Sees merger benefits for Dome Mines, Campbell

“The advantages (of the proposed Placer-Dome-Campbell merger) will far outweigh the disadvantages,” Dome Mines Chairman Fraser Fell assured The Northern Miner, following the annual meetings of Dome and Campbell Red Lake Mines.

Also at the meetings, Mr Fell indicated that two new gold mines are in the offing for Dome and Campbell.

On the merger, he backgrounded for shareholders the events leading up to the decision, which will see the formation of North America’s largest gold producer, and outlined the advantages — and some disadvantages — which would accrue to both Dome and Campbell.

On the positive side, he said the amalgamated company, (now officially to be named Placer Dome Inc.), is expected to have higher earnings and cash flow than Campbell, and higher earnings, cash flow per share and a lower average cash cost per oz of gold than Dome.

For Campbell, minority shareholders will no longer be shareholders in a company controlled by another company, Mr Fell pointed out, and for Dome the amalgamated company will have a less significant exposure to Dome Mines’ $225-million guarantee, (to Dome Petroleum), and thus greater financial flexibility than Dome Mines itself.

Both companies, he said, would benefit from the fact of amalgamation with Placer, which he described as a company with a history of dynamic growt h and greater identified potential for future growth in gold production.

But on the negative side, he said, is the fact that Placer Dome would have a higher proportion of non- gold and non-North American assets than Campbell, and a higher average production cost per oz of gold than Campbell as well as lower gold reserves per share.

In the case of Dome Mines, the amalgamating company would have a higher proportion of non-North American assets and “perhaps therefore, some sovereign risk.”

He said he would not consider any of these serious disadvantages.

Under the latest plan for the merger, which will be voted on at shareholder meetings in July, Placer Dome will have its registered office and a principal office at Toronto, and a principal office at Vancouver.

It will have an authorized capital consisting of an unlimited number of common shares and unlimited number of shares designated as preferred shares, issuable in series, of which about 219.2 million common shares and no preferred shares will be outstanding, following amalgamation completion. Pay cash dividends

Mr Fell said it’s expected the new company will pay regular cash dividends, however.

Executive officers of Placer Dome will be Fraser Fell, chairman, John Walton, president and chief executive officer, Anthony Petrina and Henry Brehaut, senior vice-presidents of operations for Placer and Dome-Campbell divisions, respectively, John Racich, senior vice-president and chief financial officer, and John Hick, senior vice-president corporate.

Mr Fell, commenting that Placer and Dome-Campbell are already “lean and thin,” on both sides, said he expected the merger would go readily and smoothly, without any likelihood of blockages at the shareholder approval meetings.

In his comments on operations for Dome Mines and Campbell, Henry Brehaut, president of both companies, referred to the Dona Lake gold project in the Pickle Lake area of Ontario, and the Musselwhite project to the northwest of Pickle Lake.

Mr Fell said following the Campbell meeting he expected both projects would be mines.

Government approval on the Dona Lake project, for instance, was expected the day of the Campbell meeting, and would clear the way for a go-ahead decision. It is jointly owned by Dome and Campbell.

Mr Brehaut said there is an indicated mineral inventory at Dona Lake of 1.9 million tons, at an estimated grade of 0.20 oz gold per ton, with capital expenditures to reach commercial production estimated to be in the order of $36 million. 40,000 oz per year

Once in operation, the Dona Lake mine could add 40,000 oz gold annually to the Dome group’s production, he said.

At the Musselwhite project, approximately 2,200,000 tons of gold-bearing material averaging 0.24 oz gold per ton had been defined to the end of 1986, Mr Brehaut said, and further drilling is planned this summer, followed by an estimate of tonnage and grade in all identified zones, and consideration of an underground exploration program.

Reviewing results at Dome Mines and Campbell, he said Campbell’s gold production has increased by 147,000 oz or 73% since 1981, to 348,000 oz in 1986. He noted that last year gold production increased by 78,000 oz as a result of the acquisition of Kiena Gold Mines, and higher production at both the Campbell and Detour Lake mines.

Campbell alone produced 229,000 oz in 1986 from ore grading 0.615 oz per ton, at an average cost of $107(US) per oz, and remains, he said, one of the highest grade and lowest cost mines in the world.

At the Dome mine itself the production of 137,000 oz last year exceeded the previous year by 11,000 oz. Gold production actually exceeded plan by 4,000 oz and the Dome president said production of 134,000 oz is projected for this year.