Mazarin to buy Quebec’s stake in asbestos mines

Junior Societe d’Exploration Miniere Mazarin (ME) is extending its mineral holdings into the asbestos field.

The Quebec City-based company, with gold and copper exploration prospects but perhaps best known for its graphite property in the Fermont area of Quebec near the Labrador border, plans to spend $34.4 million to acquire the asbestos interests of Quebec government agency Societe nationale de l’amiante (SNA).

Mazarin and a group of Thetford Mines, Que., business people must pay $2 million immediately and the balance during a 10-year period to purchase three SNA subsidiaries: Asbestos Corp. (TSE) (a 54.6% interest), and Bell Asbestos Mines and Atlas Turner (a 100% interest each).

Mazarin’s Thetford associates have invested $2 million in Mazarin in the form of convertible debentures. The associates have grouped together under the name Amiante 2000. (The Thetford Mines area is the heart of the province’s asbestos industry.)

The president of Mazarin, Regis Labeaume, will become chairman of the three companies, and Marcel De Rouin, Mazarin’s executive vice-president, will act as president of the companies. De Rouin served as president of Bell from 1982 to 1987.

In a telephone interview, Labeaume said that the deal had been in the works for about 1.5 years. Asked if it was a major step for a small company, Labeaume said, “I’d say yes.”

Mazarin’s offer was the highest of three bids received by government officials. SNA says assurances have been made of the continued existence of Asbestos Corp. and Bell.

Mazarin and its associates have acquired the $100-million debt of the three subsidiaries. The $100 million is a provincial government loan to the subsidiaries; the new owners will pay the balance of the $34.4 million purchase price from interest earned on the loan.

Completion of the sale will take the Quebec government out of asbestos mining and manufacturing. Assets or shares of SNA’s manufacturing subsidiaries were sold between 1986 and 1988 by the governing Liberal party

In the late 1980s, under difficult market conditions, the government handed over operation of the assets of Asbestos Corp. and Bell to a privately owned limited partnership named LAB, which is controlled by Jean Dupere. Currently, LAB operates three asbestos mines in the Thetford area. (SNA and Bell each has a 20% interest in LAB. The combined 40% interest allows each to receive about 32% of the net profits of LAB. Labeaume said LAB had a net profit of $24-25 million in 1991.)

Nationalization of the provincial asbestos industry was undertaken by the then governing Parti Quebecois beginning in 1978, with the creation of SNA. Bell was acquired in 1980 and a control position in Asbestos Corp. in 1982. It is estimated that the province has spent $500 million since 1978 to nationalize and maintain its asbestos industry. Asbestos has undergone much public scrutiny, particularly in the U.S., because of health concerns. The majority of the Thetford area asbestos is exported to Asian markets. The Quebec government purchased control of Asbestos Corp. from General Dynamics Corp. of St. Louis. No follow-up offer was made to minority shareholders (combined, an approximate 45% interest) of Asbestos Corp. and during the past 10 years, those minority shareholders have waged a legal battle with the government. The shareholders have indicated they will seek a court injunction to stop the Mazarin deal.

The SNA and the Quebec government say that independent of the sale, they will assume any responsibilities they may have toward minority Asbestos Corp. shareholders.

According to Quebec government preliminary figures, provincial asbestos shipments in 1991 were worth about $223 million, up 17% from the previous year. In terms of quantity and value, it was the best year for asbestos production in Quebec since 1985.