$500 million deal Placer to sell Falco stake

Gold-producer Placer Dome (TSE) wants to divest itself of its almost 25% interest in Falconbridge Ltd. (TSE), shareholders were told at Placer’s annual meeting which took place in Toronto.

Placer has a 14% share interest in the nickel producer representing about 15.6 million shares. Placer’s Falconbridge shares are held directly and through a 52.9%-owned affiliate, McIntyre Mines (TSE).

Placer also owns Falconbridge debentures worth $135.4 million, the debentures convertible into about 6.2 million additional shares of the nickel company, and warrants.

In total, Placer’s interest in Falconbridge, which Placer Chairman Fraser Fell described as an investment, would be about 24.8% if all of the debentures and warrants were exercised.

Fell told reporters Placer has received an offer for the Falconbridge holding but the company is not currently negotiating sale of the shares. He said Dominion Securities has been retained to find a buyer for the entire interest.

Falconbridge’s shares have been trading on the TSE in the $22-$23 range of late, with a 52-week high of $31.25 and a low of $16.63.

In May, 1985, Placer paid $160 million for 1.9 million shares of McIntyre (and its 9.2 million shares of Falconbridge) and 3.3 million additional shares of Falconbridge. In February, 1986, Placer acquired a further 1.6 million shares of Falconbridge for $33.2 million. And, in January of this year, Placer bought 1.5 million shares of Falconbridge for $35.6 million. In its annual report, Placer says McIntyre’s only significant asset is its 11.5% equity interest in Falconbridge. Operating earnings

For the first quarter of 1988, Placer recorded an 18% increase in operating earnings to $58.1 million. Net earnings for the three months totalled $39.6 million (18 cents per share) compared with $40.4 million (19 cents per share) for the same period last year. (First-quarter earnings in 1987 included other income of $19.2 million.)

The company attributed the rise in operating earnings primarily to increased prices and production of copper and molybdenum.

For 1987, the company reported net earnings of $158.2 million (73 cents per share) on revenues of $833.9 million, compared with net earnings of $93.9 million (46 cents per share) on revenues of $719 million in 1986.

Known primarily as a gold producer, Placer turned out 781,000 oz of the yellow metal in 1987, down from 1986. The company projects gold production of 801,000 oz for 1988, slightly more than one million oz for 1989 and 1.1 million oz for 1990.

Also last year, the company produced 7.1 million oz silver and 65 million lb copper. Virtually debt free, Placer reports it was able in April to reduce its total borrowings to $31 million(US) from $50.8 million when the producing Kidston mine (53.1% interest) in Australia made a final payment on its contruction loan. New mines

Placer, formed last year through the amalgamation of Placer Development, Dome Mines and Campbell Red Lake Mines, has three gold-mining projects — Misima, Big Bell and Dona Lake — it hopes to have in production by 1989, the combined output of which will increase the company’s total gold output by more than 40%.

Construction of the Misima mine in Papua New Guinea is on schedule, the company reports. The roads, plant site, ancillary buildings and airstrip surfacing are under way. Budgeted cost is $261 million. The Misima mine is expected to produce more than 400,000 oz gold during the first 12 months of operation at a projected cash cost of $100(US) per oz. Placer will have a 61% interest in the mine.

The open-pit development of the Big Bell property in western Australia will cost an estimated $133 million to bring into production, with the underground workings to cost an extra $64 million. Production should average 160,000 oz gold per year for the first six years at an average cash cost of less than $200(US) per oz. Placer’s interest will be 38%.

In northwestern Ontario, in the Pickle Lake area, Placer has a 100% interest in the Dona Lake project which is being developed at an estimated capital cost of $42.6 million. Anticipated annual production is 40,000 oz gold. Porgera deposit

On the exploration side, Placer has a 23% interest in the Porgera gold project in Papua New Guinea which is considered one of the largest undeveloped gold deposits in the world. A feasibility study for the project, which could turn out more than 800,000 oz annually at a cash cost of less than $100(US) per oz, should be ready in June.

Placer reports total gold reserves of 16.2 million oz from its share of mining properties world-wide. The company has budgeted $52 million for exploration in 1988.

At the annual meeting, shareholders voted overwhelmingly against a resolution seeking a more active role by Placer in the operations of the Marcopper Mining Corp. copper mine in the Philippines, where environmental concerns have been raised over the dumping of tailings into Calancan Bay.

Largest shareholder of Marcopper, with a 49% interest, is the Philippine government. Placer, with a 39.9% interest, says it does not control Marcopper nor does it manage that company’s affairs, and it is prohibited by Philippine law from interfering in the company’s management.