Rio beefing up exploration role

Backed by the financial muscle of its England-based parent company, Rio Algom Ltd. (TSE) of Toronto is back in the exploration business. While company executives have declined to be specific about Rio Algom’s plans for this year, Rio Tinto Zinc has given the company a clear mandate to make acquisitions when the right projects become available.

After RTZ divested itself of its North Sea oil and gas assets, Chairman Sir Alistair Frame told shareholders at a recent annual meeting that Rio Tinto is withdrawing from businesses where it does not have a sustained competitive advantage.

As a 50%-owned subsidiary of the British resource and industrial minerals producer, Rio Algom will carry out the mining-based policy with over $200 million cash (at year- end), a low debt-to-equity ratio, and working capital of over $650 million.

To guide the company in its renewed mining and exploration drive Rio Algom recently announced some additions to its executive and exploration offices in Toronto.

Colin Macaulay, now chief executive of Rossing Uranium Ltd. in Namibia, was recently named president and chief operating officer. Known as an operations type guy with a wealth of experience in Rio Algom’s uranium division, Macaulay will replace President Ray Ballmer when he takes up his new post on Aug 1. Mining commitment

As Rio Algom’s new vice-chairman, Ballmer will be the strategist behind the company’s renewed commitment to mining.

Patrick Chance was recently hired from Lacana Mining to beef up Rio Algom’s exploration office. Headed by Vice-president Kelly O’Connor, it will soon include three new senior exploration geologists working out of regional offices in Saskatoon, Sask., Thunder Bay, Ont. and Toronto.

Since O’Connor was taking a tour last week of Rio Algom’s mining leases near Elko, Nev., The Northern Miner was unable to reach him for comment.

While a former employee in Rio Algom’s Toronto exploration office said the company has a budget on demand for the right kind of properties, it isn’t yet known what those opportunities will be.

“I suspect that they will buy properties that are already under development,” said McNeil Mantha mining analyst Bruce Reid who expects Rio Algom to take a long- term approach to resource acquisitions.

As reported (N.M., May 2/88), the company recently reacquired the East Kemptville, N.S., tin mine from the Bank of America for $41 million plus royalties. But Reid expects Rio’s next acquisition to be in the area of either base or precious metals. Gold property

The fact that Rio Algom was recently negotiating to acquire an interest in a promising gold property (with reserves outlined) in northwestern Ontario, would seem to confirm Reid’s prediction.

“There are a lot of opportunities out there, it’s just a question of identifying the right ones,” said Patrick Chance during a brief interview with The Northern Miner.

Meanwhile Rio Algom’s list of mining assets includes Potash Co. of America which produced 1,328,000 tons of potash last year from operations at Sussex, N.B. and Saskatoon.

While Potash Co. of America reported an operating loss of $349,000 in 1987, news that the Saskatoon operation can be reopened (after a shutdown due to flooding) combined with the suspension of anti-dumping legislation in the U.S., should boost the Potash division, Reid said recently.

Through its 68.8%-owned subsidiary Lornex Mining (VSE), Rio Algom holds a 45% interest in the Highland Valley Copper operation and a 39% joint venture interest in the Bullmoose coal mine in B.C.

Highland Valley produced 345.3 million lb copper and 6.1 million lb of molybdenum concentrates during 1987, its first full year in operation. Highland Valley

In January, partners Lornex, Cominco Ltd. (TSE) and Highmont Mining, agreed to spend $70 million to incorporate the Highmont mill into the Highland Valley operation. As a result, milling capacity at the operation is expected to increase to 131,000 from 91,000 tonnes per day.

Due to strike at Rio Algom’s Elliot Lake, Ont., uranium mines, recoveries in 1987 were reduced to 6.3 million lb of uranium oxide from 7.3 million lb in 1986. As a result, operating profits in the company’s uranium division decreased to $50.9 million last year from $77.1 million in 1986.