Fund managers relish chance to grill top mining executives

There were more pinstriped suits in the room then you’d see at Harry Rosen’s when Gardiner Watson Institutional, a division of Dean Witter Reynolds (Canada), held its annual mining forum in Toronto recently.

About 100 money managers, representing several billions of dollars in Canadian institutional investment funds, turned out to hear what top executives from some of Canada’s premier mining companies had to say about their companies’ fortunes.

It’s not often that senior officers from eight major mining companies can be found at one place at one time ready to answer some tough questions. The fund managers made the most of it as the speakers’ alloted time stretched into seven hours.

Will Sigma Mines and Kiena Gold Mines merge, was the first question put to Dome Mines Chairman and CEO Fraser Fell after he had outlined his company’s finances and operations.

“That should be done sometime,” said Mr Fell although such a move would be complicated by the fact that the two companies have different parents and incorporated in different provinces. “Some rationalization is in order.”

If the $225-million loan guarantee Dome Mines made for Dome Petroleum was originally to be in effect for only nine months, why hasn’t it been settled by now?

“Like so many other things with Dome Petroleum, it’s not easy to settle,” said Mr. Fell. “Admittedly, Dome Mines made a mistake that day” but Dome Mines is in the middle of discussions with banks with respect to eliminating the guarantee. If the guarantee was called today, Dome Mines total debt would come to about $273 million which it could handle, he said.

“Suffice it to say that it is a first priority for Dome Mines to disentangle itself from Dome Petroleum.”

What’s the future for Rio Algom’s tin mine in Nova Scotia one member of the audience asked Rio Chairman and CEO George Albino.

“East Kemptville is a cloud over the company,” said Mr Albino. But, he said, “it will be resolved in the near future.” He added that “a restructuring of some form” is likely.

Will the Japanese be willing to continue paying a premium for coal from northeastern British Columbia where a Rio subsidiary, Lornex Mining, has a 39% interest in the Bullmoose coal mine?

“The Japanese have to pay more for that coal, and they will pay it,” said Mr Albino noting that coal from northeastern British Columbia is a special situation because of the involvement of the Japanese and the B.C. government along with the mining companies in developing the mine.

There will be tough contract negotiations over price every year, he said, “but there’s no reason for concern over our part of the bargain.”

With $140 million in cash on hand, has Placer Development considered expansion by takeover?

“We look at that all the time, but we haven’t found one we really like yet,” said Anthony Petrina, Placer’s senior vice-president and chief operating officer.

Will Cominco be involved in some kind of zinc cartel now that a controlling interest in the company has been bought by a consortium that includes other of the world’s major zinc producers?

“Zinc producers have an opportunity for self discipline not available to other commodities,” said Robert Stone, Cominco’s vice- president of finance, but added that “I’ll walk out of the boardroom” the day they start talking cartel.

And so it went. The company officials would state their case: the fund managers would question their plans for the future.

Questions were largely non- technical, reflecting the funds’ broader range of interest, yet managed to touch on just about every major issue facing each of the companies.

Also at the forum were officials from Lac Minerals and International Corona Resources, none of whom would comment on the appeal of an Ontario Supreme Court decision earlier this year awarding the Page-Williams gold mine at Hemlo, Ont., to Corona.

Lac is appealing that decision to the Ontario Court of Appeal which is scheduled to hear the case Nov 17. A decision is not expected before January.

Lac, which developed the mine, was at pains to show that even without the Page-Williams mine Lac is a major Canadian mining company. Corona, on the other hand, included projected production figures from the Page-Williams mine in all of its estimates for the future.

Sherritt Gordon Mines and Noranda Minerals were also represented at the forum.