Acquisition by Pine Point will keep company going.

Loyal shareholders of Pine Point Mines (TSE) should be relieved to learn the company will be around for a while longer. The 50.1%-owned Cominco subsidiary recently agreed to acquire a 33% interest in the Polaris mine from its parent company. An earlier and to some extent controversial proposal to purchase 40% for $90 million was apparently scuttled by the Oct 19 market crash.

The $67.7-million acquisition cost does not include related liabilities of approximately $5.7 million but David L. Johnston, president, confirms it covers “certain exploration properties owned by Cominco in the vicinity of the mine.”

Pine Point also has an option to purchase another 12% interest before June 30, 1990, at prices varying between $2.2 and $2.6 million for each 1% interest acquired. It will also have to assume an appropriate percentage of related liabilities with any new purchase.

Johnston tells The Northern Miner that Pine Point is not planning any other acquisitions at the moment and he adds: “if this is all we do, then we’ll become a holding company.” The Polaris purchase “pretty well commits us for a while,” he emphasizes, while not ruling out some other business venture in the future.

Because the purchase was between a subsidiary and its parent, Pine Point took steps to alleviate concerns expressed by minority shareholders. An independent committee of directors was constituted to review the transaction and its recommendations were reviewed by independent financial, legal, accounting and engineering advisers, the company emphasizes. A fairness opinion was also received from Richardson Greenshields of Canada which stated that “the terms of the proposed transaction is fair, from a financial point of view, to the shareholders of Pine Point.”

The purchase will be financed with approximately $33 million from existing cash resources and through drawdowns under committed revolving loan facilities totalling $80 million from two Canadian chartered banks. Cominco has also agreed to provide a $20-million subordinated loan facility to Pine Point if required.

The Polaris mine, which is located on Little Cornwallis Island in the Northwest Territories, is Canada’s most northerly base metal mining operation. It produces approximately 250,000 tonnes a year of zinc and lead concentrates which are shipped to European smelters. At year-end, reserves were 15.1 million tons grading 14.4% zinc and 3.9% lead.

Concentrate is still being sold from the Pine Point mine on Great Slave Lake, 125 miles south of Yellowknife. “We are just in our last week of milling ore up there,” says Johnston, who notes that “about a half dozen people will remain to load concentrate over the next three years.” Pine Point sold its mining fleet to Echo Bay last summer and is currently negotiating the sale of the mill and other assets.

The company is trying to sell everything in “large blocks” rather than on a piecemeal basis, he claims. “There is a whole bag of assets that go together including the mill,” he adds. Johnston says the crushing and grinding parts of the plant are the most valuable and are common to almost any type of milling operation, including a gold plant. Getting equipment out of Pine Point isn’t a problem because there is rail access right to the mine site. All the company’s housing has been sold and it is going out across the ice on Great Slave Lake, he notes. “We have already moved 60 or 70 units at least.”

Proceeds from the sale of equipment will go into working capital and could be used for other investments, he says. “When we looked at winding up the operation, we thought we could probably pay for the complete windup of the place by sale of assets. And this is proving to be the case.”

At the end of 1985, Pine Point made a $15-million provision in its financial statements for the mine closure, something he says is “fairly close.” At the beginning of 1988, Pine Point had about 490,000 tons of zinc concentrate and 14,000 tonnes of lead concentrate. Most of it has been committed to Cominco but there is “some left for spot sales,” he says.