Lac Minerals: a mining company built by father and son

In the past two decades, Peter Allen has taken his father’s collection of small mining companies and turned them into a single, big-league gold player. And now Royal Oak Mines (TSE) — a company barely a quarter of its size — is threatening to take it over.

Lac Minerals (TSE) sprung from Little Long Lac Gold Mines, an aging orebody near Geraldton, Ont., which John (Jack) Allen took over in 1951 after convincing shareholders that it could be rejuvenated and made more productive over the long term.

The Little Long Lac group (as it became known) grew into an investment and exploration vehicle, leading Jack Allen to the Bahamas for his first investment foray. He met with a representative of Sir Harry Oakes’ estate, persuading him to sell an interest in Oake’s Lake Shore mine in the Kirkland Lake camp. Once an annual 500,000-oz. producer, it was, at the time, a depleting yet still producing mine.

He later added Lake Shore’s neighbor, the Wright-Hargreaves mine, as well as MacLeod-Cockshutt, Hardrock Gold, Perron, East-Malartic, McKenzie Red Lake, Barnat, Macassa and

others.

It was a confusing collection of companies which, by 1985, the younger Allen would reshape into a comprehensive corporate entity.

Peter Allen became involved in his father’s company in 1965 by gathering directorships in several of the Allen companies. By 1974, he had graduated to president and chief executive officer. But Lake Shore and Wright-Hargreaves were long-gone as producers. Only the base metal operation Willroy and the East-Malartic and Macassa gold mines were running.

He authorized an all-out exploration drive, which proved up the Thompson-Bousquet property (now Bousquet Nos. 1 and 2) in northwestern Quebec. Then, in 1981, a 2-man team made a fateful visit to Hemlo — leading to an enormous gold find, the fattest since the Kirkland Lake camp discovery. However, Lac lost the ground in a huge court battle, in the late 1980s, against International Corona, a junior at the time. Deemed by the courts to have violated the law in acquiring the ground, Lac was forced to surrender the Page-Williams mine to Corona and Teck (as half-owners). As a result, Allen saw his vast gold reserve shrink to a comparative trifle. However, he and his company gradually rebounded and, in 1987, acquired the Toqui mine in Chile — a 650-ton-per-day underground producer. In 1989 (the same year as the Supreme Court ruled definitively in Corona’s favor and reimbursed $212 million to Lac), Peter Allen bought Bond International Gold (BIG), a 600,000-oz. producer. It was a move that garnered high praise from analysts at Nesbitt Thompson, who wrote at the time: “With this acquisition, the company has established itself as one of the major producers in the North American gold mining industry.”

Bond brought with it 629,000 oz. of gold production and two jewels: El Indio in Chile, and Bullfrog — an open pit mine near Beatty, Nev. In 1993, the company created two separate business units — Lac North America and Lac South America — to operate its 10 mines, as well as explore and develop new mines. The company is also involved in exploration in Australia, Indonesia, Papua New Guinea, Africa and Central Asia.

Lac produced about 1.1 million oz. of gold in 1993, compared with 1.141 million oz. in 1992.

Having withdrawn from the joint bid for El Abra, a deposit in Chile, Lac recently announced that it, Tintina Mines (TSE) and NSR Resources (TSE) have mutually terminated negotiations on jointly exploring the large land parcel in the Fort MacKay region of northeastern Alberta.

In addition to completing a $100-million expansion at the Indio complex in Chile, Lac has now focused its efforts on developing the Red Mountain gold deposit near Stewart, B.C. and the Nevada gold project in northern Chile. A $14.5-million program will be completed on the Red Mountain project by 1994 year-end. At this time, Lac hopes to have feasibility mine level plans and to have begun detailed engineering. It also expects to have applied for a mine development certificate before 1995. By 1997, the project should be producing 200,000 oz. gold per year.

The Indio project, 300 miles north of Santiago, Chile, is undergoing an expansion program designed to double milling operations and expand underground operations. As a result, by 1995, annual gold production will rise by 75% and copper production by 50%.

At the Nevada project, work will be completed to prove up the reserves. The geological resource is 2.7 million oz. and Lac plans

to put the deposit into production in 1998 at an annual rate of 225,000 oz.