Metall Mining is shopping for polymetallic bargains

At a time when the recent stock market debacle has added to the list of available mineral properties in North America, a new player has joined the hunt for bargains.

Armed with a war chest of approximately $190 million, Metall Mining Corp.’s 3-man acquisition team is currently combing North America for new properties to add to an already impressive portfolio.

Incorporated in June as the principal worldwide mining vehicle of West German metals giant Metallgesellschaft AG, Metall’s assets include a 48.8% interest in Temagami Mining Co., a company that effectively controls Vancouver- based Teck Corp.

Since October, 1986, Toronto- based Metall has also held a 25% interest with Teck and M.I.M. Holdings of Australia in a holding company which controls Cominco Ltd. Those interests were handed down to Metall Mining from a parent company which traditionally hasn’t excelled in the exploration and property acquisitions business.

While its pedigree as one of the world’s leading non-ferrous metal companies gives Metallgesellschaft considerable expertise in the business of metal trading, its operations were so diverse that a Metall executive says decisions regarding mining were often made by managers with no direct experience in the field.

According to Robert Morgan, Metall’s vice-president finance, the parent company had a number of other operating problems.

“Since many North Americans find Metallgesellschaft difficult to pronounce, brokers insisted that we shorten the name of the the company’s new 62%-owned subsidiary to Metall Mining Corp.,” said Morgan.

Metallgesellschaft’s behind-the- scenes business strategy which gave it mostly indirect interests in Canadian giants like Teck Corp. and Cominco, had also given the company a relatively low profile in comparison to some of its illustrious partners.

“We’ve always felt that Metallgesellschaft’s mining division was run without a definite goal,” added Morgan. “In the past, a deal may have been arranged to benefit one of Metallgesellschaft’s many sectors like the ore trading department for example,”

With former Metallgesellschaft Canada President Dr Klaus Zeitler in charge, the new company will be run with profit maximization as the cornerstone of its activities.

To add some experience to Metall’s acquisition team, the company hired Norman Hardie to lead the search for new properties. A South African-born mining engineer who worked in Anglo American’s Botswana mines, Harding has been named vice-president corporate and project development.

While the company has opted to focus on North America and Australia, Metall won’t rule out acquisitions in other parts of the world, particularly in regions where Metallgesellschaft is already doing business.

Among a list of joint-ventures which includes the Ok Tedi mine in Papau New Guinea, Metall recently acquired a 24.5% interest in a Turkish zinc/copper deposit which will give the company a valuable insight into how business is done in that country.

Morgan said his company has also been looking at some gold situations in Zaire. “While we didn’t get involved, we had access to all the best available data,” he said.

Although gold is the only game in town for many of Metall’s competitors, Morgan said his company will also look for base metal and industrial metal opportunities.

“Before setting up the new company, we felt that we couldn’t outbid established gold producers for available gold properties, so we decided to concentrate on medium- sized base metal plays with a precious metals content,” said Morgan.

Metall’s 16.7% interest in the Afton copper and gold mine near Kamloops, B.C., is a good example of the type of operation which Morgan says his company might be interested in. Since open pit reserves (2,217,000 tons averaging 1% copper and 0.018 oz gold per ton) at Afton are almost depleted, extension of mine life beyond 1988 will require mining of the Ajax copper/gold deposit 10 miles away.

Metall has also indicated that it will spend a significant portion of the $190-million acquisition fund to increase its interest in properties in which the company is already involved.

Those include a 7.5% interest in Ok Tedi Mining Ltd. which operates a low-cost open pit gold-copper mine in Papua New Guinea. After a series of disasters, production there is scheduled to peak this year with 900,000 oz before dropping off to 400,000 oz by the early 1990s.

While some of Metallgesellshaft’s European mining assets will remain outside the Toronto entity’s portfolio, Morgan says they include the unprofitable projects and only possible turnaround situations will be transferred.