Total Erickson heads for big league status with option to control

If negotiations being carried out by Total Erickson Resources and its parent Total Resources (Canada) are successfully completed, the former might well be joining the big league of Canada’s gold producers.

The companies are all part of the Total group, with Total Compagnie Francaise des Petroles of France owning 100% of Total Resources (Canada) and the latter holding a 54% controlling interest in Total Erickson.

Total Erickson has been granted an option by Total Resources to acquire, at cost, all the shares of Getty Resources tendered under its recent takeover bid.

Total Resources acquired 12.4 million Getty shares at $11 per share in January, at a cost of approximately $136.9 million, giving it 87.5% control on a fully diluted basis.

Jean-Pierre Januard, now president and chief executive officer of Getty, holds the same position with Total Erickson and is executive vice-president of Total Resources.

“When our parent company bid for all the shares of Getty, clearly Total Erickson was not in a position to finance it,” Januard explains. “We agreed that we would have the option to buy all the shares from them and are studying with the parent company on ways to structure this deal.”

Getty’s prize asset is its 49%- owned joint venture with Noranda Exploration in the Tundra gold project about 130 miles northeast of Yellowknife. The deposit is regarded as the largest undeveloped gold resource in Canada with possible geological reserves of 26.4 million tons grading 0.18 oz gold per ton. A $33-million underground exploration and development program is under way on the property.

“The two companies, from an economic viewpoint, are a good match,” Januard says. “Total Erickson has small vein-type gold mines without sufficient reserves for a long mine life. With the long-term project (Getty’s Tundra deposit) it makes sense when you want to build a mining entity within the Total group in Canada.”

The past year has already been one of steady growth for Total Erickson. Net profits in 1987 were $2 million or 6 cents per share, versus $2.5 million or 9 cents per share in 1986.

Gold production for the company’s account was 53,245 oz in 1987 versus 35,363 oz the year before. The marked increase in the average price received for gold helped sales increase to $30.3 million, including $1.7 million in oil and gas revenues, versus $16.8 million in 1986.

The two mines operated by the company, the Erickson gold mine in northern British Columbia (owned 100%) and the Mount Skukum gold mine south of Whitehorse, Yukon (37% owned), achieved an aggregate gold production of 81,167 oz. Cash flow from operations was $10.3 million versus cash flow of $9.6 million in 1986.

During the year, Total Erickson acquired a significant portfolio of precious metal exploration properties in the United States (Arizona, Nevada and Montana) and in Canada (Yukon, B.C. and Ontario). As a result of its acquisition of 51% of Trans-Canada Resources as at Oct 31, the year-end results include two months of Trans-Canada’s activity.

Working capital at year-end was $17 million.