PLACER DOME’S CHIEF

Almost three years ago, when John Walton joined what was then Placer Development as its president and chief executive officer, the question mining people were asking was “Who is John Walton?” And for many people, that question went unanswered for several months as Walton learned everything he could about Placer — information which two years later would precipitate the largest mining merger in Canadian history. That merger created North America’s largest gold producer (a tenuous position at best, what with Newmont’s new-found aggressiveness) and extended Placer’s influence into central Canada, something the company had never experienced. But Walton is still something of an unknown, perhaps because the Canadian media are dominated by the concerns of central Canada while Walton is stationed on the West Coast. But Walton is not concerned. Even being No. 1 in gold, as Placer Dome is in Canada, isn’t important to Walton, whose marketing savvy is said to rank with the best corporate minds in the country. “We expect to produce one million ounces of gold this year, but we aren’t really concerned about our position,” he tells The Northern Miner Magazine in a recent interview. “It’s the quality of the investment that counts and we want to be the quality leader for the investor.”

Walton was born in Toronto in 1930 and raised in Chicoutimi, Que., where at 15 he left to attend college at St. Catharines, south of Toronto. His father was a forestry engineer and his grandfather was an Anglican missionary from England who spent years in the James Bay region and was later dubbed “Reindeer Walton.” As a preacher, he became quite a linguist and eventually published Canada’s first Eskimo/Indian dictionary. Besides speaking English, Walton speaks French and some Portuguese.

Walton came to what is now Placer Dome from Westmin Resources in Calgary. A McGill-trained civil engineer, he spent several years in the Canadian construction industry before joining the Rio Algom Group and, later, Canadian Liquid Air as its chief operating officer. While he readily admits that he is not a “technical man” in the true industry sense, Walton has gradually acquired a broad knowledge of both the mining and petroleum industries. In 1977, he joined the Patino N.V. Group where he served as chief executive officer of its 53%-owned subsidiary, Amalgamated Metal. He was part of a group that bought control of Patino in the late 1970s, and it was with Patino that he developed his interest in mining. “I mortgaged everything I had to buy Patino shares and that really sharpened my mind,” he said.

He ended up in South America where he looked after Patino’s assets in Brazil, a country with a population of about 120 million and a gross national product the size of Canada’s. Patino’s Brazilian interests were later sold to Brascan Ltd., Westmin’s controlling shareholder. Recalling his three years in the country, Walton described Brazilian executives as “world class” and the country’s people as hard-working and friendly. “It was a frustrating place to work in terms of support structure though,” he admits.

Placer Dome is interested in Brazil but has no current plans to invest there, Walton said. Assessing the political risk in such countries is difficult, so drawing up a proper mining agreement is important. “The riskier the venture, the faster you have to get your money out,” he said. Not that North America is that much safer. Walton noted that environmental constraints are much more severe in Canada and the U.S. There is also political risk, an example being the imposition of government royalties on production.

Walton enjoyed his association with Brascan, which began in 1980 and ended when he joined Placer in July, 1985. Described by friends and associates at Westmin as affable, entrepreneurial and a person who looks at the “bigger picture,” Walton had his subordinates analysing specific holdings to determine whether or not they were worth keeping. He is not one to sit behind a desk, and his office furniture includes a lectern and a stool designed more for leaning than for sitting.

His exposure to oil and gas and mining at Westmin led him to conclude there is really no similarity between the two businesses. Although up-front costs are higher in oil and gas, development costs are lower, he said, adding: “When you find a mine, your problems are just beginning.” Elaborating on the difference between the two industries, Walton conceded that “there is no way a mining company can manage an oil and gas company” (and vice versa presumably), while noting that Placer Dome’s investment in Prairie Producing Co. (its U.S. oil and gas subsidiary) is “self-managing.”

Walton understood that Placer needed more North American income when he joined the company, which set the stage for the merger with Dome Mines and its subsidiary Campbell Red Lake Mines.

“It was an absolute necessity and even more fortuitous to match up with Dome which had no international exposure but good mines in Canada.” Whose idea was it? Walton doesn’t take the credit because the plan came from Robert Matthews, a vice- president and director of Dominion Securities in Toronto. In essence, he brought the two groups together, said Walton. The companies worked on the merger for three to four months before it was announced, and Walton boasted there were “no leaks.” Shareholders were 95% in favor of the amalgamation. Walton is characteristically bullish about the merged company’s future. “It’s a matter of going after what you want to be. The merger gives both companies a chance to renew themselves. Placer Dome has a good North American base from which to expand; it’s just a question of getting all the rowers into Olympic shape.”

Walton says there was a certain amount of internal “nervousness” over the merger but adds that this was understandable because companies “are not used to change.” Everybody liked each other from the beginning, he says, although “some people did leave.” At least two senior executives in the merged company were old friends, having studied together at Queen’s University. The two old friends are executive vice-president and chief operating officer Anthony Petrina and Henry Brehaut, senior vice-president, Canadian operations.

After the merger, there was more than a little confusion about where the head office would be located. Walton described Vancouver as the central office for worldwide projects and Toronto as the headquarters for Canadian operations and eastern exploration. So there doesn’t appear to be a single head office yet. He commutes between the two offices, sometimes spending two weeks in each location. “We think the head office concept is wrong, but we do support corporate offices,” he explained.

Walton expects Placer Dome to grow by developing new mines, which is where “shareholders will get the best leverage.” Currently, the company is developing three new gold mines — the Dona Lake deposit in northwestern Ontario, the Misima gold property in Papua New Guinea and the Big Bell in western Australia. Growth by acquisition at this time does not appear to be a part of Placer Dome’s strategy. The idea of merging with Dome and Campbell Red Lake appealed to Walton for several reasons. A merger was simple and there was “no goodwill to depreciate,” which would have been the case in a straight acquisition.

Walton said Placer Dome’s stock “washed out with the rest when the market collapsed” and, as a result, he believes investors have become more conservative and are really shopping for quality. And that’s where he plans to position Placer Dome. While forward selling might have capped the price of gold for now, he expects “it will go back up.” And when it does, investors will want shares of Placer Dome, which by then, if Walton’s vision becomes reality, will be the “quality leader” among gold equities.