Normandy Mining and Boliden come knocking on Canada’s door

Toronto’s status as the capital of the global mining industry has been further cemented by news that major firms Normandy Mining of Australia and Boliden (BOL-T) of Sweden setting up shop in the city.

Luis Baertl has been appointed chief executive officer of Normandy Latin America, a new, wholly owned subsidiary. Baertl had previously served as senior vice-president of corporate development in Latin America for Barrick Gold.

The company has had an temporary office in Toronto for the past 18 months and will be applying for a Toronto Stock Exchange listing in September.

Normandy began life in 1985 with a capitalization of A$2 million, which, over the ensuing 12 years, has grown to A$3 billion. The company has turned a profit every year of its existence.

“We’re twice as big as the next biggest gold producer in Australia,” says Normandy’s executive chairman, Robert Champion de Crespigny. “Gold’s our focus, our dominant business, our engine room.”

Outside of South Africa, Normandy ranks fifth among world gold producers, pumping out roughly 1.5 million oz. of the yellow metal annually.

Topping Normandy’s asset list is Kalgoorlie Consolidated Gold Mines, in which it has a 50% interest. Kalgoorlie owns and operates the Super Pit, Australia’s largest gold mine, which, in 1995-96 produced 518,687 oz. per year, as well as the Mount Charlotte underground mine, which boasts annual production of 116,607 oz. Both mines are in Western Australia’s Eastern Goldfields region.

Among Normandy’s other Australian gold interests are: Tennant Creek (100% interest), a complex of two mines and a tailings retreatment project in the central Northern Territory which combined to produce 126,245 oz. gold in 1995-96; Big Bell Consolidated (100%), which consists of the Big Bell underground mine and the Great Fingall open pit in Western Australia, both of which yielded a total of 219,206 oz. in 1995-96; the Boddington mine (44.4%) in Western Australia, a combined underground and open-pit operation which produced 343,821 oz. gold in 1995-96; the Martha Hill mine (67.1%) in New Zealand, an open pit that produced 79,215 oz. gold in 1995-96; the Kaltails project (90%) in Western Australia, a dump reclamation operation that recovered 66,649 oz. gold in 1995-96; and the Vera-Nancy mine in northern Queensland (50%), a combined open-pit and underground operation that opened in February and is set to produce 100,000 oz. gold per year.

Normandy also holds a 76% indirect interest in the large Mount Leyshon open pit mine in Queensland, which produced 210,704 oz. gold in its last fiscal year, and a 75% indirect interest in North Flinders Mines, owner of the Tanami operations in Northern Territory, which combined to produce 225,748 oz. gold in the 1995-96 fiscal year.

.SIndustrial strength

Normandy is also Australia’s largest producer of industrial minerals through its Commercial Minerals unit, and is a major Australian base metals producer, churning out 89,000 tonnes of zinc and 21,000 tonnes of copper annually, plus significant amounts of lead and silver.

Champion de Crespigny says keeping Normandy’s domestic gold production at such a high level is difficult, owing to disputes relating to the rights of the country’s indigenous people. He adds that “the nature of Australians, their reluctance to go ahead with projects” can also delay or threaten the opening of new mines.

“The big difference in Canada, and why indeed we think [it is] the capital of the mining world, is that the people have a very positive attitude to doing business. In Australia it’s generally more negative, and that’s why for us it was important to get overseas.”

Normandy’s first big step in that direction was the formation of LaSource, a joint venture with Bureau de Recherches Geologiques et Minires, an agency of the French government.

Normandy holds a 60% interest in the LaSource Group, which has interests in three operating gold mines in Africa: the Ariab gold mine in Sudan (40% interest), a low-Cost, heap-leach operation that produced 144,935 oz. in the 1995-96 fiscal year; the Ity gold mine in Ivory Coast (51%), a high-grade heap-leach mine that yielded 41,973 oz. gold in 1995-96; and the Lero heap-leach gold mine in Guinea (42.5%), which produced 39,038 in 1995-96.

LaSource also holds a 24.7% interest in the huge Yanachocha heap-leach gold mine in northern Peru, which produced 800,000 oz. gold in 1996, as well as interests in industrial minerals in France and Turkey, a cobalt project in Uganda and an iron ore project in Guinea.

“Our target with regard to LaSource was very much to get into West Africa, and we’ve now got ourselves a strong position there.” says Champion de Crespigny. “Our next step is to try to become a big player in Latin America.”

.SWaiting game

Although Normany management has been asked why it took so long to get around to Latin America, Champion de Crespigny says the company was simply waiting until it had grown large and strong enough to be able to make such a move successfully.

“Until we had the cash flow to be a reliable partner, it was silly for us to go away [from Australia]. If you don’t keep all of your supply lines up, you fall apart.”

While Normandy is far from the first Australian company to enter the Latin American gold business, Executive General Manager Colin Jackson says Normandy eschewed pioneer status in favor of being one of the “strong and the smart.” With annual profit running at around $120 million and cash flow of $350 million, Jackson says no other company, save Barrick Gold, is in as strong a position to invest in new projects.

“We see Toronto as the capital of mining, and we’re mad keen to go into joint ventures and develop business with Canadian companies.”

Jackson adds that by setting up a subsidiary in Canada rather than trying to run Latin American operations from Melbourne and Sydney (as some other Australian companies do), Normandy has an advantage over its competitors insofar as Australians are asleep during Canadian business hours. “You can’t run a business in places where people are asleep,” he says.

Jackson insists that his company is driven chiefly by earnings per share, whereas North American mining firms tend to focus more on expanding production and resources. “These are splendid objectives,” he says, “provided they actually give you growth in profit. For us, when we’re making an acquisition or allocating capital for a project, the key determinant is, Does it give us earnings-per-share growth? And that’s clearly why our company has been successful.”

Adds Champion de Crespigny: “Two things are important to us — focusing on cash flow and dominating the fields we’re in.”

Jackson points out that Normandy’s management does some things differently from most North American companies. For example, when working out the year’s budget, Normandy first sets aside $100 million for dividends plus an equal amount for exploration.

.SBoliden

Normandy’s move into the Canadian market follows closely behind a similar push by Boliden, a major Swedish mining and smelting firm, earlier this month. Boliden’s parent company, Trelleborg, sold 51% of Boliden in an initial public offering worth $772 million. Boliden is now seeking a TSE listing.

“The evolution into a major public mining company based in Toronto is an important step towards the objective of making Boliden a truly international mining company,” Trelleborg’s president, Kjell Nilsson, states in a release.

“Toronto is the financial centre for the mining world and is the domicile for a large number of international mining companies. The move to Toronto will also strengthen Boliden’s ability to attract skilled and experienced individuals to implement Boliden’s expansion plans.”

Boliden is the seventh-largest producer of zinc in the Western World. It operates 11 mines, including five underground base metal mines and one open-pit base metal mine near its namesake town in Sweden. It also owns a base metal operation in Spain and holds a half interest in the Sukhaybarat gold mine in Saudi Arabia.

Boliden’s total production in 1996 was 142
,498 tonnes of zinc, 65,669 tonnes of copper, 97,346 tonnes of lead, 154,995 oz. gold and 7.7 million oz. silver.

Together with with Vancouver-based South Atlantic Resources (SCQ-V), Boliden has formed a joint-Venture company dubbed North Atlantic Resources. The new company is exploring for gold and base metals on 23 properties encompassing more than 5,000 sq. km in three Swedish mining districts.