Is there a third bidder waiting in the wings? — American

Just two short weeks after Royal Oak Mines (TSE) launched an aggressive takeover bid for Lac Minerals (TSE), a second suitor — gold giant American Barrick Resources (TSE) — has made an offer for the besieged million-ounce producer.

“We believe our acquisition of Lac will benefit the shareholders of both companies,” said Peter Munk, Barrick’s chairman. He added that “we find Lac’s operations in South America to be particularly complementary to Barrick’s corporate development activities.”

Under the deal, for each Lac share held, investors have the option of taking either $4 in cash and 0.31 Barrick shares, or an all-share alternative of 0.43 Barrick shares. Either way, the offer reflects a value of about $14 for each Lac share, based on the closing price of Barrick shares on the Toronto Stock Exchange on July 22.

The offer is contingent on Barrick acquiring 66.6% of Lac’s 147.6 million outstanding shares, and on Lac’s shareholders agreeing to waive the poison-pill plan implemented in 1991 to ward off a hostile takeover. Royal Oak announced its offer for Lac on July 7. Under the terms of its bid, Royal Oak offered $3.75 in cash and 1.75 Royal Oak shares for each outstanding Lac share. Alternatively, Lac shareholders can choose 2.4 Royal Oak shares for each Lac share they own. The bid offers a 20% premium to Lac’s pre-announcement share price and includes a 28% cash component. Both Lac and Royal Oak were quick to respond to the Barrick bid. James Pitblado, Lac’s chairman and interim chief executive officer, said management is evaluating the offer but that the bid “does not give recognition to the value of Lac’s assets, its potential, cents nor to] its future market price.” Overall, Pitblado would rather see the company remain independent.

However, not long after issuing its response, Lac revealed that it has held what it calls third-party talks with companies interested in doing possible deals. The company apparently made the disclosure in a document sent to shareholders this week and filed with U.S. securities regulators. In her response, Royal Oak Chairman Margaret Witte said “a key issue is whether Lac shareholders want Barrick shares at their current value, or if they want shares of Royal Oak which have significant potential value with the addition of Lac’s assets.” Witte feels there is no upside in “Barrick’s paper.”

She believes the Barrick bid may have been made in haste and that its implications may not have been fully thought out. “American Barrick would have to either write off about $1 billion of the purchase as goodwill or attempt to sell off Lac’s Canadian assets to reduce that writeoff,” Witte said.

With regards to selling off some of Lac’s North American assets, Barrick has admitted this could be a possibility. “They might make a better strategic fit for another mining company,” a Barrick spokesman reportedly said. Ronald Coll, senior mining analyst at McLean and McCarthy, said institutional investors are embracing the Barrick bid. “Their offer pretty well ices it,” Coll said. “If Barrick wants it, they have the resources to get it,” he added. The Barrick offer comes just a few days after the abrupt resignation of Peter Allen, chief executive officer on Lac’s much-maligned board of directors. Under its takeover bid, Royal Oak has been highly critical of Lac’s management, blaming it for the company’s lacklustre performance. In a letter to Lac’s board, Allen cited his strong desire to remove personalities as a factor in the takeover fight with Royal Oak. “I am not prepared to let personalities define this takeover fight,” he wrote. “This fight should be about long-term value, pure and simple.”

In an attempt to remove management as an issue, investment dealer Yorkton Securities had tabled a plan to have a new management team installed at Lac, just prior to Allen’s departure. Yorkton proposed that Paul Crossgrove, former vice-chairman at Placer Dome (TSE), head up the new team. However, with the Barrick offer, this plan seems to have been put on the back burner. Should Barrick be successful in its bid, it would become North America’s top gold producer with an annual output

of about 2.8 million oz. gold. The only gold companies with more gold production than the Barrick-Lac combination would be Anglo American and Goldfields of South Africa, both based in Johannesburg, South Africa (see accompanying table).

With the emergence of the Barrick bid, several possibilities exist: * Royal Oak could raise its bid;

* Barrick could, in turn, raise its bid for Lac;

* a third bidder could enter the fray; or.

* Lac could remain independent.