Westminer committed to N.A. despite problems at mines

Having completed that mission, the affable 52-year-old Australian planned to return to Melbourne.

But almost two years after Australia’s largest gold producer shelled out $500 million in a Christmas shopping spree that netted the assets of Northgate Mines, Seabright Resources, Grandview Resources and Western Goldfields, Laylor reckons that his term as president of Westminer Canada may be extended.

The reason lies in the quality of the assets that the Australian ouitfit elected to acquire in late 1987. On the strength of published records and reports by consulting geologist Laurie Stephenson and first Marathon Securities of Toronto analyst John Lydall, Western elected to purchase the two Chibougamau gold/ copper mines previously owned by Northgate for $160 million.

Without making any site visits, Western also agreed to pay $92 million for Seabright Resources which was developing two gold mines in Beaver Dam and Forest Hill, N.S. Grandview Resources’ Carson Hill gold mine in California was picked up for $95 million. Acting on advice from agent first Marathon, Western Mining completed its Christmas shopping spree by paying $101 million for Western Goldfields’ Hog Ranch mine in Nevada.

“The investments were not as good as we would have liked,” said Laylor who now admits that Western’s decision not to visit the mines before making an offer may not have been wise.

“In hindsight, you could argue whether that was right or wrong,” he said.

While Westminer’s North American mines churned out 140,000 oz of the yellow metal last year, the privately owned Western Mining subsidiary was forced to take a $183-million write-down on its two U.S. heap leach mines due to lower- than-expected gold recoveries.

One or both of the two operations, which produced 60,000 oz last year, could be shut down if efforts to improve those recoveries aren’t successful. As a result, the company’s total gold production for the year ended June 1990, could be down by 40,000 oz from 1989 levels.

Westminer has also launched a $92-million lawsuit against former directors of Seabright Resources for allegedly exaggerating the extent of the reserves at the Beaver Dam mine in Nova Scotia. The last of the Forest Hill ore is being run through a milling facility at nearby Gays River.

While the Forest Hill deposit was thought to contain 1.2 million tons of grade 0.43 oz when Westminer bought Seabright, the head grade of ore treated recently was 0.26 oz. But if Westminer’s rapid fire acquisition approach has met with mixed results, Laylor’s bosses in Melbourne are committed to North America and his job is to turn the situation around.

From an executive office in downtown Toronto, Laylor and his team of three Australian vice- presidents will oversee a $7-million exploration program planned for this year.

About $3 million of that is earmarked for Canada where plans are under way to reduce costs and increase production at the two Chibougamau mines. Together they produced 69,757 oz gold, 106,181 oz silver and 8,809 ton of copper concentrates.

Drilling is also in progress at the nearby Dore Lake project where 1.6 million tons of grade 1.5% copper and 0.146 oz gold have been outlined via one of three Chibougamau mine shafts.

In Nova Scotia, Westminer is attempting to revive an old lead- zinc mine at Gays River which Laylor says could be brought back into production at an annual rate of 200,000 tons grading 5% lead and 9.4% zinc.

Under consideration, is the feasibility of extracting about 1.1 million tons of Mississippian-age carbonates, using a mill that is processing ore from the Forest Hill operation. “A decision on Gays River will be made by the end of the year,” said Laylor.

In the U.S., Westminer is planning to focus its exploration efforts in northern Michigan where the company is hoping for a “major exploration success” to make up for the disappointment of its heap leach mines.

Increasing sulphur content in the Carson Hill ore has reduced gold recoveries. Low recovery levels have also been experienced at the Hog Ranch mine.

Having spent less than half of the $1.3 billion originally set aside to build a North American mining subsidiary, Western Mining still has plenty for future acquisitions. The company is also benefitting from a hedging program which allows subsidiaries of Western Mining to sell forward 208,000 oz gold at $513(US) per oz over the next two years.

According to Westminer, an extraordinary loss of $110.6 million relating to the writedown on its U.S. mines. The loss includes a hedging gain of $72.7 million.

“Our aim is to finish up with a separate U.S. and Canadian mining division staffed by Canadians and Americans,” said Laylor who claims that it took eight years to get acclimatized to the culture and mining environment in Brazil where Westminer owns 75% of a small gold mine.

“We’re the new boys on the block and we are keeping our heads down,” he said.

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