Imperial puts Esso Minerals assets on sale

Imperial Oil has announced plans to sell Esso Minerals Canada so it can concentrate corporate resources on the energy related, petroleum product and chemical businesses.

Esso would prefer to sell its mineral holdings as a block but if a buyer can’t be found, the company might then have to look at selling them in a piecemeal fashion says President Michael Berthelsen. RBC Dominion Securities has been retained to manage the sale and is working out a base price for Esso’s mineral assets.

Esso Minerals accounts for less than 2% of Imperial’s total annual earnings says Berthelsen. Last year Esso Minerals earned $5.4 million and he says “we are going to have a good year this year too.” A number of issues have to be addressed before the sale including the right of first refusal on some of Esso’s property agreements, he adds. Regarding potential buyers, Berthelsen says the company has received a “few inquiries.”

Esso has a 35% interest in the Selbaie copper-zinc-gold-silver mine in Quebec, and more than 50 active exploration and development properties across Canada. The company also has a 24% interest in the Musselwhite gold property in northwestern Ontario, where project operator Placer Dome Inc. has outlined reserves of six million tons grading 0.20 oz. gold per ton. Little is known about the majority of Esso’s exploration projects, except that a number of the properties are described as promising.

One mining analyst in Toronto said that if Imperial Oil hopes to divest quickly in a cash sale, then only companies with strong cash balances would be considered potential buyers. Such companies would include Northgate Exploration (TSE), Kerr Addison Mines TSE), and Rio Algom (TSE). All of these are reported to be looking for good mining opportunities and have healthy cash balances. The sale of Esso Minerals’ assets does not include Imperial’s coal operations which are a part of Esso Resources Canada and are managed out of Calgary.

There are 41 regular employees in the company, about 25 of whom are located in Vancouver. The remainder are located in Toronto, Val d’Or and Timmins. Berthelsen said that employees would be given the option of relocating elsewhere in the organization or accepting a severance package. The company will “ensure that all employees are treated in a fair and equitable manner during this transition.”

In other news, Ekaton Industries Inc. of Calgary announced it has acquired Esso Minerals’ 12.5% interest in the kaolin leases at Wood Mountain, Sask. Kaolin is a clay mineral used as a raw material in porcelain and paper making.

Under the terms of the agreement, Ekaton will pay $250,000 to Esso prior to November 30, 1988 and an additional $200,000 at the completion of the Kaolin project financing or on Oct 31, 1989, whichever is earliest.