Metall shuffles mining interests

German mining giant Metallgesellschaft AG recently announced a $195-million transaction designed to streamline its holdings in North America and Australia.

Through its 59.3% owned Toronto subsidiary Metall Mining (TSE), the German firm cut its participation in major North American mining firms from two to one by reducing its direct interest in Vancouver-based Cominco (TSE). The proposal would allow Metall to boost its position in longstanding associate Teck (TSE) of Vancouver and in Australian mining concern M.I.M Holdings.

As well as its Mount Isa copper-lead-zinc mine and metallurgical complex in Queensland, Australia, M.I.M. has an indirect interest in the Porgera gold project in Papua New Guinea, held through 65% owned Highlands Gold. Because Teck’s assets include the David Bell and Williams gold mines at Hemlo, Ont., a consequence of the transaction will be a shift in Metall’s asset mix toward copper-gold and away from zinc.

While the proposal is subject to regulatory and corporate approvals, Metall President Klaus Zeitler says it makes eminent sense because of Metall’s long relationship with Teck and the Keevil family.

If it goes ahead, Metall will increase its stake in M.I.M. to 8.5% from 4% by acquiring 65.4 million shares of the Australian company. As a result, Metall and other Metallgesellschaft group companies will own 14% of M.I.M’s shares. Metall will also increase its equity stake in Teck to 14.1% from 9.5% by acquiring 3.4 million class B and 301,400 class A Teck shares from M.I.M. and seek greater board representation to reflect the higher position. Teck’s President and chief executive officer Norman Keevil has agreed to join the Metall board.

At present, the three companies hold a direct 27% interest in Cominco via Nunachiaq Inc., a holding company owned 50% by Teck, 25% by Metall and 25% by M.I.M. The three own another 16.1% of Cominco which brings their total interest to 43.1%.

In return for the Teck A and B shares, Metall will deal its 25% interest in Nunachiaq, a 4% direct shareholding in Cominco, and a 5.6% joint venture stake in the Polaris zinc lead mine to M.I.M. That would leave M.I.M and Teck each with 22.5% of Cominco, held through Nunachiaq and directly. Zeitler said the reorganization plan will have a positive effect on Metall’s earnings and consolidate its existing holdings into larger positions in Teck and M.I.M.

Because of low recoveries at its Copper Range copper mine in Michigan, Metall reported a first-half loss of $2.49 million or six cents a share compared with a gain of $5.05 million or 13 cents a share in the same period last year. The proposal is expected to have little effect on Teck because it is already held 40% by Temagami Mining Co., a company controlled by the Keevil family. With a bigger interest in Cominco, M.I.M. can use its expertise in engineering and refining to solve problems at the Trail smelter in British Columbia.