Teck takeover of Cominco may be record mining coup

Moving decisively to take management control of a company many times its size, Teck Corp. has reshuffled the board at Cominco and replaced several board members with Teck nominees. This first salvo in the battle to revamp Cominco will see Teck president, Dr Norman Keevil, Jr. replace past chairman, Norman Anderson. Robert Hallbauer, a senior vice- president at Teck, will become Cominco’s president.

These recent developments have stunned Cominco employees, particularly those at the company’s head office in Vancouver, who no doubt are anxiously awaiting Teck’s next move. Dr Keevil had stressed previously that a high priority will be given to the reduction of Cominco’s long-term debt which is said to be over $600 million.

In a recent prepared statement, he also claimed that the new shareholder group was “supportive of Cominco’s debt reduction and new mine development plans, particularly at Valley Copper and Red Dog in Alaska, as well as its lead smelter modernization at Trail.”

Emphasizing the group’s “broad international experience in mining, smelting, and refining.” Dr Keevil may have inadvertently given a clue as to what course of action the new board may take to reduce that debt. The takeover has given Teck a degree of forward integration (smelting and refining) it probably never contemplated in the past and also a non-metals business — fertilizers.

Whether Teck’s business philosophy and “hands on” management style is compatible with fertilizers is still uncertain and it would represent a saleable asset which would go a long way to reducing Cominco’s debt. There are persistant rumors that Teck is considering the sale of this division which has been set up as an essentially autonomous unit with its own president, John Anderson, who has remained on the Cominco board despite the reshuffle. Past Cominco president, Bill Wilson, is also staying, along with several others including R. G. Duthie who, coincidentally, is also on t he board at Teck.

As the significance of the takeover sinks in, the industry is beginning to recognize that Teck may have pulled off one of the biggest coups in this country’s mining history. For $102 million and its share of a $75 million promissory note from the Teck-led consortium purchasing the 31% interest in Cominco, Teck has made an “asset” again of its Highmont mill in B.C.’s Highland Valley.

Teck was conspicuously left out of an agreement between Lornex Mining and Cominco to develop Cominco’s Valley Copper orebody, something that prompted Teck to consider legal action against Lornex. Teck argued it had an agreement with Lornex that neither party would be excluded from such a pact. Its Highmont mill is much more modern than Cominco’s milling operation at the old Bethlehem mine property and will now almost certainly be incorporated into Cominco’s and Lornex’s joint plans to develop the huge, higher grade, and metallurgically simpler Valley orebody. The rated capacity of these two mills is well below what they could actually produce from the Valley orebody, so there is still room to optimize production further over and above the joint venture’s previously proposed production rate of 120,000 tonnes per day.

Also, Cominco’s past policy of selling non-core assets, particularly mining holdings, might not sit too well with Teck which because of a court decision on Lac Minerals’ Williams property will almost overnight become one of this country’s largest gold producers. Cominco has put its Con mine at Yellowknife up for sale, something that Teck will also certainly rethink. The Northern Miner has learned that Cominco recently cancelled the sale of an interest in a U. S. gold producer because of the takeover.

Another tantalizing little hypothesis being bandied about is that the Teck consortium, which includes Metallgessellschaft and MIM Holdings (Mt. Isa Mines), is now in a position to control the zinc market and as a consequence — prices. Metallgesellschaft, a large smelting company which four years ago sold a 50% interest in one of its metallurgical complexes to MIM in order to guarantee itself a source of concentrates, now has an even more secure supply of concentrates. Whether they are game to squeeze existing smelters or regulate concentrate output to boost prices has no doubt crossed people’s minds.