Minority shareholders delay Falconbridge’s Raglan deal (June 19, 1989)

While the Toronto-based nickel giant won judicial approval recently for a plan to acquire the 26.2% stake in Raglan it does not already own, about 200,000 shares remain to be picked up.

At a special meeting in Toronto, 73.8% of Quebec Raglan shareholders and 89.1% of minority shareholders voted in favor of the plan which would give Falconbridge full control of the company’s 12-million ton Ungava, Que., nickel deposit.

To acquire the remaining 200,000, however, the Ontario Supreme Court judge also ruled that Falconbridge must pay the legal costs of the dissenting shareholders who say that a $14-million offer for their shares does not represent fair value.

But if the disgruntled shareholders decide not to accept a formal offer from Falconbridge, the nickel miner may have to ask the judge to place a fixed fair value on the outstanding shares.

Under the plan of arrangement, shareholders are being offered one Falconbridge share for each 5.5 of their own shares, or $5.36, or a combination of cash or shares.

The fight for a better deal has been spearheaded by Albert Title, a Toronto-based accountant, who claims to represent about 100,000 shares “What we are being offered is tantamount to expropriation,” he said. Title was referring to the fact that he and other shareholders have been given no choice but to sell shares which have traded as high as $59 in 1969. More recently they were trading at around $5.75 in a 52-week range of $5.88 and $1.50.

Title and other dissenting shareholders are also opposed to the plan because they remain unconvinced that the Ungava deposit, with an average grade of 3.11% nickel and 0.79% copper is only marginally economic at current prices.

Until Falconbridge is confident that a $4 nickel price can be sustained throughout the life of the project, the deposit is expected to remain in the ground.

“We haven’t changed our views on Raglan or on future trends in nickel prices,” said Raglan Chairman Brian Ferguson.

According to John Gillies, Falconbridge’s vice-president marketing, people who predict that nickel will remain beyond $4 are sticking their necks out a long way. “You are in the gambling game then,” said Gillies.

But Gillies’ bearish outlook for nickel, which was selling at $5.86 on the London Metal Exchange recently, appears to contradict the views of one of Falconbridge’s European marketing executives. During a recent speech in London, England, Falconbridge Europe President Cliff Carson predicted that a floor price of $5 was sustainable until the end of the decade when prices could reach $10.

“Senior people in Europe are saying one thing while your senior people in Toronto are saying something else,” said John Vance whose wife Juliet is a Raglan minority shareholder and a member of the dissenting group.

“Our contention is that not all of the information (with respect to the economics of bring the Ungava deposit into production) have been made available,” said Title.

But, according to Ferguson, reports that Falconbridge was actually paying $56 million for a deposit which is thought to be worth $6 billion at today’s prices are misleading. “They ignore the cost of capital investment and smelting costs,” he said.

Ferguson estimated that since 1965, about $33 million has been spent on the Raglan property which contains a shaft and underground workings. A further $3.3 million will be spent over the next three years on drilling to ke ep the property in good standing.

Meanwhile, after notifying Falconbridge about their concerns, the dissenting shareholders can still apply to the Supreme Court for a further determination when they receive confirmation of the offer.

“We could also settle without going to court,” said Title.

It may be just a short stay of execution, but a small group of New Quebec Raglan Mines (TSE) shareholders are still holding out for a higher price on shares that Falconbridge Ltd. (TSE) is attempting to buy.

While the Toronto-based nickel giant won judicial approval recently for a plan to acquire the 26.2% stake in Raglan it does not already own, about 200,000 shares remain to be picked up.

At a special meeting in Toronto, 73.8% of Quebec Raglan shareholders and 89.1% of minority shareholders voted in favor of the plan which would give Falconbridge full control of the company’s 12-million ton Ungava, Que., nickel deposit.

To acquire the remaining shares, an Ontario Supreme Court judge has ruled that Falconbridge must pay the legal costs of a the dissenting shareholders who say that a $14-million offer for their shares does not represent fair value.

They are being offered one Falconbridge share for each 5.5 of their own shares, or $5.36, or a combination of cash or shares. The Raglan issue has been trading at around $5.75 in a 52-week range of $5.88 and $1.50.

The fight for a better deal has been spearheaded by Albert Title, a Toronto-based accountant, who claims to represents about 100,000 shares. “What we are being offered is tantamount to expropriation,” he said. Title was referring to the fact that he and other shareholders have been given no choice but to sell shares which have traded as high as $59.

He and other dissenting shareholders are also opposed to the plan because they remain unconvinced that the Ungava deposit, with an average grade of 3.11% nickel and 0.79% copper is only marginally economic at current prices. Until Falconbridge is confident that a $4 nickel price can be sustained throughout the life of the project, the deposit is expected to remain in the ground.

“We haven’t changed our views on Raglan or on future trends in nickel prices,” said Raglan Chairman Brian Ferguson.

According to John Gillies, Falconbridge’s vice-president of marketing, people who predict that nickel will remain beyond $4 are sticking their necks out a long way. “You are in the gambling game then,” said Gillies.

But Gillies’ bearish outlook for nickel, which was selling at $5.86 on the London Metal Exchange recently, appears to contradict the views of a Falconbridge Europe executive. During a recent speech in London, England the executive predicted that a floor price of $5 was sustainable until the end of the decade when prices could reach $10.

“Senior people in Europe are saying one thing while your senior people in Toronto are saying something else,” said John Vance whose wife Juliet is a Raglan minority shareholder.

“Our contention is that not all of the information (with respect to the economics of bring the Ungava deposit into production) have been made available,” said Title.

But, according to Ferguson, reports that Falconbridge was actually paying $56 million for a deposit which is thought to be worth $6 billion at current today’s prices are misleading. “They ignore the cost of capital investment and smelting costs,” he said.

Ferguson estimated that since 1965, about $33 million has been spent on the Raglan property which contains a shaft and underground workings. A further $3.3 million will be spent over the next three years on drilling to keep the property in good standing.

Meanwhile, the dissenting shareholders can still apply to the Supreme Court for a further determination when they receive confirmation of the Falconbridge offer.

“We could also settle without going to court,” said Title.

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