TVX, Kinross make joint bid for Lac

The bidding race for the takeover of Lac Minerals (TSE) has grown more crowded with the public inclusion of TVX Gold (TSE) and Kinross Gold (TSE).

The two gold producers made public, near the end of July, their joint proposal to acquire Lac, having met privately with Lac representatives more than one week previously to discuss the takeover.

TVX and Kinross join American Barrick Resources (TSE) and Royal Oak Mines (TSE) as bidders for the million-ounce gold producer which has mines in Canada, the U.S. and Chile.

Speculation remains that another bidder may enter the race. And some analysts are not discounting the possibility that Barrick and Royal Oak may harmonize their takeover bids.

Lac Chairman James Pitblado said his company, with about 148.7 million shares outstanding which are widely held, prefers to stay independent. The company recently lost its president of many years when Peter Allen submitted his resignation.

TVX and Kinross say Lac shareholders would receive shares in both TVX and Kinross which, at current market prices, would have an aggregate value of about $15 per Lac share.

Barrick’s $2.1-billion bid and Royal Oak’s $2-billion bid both work out to about $14 per Lac share.

Royal Oak started the bidding war with its July 7 announcement of a takeover offer; unless extended, the Royal Oak offer will expire Aug. 9. Barrick has set an Aug. 26 deadline.

At the close of trading Aug. 2, Lac shares were trading at $14.38. The proposed TVX-Kinross proposal would involve the geographic separation of Lac’s assets, with Kinross owning the Canadian assets and TVX, which has mining interests in Chile and Brazil (as well as in Canada and the U.S.), the remainder.

The pair says the proposal would see Lac shareholders owning more than 50% of the outstanding shares of both TVX and Kinross.

On a pro forma basis, TVX says its annual production would total about 1 million (gold equivalent) oz. and reserves would exceed 14 million (gold equivalent) oz., while Kinross says its annual output would be about 750,000 (gold equivalent) oz. with reserves exceeding 8 million (gold equivalent) oz. (The companies convert their byproduct silver output to gold production, hence “gold equivalent.”)

TVX is an independent company which was controlled formerly by nickel miner Inco. In 1993, TVX produced 438,800 (gold equivalent) oz. TVX Chairman Eike Batista has an 11% interest in the company.

Kinross, fairly new on the scene, grew substantially through the acquisition of Falconbridge Gold and that company’s Canadian and African assets. During the first six months of this year, Kinross reported output of 114,700 (gold equivalent) oz. As of the end of 1993, Dundee Bancorp (TSE) has a 10.7% interest in Kinross.

Lac recently reported second-quarter net earnings of US$5.4 million, compared with a loss of US$800,000 for the same period in 1993. First-half earnings were US$9.3 million, compared with a loss of US$200,000 for the same six months last year.

The company reported a cash production cost of US$164 per oz. for the first half, down US$26 from the same period last year. First-half gold output totaled 550,000 oz.

Lac said gold reserves in the proven, probable and possible categories stand at 13.5 million oz. In addition, it has “geological resources” estimated to total 13.5 million oz.

Some US$600 million in development work is planned for the next three years. Lac’s forecast gold production for each of 1997 and 1998 is 1.6 million oz. Meanwhile, Royal Oak experienced a fire at its Delnite mine shaft near Timmins, Ont., when an old headframe on an inactive property went up in a blaze. The fire damage is not expected to affect other operations in the area.