Placer, Dome/Campbell to merge

In what will certainly represent the largest mining merger in Canadian history, Placer Development, Domes Mines, and Campbell Red Lake Mines have agreed to form a new company which will have a market capitalization of over $5 billion dollars.

The joint announcement by the three companies coincided with Placer’s annual meeting in Vancouver where some details of the proposal were revealed. Because the companies are registered with the Securities and Exchange Commission in the United States and final details of the amalgamation are being worked out, Placer officials were understandably hesitant about revealing anything definitive.

But Placer Chairman, H. Richard Whittall, emphasized the new company will “not be associated with Dome Petroleum” other than through its 19.5% interest in the troubled oil company which is being taken over by Chicago-based Amoco Corp.

Exactly what the new entity will be called has not been decided but he said “the name Placer would be involved.” Under the merger proposal, there would be a tax free conversion of shares. Dome’s shareholding in Campbell, which represents majority ownership, would be cancelled; and Placer shareholders will be asked to approve a 2 for 1 stock split after which they would receive one common share in the new company for each of their post-split Placer common shares. Dome shareholders would receive 0.851 common shares of the new entity for each share held and Campbell shareholders would get 1.702 common shares for each one held.

Approximately 45% of the outstanding common shares of the new company would be owned by former Placer shareholders, about 37% by former Dome Mines shareholders and approximately 18% by former owners of Campbell shares after their cancellation by Dome Mines. Following the amalgamation, Dome Petroleum’s 21.5% interest in Dome Mines would be reduced to an approximate 7.5% interest in the amalgamated company. The new company would hold Dome’s 19.5% interest in Dome Petroleum the “carrying value of which has been written off,” said Mr. Whittall. It would also inherit Dome Mines’ obligation to guarantee $225 million of Dome Petroleum’s massive debt load.

In terms of annual production, the new company will be a colossus and indeed “one of the world’s most important gold producers outside South Africa and the Soviet union.” he noted. Net production for the combined companies in 1986 totalled 825,000 oz gold and they will also produce significant amounts of silver, copper, molybdenum, oil and gas.

Without a doubt it will be the largest gold producer in North America and even more so when Placer’s Misima gold project in Papua New Guinea comes on stream in the next few years. At the annual meeting John W Walton, president, said approval by the government was “imminent” and only the financing details had to be worked out. In particular, Dome and Placer have several more advanced stage properties which The Northern Miner estimates should boost annual gold output to over one million ounces by the end of the decade.

Discussing the merger with Dome and Campbell, he confirmed the companies had been negotiating for about 10 weeks and denied rumours that Placer had been approached independently with a takeover offer. He emphasized that the merger plan was “not defensive at all”and described it as “strategic positioning for the future.” Placer would have been difficult (and expensive) to take over because there are no significant blocks of the stock in anyone’s hands since Noranda sold its equity which seems to back up his argument.

He confirmed there were no plans to sell assets and in Placer’s case said they don’t expect any layoffs resulting from the merger. One broker at the meeting predicted the merged company would become a premier mining investment house and it’s not hard to understand why. Individually, the companies probably qualify already.

Fraser M Fell, presently chairman and chief executive officer of Dome and Campbell would become chairman of the new company with Mr Walton holding the position of president and chief executive officer. All their offices would be maintained in their present locations.

In Toronto, Dome Mines President Henry Brehaut told The Northern Miner the proposed merger had been in the works for “a couple of months.” He said a new name had not yet been picked for a merged company, but indicated it could combine both the Placer and Dome names. Asked what his postition would be now, with John Walton elected as president and chief executive officer of the new company, Mr Brehaut said he guessed he “would get a new title.” He did not elaborate, and said he had no further comment on the proposed merger.

Dome Mines general counsel John Hick said as far as Sigma Mines was concerned, it would remain a subsidiary of the new company, as would Kiena Gold Mines. The new company would also retain the approximate 20% interest held by Dome Mines in Falconbridge Ltd.