Mcleod buying Falconbridge’s 56% stake in Falconbridge Gold

Having apparently given up on any short term rally in the price of gold, Toronto-based Falconbridge Ltd. has agreed to sell its 56.4% stake in Falconbridge Gold (TSE), to a private company controlled by financier Dennis Mcleod.

The shares are being sold to Portree Inc., a private Cayman Island company in which Mcleod is a director. But neither Mcleod nor Lars Vannman, senior vice-president of business development at Falconbridge Ltd., were prepared to say what Portree is paying for the shares.

“The purchase price can’t be too much over market price otherwise it would trigger a follow up bid to other shareholders,” said Vannman. Under Canadian securities rules, the legal limit is 15% and Portree doesn’t intend to make a follow up bid.

Subject to approval from the boards of both Falconbridge and Portree, the latter has signed a letter of intent to purchase 8.2 million common shares of Falconbridge Gold and a $7.4 million convertible debenture.

Spun off by Falconbridge Ltd. in 1988, Falconbridge Gold produced 90,000 oz. in 1991 from its Hoyle Pond mine in Timmins, Ont., and two small mines in Zimbabwe. Ore from Hoyle Pond is processed at the Bell Creek mill near Timmins, which Falconbridge bought from Canamax Resources (TSE) in December. The company reported earnings, of $91,000 or 1 cents a share on revenue of $27 million last year compared to earnings of $5.5 million on revenue of $38 million in 1990.

No stranger to the Timmins mining camp, Mcleod is President of Caledonia Mining (TSE), a company with industrial minerals assets in Hungary and Czechoslovakia and an indirect interest in a small Spanish gold mine. Believing that Falconbridge Gold is well positioned for any upturn in the gold price, Mcleod isn’t planning any immediate changes and he has asked the company’s 100 staff to stay on. “It’s business as usual,” he said. “The plan is to do a considerable amount of development work in Zimbabwe, (where Caledonia and Falconbridge are already involved in a gold exploration joint venture) and expand at Timmins if we can find the ore to do so,” he said. “Falconbridge has a good nucleus in Timmins and a large land position.”