Westmin returns to mining

Westmin might well be the exception, however, having announced the sale of its oil and gas division to Norcen Energy Resources (TSE) which is controlled by Noranda Inc. (TSE). If the deal is approved, Westmin’s principal assets would include its Buttle Lake mining operation (zinc-lead-gold- silver) on Vancouver Island and the new Premier Gold Project north of Stewart, B.C.

Westmin has signed an agreement in principle with Norcen which will see most of its petroleum assets sold for approximately $528 million. The purchase price will involve the issuance of $250 million in 8%, 10-year subordinated debentures exchangeable into Norcen multiple voting ordinary shares at the issuer’s option on maturity at prevailing market prices.

The purchase price also involves the issuance of $65 million in 11%, 15-year unsecured Norcen debentures and the transfer of Norcen’s 28% equity interest in M. A. Hanna Company which they have agreed to value at approximately $213 million.

Should Westmin sell M. A. Hanna (which seems realistic because Hanna’s core business is no longer mining) Norcen would have the right to participate in any gain realized by Westmin if the shares are sold for over $28(US). Norcen has a stand still agreement with Hanna and could not increase its present ownership (28%) before 1992; so it is a totally passive investment.

The purchase is still subject to favorable tax rulings and the approval of Westmin shareholders at the company’s annual meeting April 20 in Vancouver.

George Kenda, director of corporate planning for Norcen in Calgary, explained to The Northern Miner that Norcen is “essentially taking them (Westmin) out of the oil and gas business.” In terms of oil and gas production, Norcen is much larger than Westmin, he emphasized.

Last year for example he said that Norcen’s oil production was approximately 45,000 bbl per day and about 182 million cu ft gas. Westmin’s oil output is relatively small in comparison and totals about 7,000 bbl per day, he estimated.

Giving a Norcen perspective on the deal, he said that “from an investor perception point of view we get rid of Hanna which is a non core asset so we can focus more on oil and gas. They (Westmin) get rid of their oil and gas and focus more on mining.”

Kenda noted that Hanna has moved away from the resource extraction side and into manufacturing and chemicals.”Now they are basically a formulated polymers company which decreased our interest level in terms of compatibility of Norcen’s assets with Hanna’s assets,” he added. Norcen had some restrictions on selling its shareholding in Hanna which presumably would be transferred to Westmin.

Marilyn Knoch, a spokesperson at Westmin in Calgary, confirmed that no decision has been made yet as to where Westmin’s head office will be located. But with all its mining assets located in British Columbia, Vancouver would be the logical choice, The Northern Miner gathers. Westmin and Norcen have each assigned two people to a committee to review staff needs and put an “organizational chart together,” she said. In essence, Westmin’s oil and gas division will be merged in with Norcen’s and presumably there could be staff redundancies.

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