MINING MARKETS & INVESTMENT NEWS – Trelleborg to divest Boliden

Swedish industrial conglomerate Trelleborg plans to divest its holding in its one-time subsidiary, Boliden (BOL-T), by distributing Boliden shares as a dividend to its shareholders.

Trelleborg, which is restructuring to concentrate on its main auto-parts, construction and aluminum businesses, reported a loss of SK150 million ($28.9 million) in the nine months ended Sept. 30, 1998. Without the loss of SK196 million ($37.7 million) on its 42.9% holding in Boliden, Trelleborg would have been profitable over the period.

Trelleborg plans to seek approval for its spinoff plan at its annual meeting on April 22.

Boliden saw its revenues fall to US$1.05 billion in 1998, from US$1.2 billion in 1997. The company reported a loss of US$75.7 million (US71 cents per share) for the year. In 1997 Boliden earned US$81.8 million, or US82 cents a share.

For the last quarter of 1998, Boliden took a loss of US$14 million on revenues of US$259.7 million.

The 1998 year-end loss included a US$42.5-million provision for cleanup costs and compensation arising from the breach of a tailings dam at its Los Frailes base metal mine in southern Spain. Legal proceedings are under way in Spain to determine liability for the incident, but Boliden said it did not expect to have to write down the US$165-million carrying value of the Los Frailes mine.

Boliden Apirsa, the company’s Spanish operating subsidiary, applied to reopen the mine and mill in October, and the company expects regulatory authorities will issue the permits in early 1999.

Boliden shut down its Myra Falls mine, on Vancouver Island, in December because of ground problems, though the mill continues to run at 50% capacity. Rehabilitation on the workings should be finished in time for production to resume in April.

At the Lomas Bayas copper mine in northern Chile, production levels have been held to an average of 70% of design capacity by metallurgical problems. High concentrations of chloride and nitrate in the ore, for which the Lomas Bayas solvent extraction-electrowinning plant was not designed, are inhibiting recovery.

Boliden has the chloride problem solved and is working on the nitrate problem. Mine management expects to have the SX-EW plant working to capacity before the end of 1999.

Boliden also announced it is offering rights to shareholders, which can be used to buy shares in a new preferred series. Under the terms of the offering, 12 rights can be exchanged for one preferred share at $25, which will pay quarterly dividends at a rate Boliden will set before the prospectus for the shares is filed. Boliden may pay dividends in common shares, and holders of the preferred series may convert them to common shares after 10 years.

Trelleborg has agreed to convert its share of those rights, amounting to $95.6 million, and other shareholders will be entitled to subscribe for additional preferred shares if all the rights are not taken up. Trelleborg will not be including these shares in its dividend to shareholders.

The offering has a maximum value of $223 million, and part of the proceeds will be used to expand the Ronnskar smelter in Sweden, a $370-million undertaking. The rest will go toward reducing Boliden’s debt, which, at the end of the third quarter of 1998, amounted to $1.66 billion, including $535 million in current liabilities.