Boliden succeeds in bid to acquire Westmin — Lomas Bayas points to potential expansion in Latin America

Boliden (BOL-T) will conduct an in-depth analysis of the assets of Westmin Resources (WMI-T) following its successful takeover of the Vancouver-based mining company.

Boliden says all conditions of its offer to buy the outstanding common shares of Westmin have been satisfied. About 78.4 million Westmin shares were tendered to the $5.40-per-share offer. Together with the shares already owned by Boliden, this represents about 89% of Westmin’s outstanding shares, exceeding the two-thirds minimum threshold, one of the conditions of Boliden’s offer.

Westmin’s board of directors have subsequently been replaced with the directors of Boliden.

In a bid to acquire the remaining 11% minority interest, Boliden has extended its offer until Feb. 6, 1998, to allow those shareholders who did not tender their Westmin shares additional time to accept the offer.

“We are very pleased with how this transaction has transpired,” says Boliden’s president, Anders Blow. “We recognize that this is a difficult time for base metal companies and their shareholders, but we also believe that this is the best time to be acquiring assets in this sector.

“When we became a publicly traded company last June, we outlined our strategy to create a first-tier mining company through internal growth, exploration and acquisitions. Buying these assets is a key element in that strategy. Westmin provides us with an immediate increase in zinc production and will add significantly to our copper production before this year is out.

But, just as important, it gives us a platform for future growth in the Americas.”

Boliden regards the Lomas Bayas copper mine project in northern Chile and the Myra Falls underground polymetallic zinc-copper mine on Vancouver Island, B.C., as Westmin’s two key assets.

Myra Falls produces zinc and copper concentrates that contain significant gold and silver credits. Boliden expects the mine will produce in the order of 60,000 tonnes zinc and 15,000-20,000 tonnes copper in 1998. Minable reserves at the end of 1996 stood at 9.1 million tonnes grading 6.6% zinc and 1.5% copper, plus 1.4 grams gold and 28.6 grams silver per tonne.

The minable reserves are included in a proven and probable geological reserve base of 12.3 million tonnes grading 7.8% zinc and 1.8% copper, plus 1.9 grams gold and 40.4 grams silver. A further 2 million tonnes are categorized as possible.

Construction of Lomas Bayas, a US$244-million open-pit, solvent extraction-electrowinning copper porphyry project, is about 70% complete.

Startup is slated for May at an annual rate of 60,000 tonnes cathode copper.

Operating costs over the 12-year life of the mine are projected to average US50cents per lb. copper.

Minable reserves, as outlined in the feasibility study, are estimated at 289.6 million tonnes grading 0.355% copper, equivalent to 2.27 billion contained pounds of copper, at a stripping ratio of 0.4-to-1. Westmin had been examining the feasibility of expanding the annual production rate by 50% to 90,000 tonnes of copper.

A 30,000-metre drilling program, completed this past year, increased the proven and probable in-pit geological reserves to 479.1 million tonnes grading 0.332% copper, equivalent to 3.5 billion pounds of contained copper.

On the neighboring Fortuna de Cobre property, Westmin incorporated the results of 23 new drill holes to boost the proven, probable and possible reserves to an estimated 592 million tonnes grading 0.272% copper at a projected stripping ratio of 0.57-to-1. The calculation is based on a total of 83 drill holes.

Westmin says the reserves appear sufficient to justify an annual production rate in the range of 60,000-90,000 tonnes cathode copper.

Westmin also holds an option to earn a 51% interest from General Minerals (GNM-T) in the Vizcachitas copper project of central Chile. Limited drilling had previously established a geological resource of 310 million tonnes grading 0.52% copper and 0.013% molybdenum, including a higher-grade, near-surface zone of 24 million tonnes grading 1.01% copper.

It is apparent that Boliden likes the potential of the Latin America projects and the exposure it gives the company to the region. “We are taking a positive view,” says Blow. “We believe there are excellent projects going forward and that there is room for expansion based on the Lomas Bayas project as we know it today. And though we still recognize [Fortuna de Cobre] as an exploration project, we are also quite hopeful about the future there.”

Closer to home, Blow is not as optimistic about the future of Gibraltar, a high-cost, open-pit copper mine in south-central British Columbia.

“Realistically, with the existing cost base of Gibraltar, the likelihood of being able to continue operating that mine is very slim.”

During the first nine months of 1997, Gibraltar produced 25,341 tonnes of payable copper-in-concentrate and cathode copper at a cash cost of US96cents per lb.

At the beginning of 1997, sulphide reserves at Gibraltar totalled 142.5 million tonnes grading 0.303% copper and 0.009% molybdenum, while oxide reserves were estimated at 3 million tonnes grading 0.273% copper.

At the moment, Boliden has not put a value on the joint-ventured Wolverine volcanogenic massive sulphide deposit in southeastern Yukon. Westmin holds a 60% interest, with Atna Resources (ANT-T) holding the remainder.

Blow says there is a great level of uncertainty about the potential of Wolverine due to the high selenium content. “We have to study this in more detail before we can say anything, if there is any possibility for us to do anything from a technical point of view, or if you can use this and grade it into some other concentrate from other producers.”

The 1997 drilling program on the Wolverine resulted in an increase of the tonnage by 17.5%. The mineral resource has been expanded to 6.2 million tonnes grading 12.66% zinc, 1.55% lead and 1.33% copper, plus 1.76 grams gold and 370.9 grams silver.

For its part, Atna, which holds a right of first refusal on Westmin’s interest, is conducting a prefeasibility study of Wolverine in order to identify the problems. Atna has had several metallurgists look at Westmin’s data to make recommendations, and has assembled a team of concentrate marketers.

Atna President Peter DeLancey wants to waste no time in establishing Wolverine’s value, in the event Boliden ends up being lukewarm toward the project.

Based in Toronto, Boliden is primarily a zinc and copper producer, with mining and milling operations in Sweden, Spain and Saudi Arabia, plus refining operations in Norway and Sweden. The company is also engaged in the fabrication and sale of copper tubing and brass products.

Boliden traces its roots back to 1924 to the discovery of a large gold deposit near the village of Boliden in the Skelleftea mineral district of northern Sweden. Trelleborg acquired 44% of the outstanding shares of a predecessor of Boliden in 1986 and the remainder in 1988. Since that time, Trelleborg has implemented a wide-ranging restructuring and expansion program throughout the Boliden group of companies.

Boliden was incorporated in April 1997, under the Canada Business Corporations Act, and spun off as a publicly traded company two months later. Swedish-based parent company Trelleborg owns 44.9% of Boliden’s 99.6 million outstanding shares. Boliden will issue a further 3.2 million shares to former shareholders of Westmin.

Over the next three to four weeks, Boliden will be assessing Westmin’s operations, including a review of all development and mining plans, leading to a full integration of the company’s assets.