Noranda bides time in pursuit of more Falconbridge shares

Wanting to give the impression it is in no hurry, Noranda Inc. (TSE) says it now intends to make normal course purchases of up to 10% of the common shares of Falconbridge Ltd. (TSE) during the next six months.

Noranda which already owns 19.9% (14.87 million shares) of the nickel-copper producer Falconbridge, was rebuffed by the Ontario Securities Commission (OSC) in October when it sought to purchase another seven million shares of Falconbridge at $22.25 per share.

The OSC restricted Noranda, until Nov 28, from making an offer for Falconbridge shares unless all shareholders of the nickel-copper company were given the chance to sell at a price ($23 minimum) paid to some institutional investors earlier this year. The restriction was invoked for a 90-day period beginning Aug 29.

Shares of Falconbridge were recently trading on the TSE in the $23-$24

range. Noranda will pursue its open- market purchases of Falconbridge stock

on both the Toronto and Montreal stock exchanges but, according to Noranda Chairman Alf Powis, the company has not obligated itself to purchasing any new shares. The company says notice of its intention to purchase shares will expire May 26, 1989.

As an “insider” owning more than 10% of the shares of Falconbridge, Noranda will have to declare any further purchases of Falconbridge shares. Planned purchases

Powis said earlier this year Noranda was not going after full control of Falconbridge; rather, it wants to try to block any other company from securing an influential equity position. Some analysts think Noranda has loftier ambitions, however.

“Noranda’s primary intention is to get control of the Kidd Creek mine,” Julian Baldry, senior mining analyst with Nesbitt Thomson Deacon in Toronto, said, adding that the company will go to every effort to control Falconbridge.

Boosting its shareholding to about 30% is part of a staged program by Noranda, he said. “I think this creeping takeover will continue to creep forward,” Baldry said.

Falconbridge, well known for its nickel operations at Sudbury, Ont., operates the Kidd Creek mining and metallurgical complex near Timmins, Ont., which includes copper and zinc mining operations, a concentrator, copper smelter and refinery, electrolytic zinc reduction plant and two sulphuric acid plants.

Not all of the copper concentrates from the Kidd Creek operation are processed using Kidd Creek facilities; Noranda’s Horne smelter in northwestern Quebec is involved in the processing of those concentrates. Of particular concern to Noranda, Baldry said, is securing feed for its own copper smelting operations and making sure those concentrates are not shipped elsewhere for processing.

In a press release, Noranda describes its share purchases of Falconbridge as representing “a substantial equity investment to enhance its position in the minerals industry” and that it “expects the investment to provide an attractive annual return.”

Noranda arrived at its current 19.9% equity position by buying shares on the open market this past summer. It had sought to acquire a 24.7% control block of Falconbridge from Placer Dome Inc. (TSE) and a Placer Dome subsidiary when the giant gold producer put the shares up for sale earlier in the year; the Placer Dome shareholdings were acquired by Falconbridge itself for $960 million.