Concentrate shipments from Polaris are expected to begin this July. The short shipping season is the result of ice conditions in the high Arctic. Income from Polaris is typically greatest during the third and fourth quarters so record zinc prices will be reflected in Pine Point’s financial statements later this year.