Analysts watch Homestake for Pickens’ move

After failing to gain control of Newmont Mining Co., Texas oilman T. Boone Pickens may be preparing for a run at another major American gold producer, a New York-based mining analyst says.

“Early indications are that T. Boone is preparing a takeover bid for Homestake Mining,” said Daniel Roling, a mining analyst with Merrill Lynch in New York.

On Nov 17, the day before withdrawing his controversial takeover bid for Newmont, Pickens filed documents with the Securities and Exchange Commission in Washington stating that through Mesa Limited Partnership, he had acquired a 4.8% stake in Homestake.

With production of 669,594 oz gold from three U.S. and two Australian mines, Homestake was America’s largest gold producer in 1986.

Based in San Francisco, Homestake owns and operates two of America’s largest gold mines — the 110-year-old Homestake mine in South Dakota which in 1986 was still the largest single U.S. producer, and the McLaughlin mine in northern California.

Homestake also has a substantial interest in the Round Mountain gold mine in Nevada, two gold mines in Western Australia and some oil and gas properties.

A Securities and Exchange Commission filing dated Sept 30 states that Mesa owns 2.25 million shares of Homestake which, according to a Mesa spokesperson, are valued at $102,375,000(US).

Although Pickens couldn’t be reached at Mesa’s offices in Amarillo, Tex., a number of American mining analysts will be monitoring the Homestake issue for signs of a Pickens takeover.

“If you are T. Boone Pickens, you don’t buy a 4.8% interest in a company like Homestake unless you have other plans,” said Roling who was basing his comments on the oilman’s usual takeover strategy.

In September Pickens-led Ivanhoe Partners began its Newmont takeover bid by offering $2.6 billion ($95US per share) for a 51% stake in the New York-based company.

That was followed two weeks later by a $105-per-share bid for 28 million of Newmont’s 66.8 million shares. In addition to the 6.65 million Newmont shares which Ivanhoe already owned, that would have given Ivanhoe a 51% interest in Newmont.

While Newmont combined with major shareholder Consolidated Goldfields of Great Britain to thwart the Pickens bid, the Texas oilman still holds 6.6 million shares of Newmont Mining.

A well-placed mining source said Pickens is holding onto that stock because it is considered to be undervalued at $36.50 on the New York Stock Exchange.

However, Roling says that Pickens will find an unfriendly Homestake takeover even more difficult than his recent Newmont bid.

Homestake Chairman Harry Conger has refused to comment on the Pickens acquisition but he has indicated that any takeover bid will not be welcomed.