Pine Point acquisition sparks clash at meeting

Eric Sprott of Toronto-based Sprott Securities argued that Pine Point’s performance would have been even stronger in 1988 had it not bought the Polaris interest from Cominco. Cominco holds a 50% interest in Pine Point.

Net earnings of $62 million were the highest in Pine Point’s history and the company’s stock price outperformed every other mining company on the TSE last year. The closing price on Dec 30, 1988 was $30 versus $14.50 a year earlier, according to a study by First Marathon Securities.

Pine Point president David Johnston said the Polaris acquisition “was one of the most astute moves made in the mining industry in years,” and he emphasized it was designed to “broaden the company’s earnings base.” He told the meeting that minority shareholder’s concerns were taken into account by the board and he noted that Richardson Greenshields issued a fairness opinion on the purchase.

In his address to the meeting, Johnston said that zinc prices took off after Pine Point acquired the Polaris interest. He also pointed out that all the company’s debt has been retired and it had over $50 million in cash and short-term investments at the end of April.

Sprott Securities put forth a resolution that would have required Pine Point to seek shareholder approval for any non-arm’s length transaction exceeding $10 million. Asking shareholders to vote against the resolution, Johnston claimed it was ambiguous and the by-law could mean that Pine Point would need shareholder approval for the sale of concentrate to Cominco. When the balloting was completed, the company won the day with 65% of the shareholders rejecting the proposal. But Sprott noted that most of the minority shareholders voted against management’s position.

Pine Point reported net earnings of $22.5 million for the three months ended March 31, compared to $9.6 million a year earlier. The Polaris mine generated a pre-tax contribution of $6.2 million.

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