Pamour and St. Joe deals signal Australian invasion

Nearly four years after Prime Minister Brian Mulroney declared that Canada was open for business, Australian mining companies have been answering the clarion call with an unprecedented wave of investment activity.

During a recent spending spree which analysts say is just a taste of things to come, Giant Resources of Australia acquired a controllng position in Pamour Inc. of Timmins, Ont., and last week Dallhold Investments Pty. Ltd. made its presence felt by acquiring a 90% interest in St. Joe Gold Corporation for $500 million. While that represents only a fraction of the $6.8 billion which foreign company’s spent on Canadian acquisitions last year, it has made Australian firms among the major players in Canadian mining.

With an annual production rate of about 200,000 oz of gold (scheduled to rise to 300,000 oz by 1990), the Pamour group, for example, is now in the same gold production leagues as Lac Minerals and Noranda Inc.

Armed with a $500-million acquisition war chest which is expected to be in place within six months, its position relative to these established gold producers could well improve.

While its Canadian interests are much smaller, Dallhold Investments will become one of the world’s largest gold mining groups with its purchase of St. Joe Gold from Irving, Calif.-based Fluor Corporation. Family interests

Already Australia’s second largest gold producer with 300,000 oz of gold , Dallhold is a holding company owned by the family interests of Australian industrialist Alan Bond.

When the agreement closes on Oct 31, Dallhold hopes to raise its production by about 90,000 oz. Admittedly most of that will come from mines in the U.S. and Chile but the Golden Patricia gold field near Pickle Lake, Ont. represents a significant Canadian presence for Dallhold. The Pickle Lake project is expected to produce 40,000 oz gold when commercial production begins during the second half of 1988.

Although Canadian companies like Placer Dome Inc., Cominco Ltd. and Northgate Exploration (through Whim Creek Consolidated) have been operating in the South Pacific for years, the Australian influx into Canada is definitely something new according to Terence Ortslan, a mining analyst with Deacon Morgan McEwan Easson in Montreal. Latest trend

He claims this latest trend is all part of the globalization of the mining industry which has only occurred in financially stable, geologically prolific and politically sound countries like the U.S., Canada and Australia. “It all boils down to a number of common denominators. There is a synergy which exists between Canada, the U.S. and Australia in terms of geology and asset potential which makes this country attractive to Australian investors,” he explained.

The money available for investment is also considerably greater in this country than it is in Australia,” said Mr Ortslan.

“Shareholders in Australian companies will accept Canadian acquisitions and vice versa, while they shy away from countries like Mexico, Brazil and South Africa.”

While he refuses to predict which Australian companies will be next to enter the Canadian market, a prominent Toronto investment banker says that this trend is likely to continue. As Vice-president and Secretary of the First Toronto Capital Corp. merchant banking company, he arranges the necessary financing for foreign companies seeking Canadian acquisitions.

Formerly employed in the Toronto offices of a New Zealand banking and insurance company called nzi Corp. Ltd., he banked the deal which resulted in Giant Resource’s interest in the Pamour Group. Pamour control

Under that Dec 11, 1986, agreement, Jimberlana Minerals which had bought control of Pamour from Noranda in 1985, sold 80 million shares to Giant’s predecessor for 37.5 cents (A) each to raise $30 million.

Giant Resources is a subsidiary of Ariadne Australia Ltd., a diversified holding company that has connections with nzi Corp. and First Toronto Capital Corp. Giant has since increased its interest in Jimberlana to 50.8%. While ag reeing that Australians are attracted by favorable Canadian investment conditions which are currently facilitated by flow- through share financing, he claims that technology is also a major factor.

“Some of the mining technology developed in Australia is now being adapted to the Canadian environment,” he says. For example Giant Yellowknife Mines has announced plans to construct a tailings reprocessing plant in Timmins using technology developed in Australia.

Starting next year Pamour subsidiary ERG Resources Inc. will operate the project slated to process about one million tons of tailings per month from a pile which has sufficient reserves to last 17 years. During that time about 913,000 oz of gold is expected to be recovered. Promising areas

“In a lot of cases, Australian companies have grown as far as they can in their own country and they are looking around for promising areas to invest,” added Mr Laramie. “When foreign exchange controls restricting the amount of money which could be invested outside Australia were lifted two years ago, investing in North America became so much easier,” he said.

Although Giant Resources and Dallhold are the companies which have made the headlines recently, a number of other Australian backed firms have acquired significant positions in Canada. They include:

* Golconda N.L. which is currently producing approximately 20,000 oz gold from its tailings retreatment operation in Australia.

Through its 51% interest in Nevada Goldfields Corp., Golconda is hoping to boost its gold output to more than 80,000 oz in the next three years.

As reported (N.M., Nov 10/86), Golconda President Robert F. Baldock explained his company’s philosophy like this: “We came over here, established an operational base, selected a number of properties and went after them.” Nevada Goldfields expects gold production to reach a high of 130,000 oz by 1989.

* Australia-controlled City Resources Canada which is planning to produce 150,000 oz to 200,000 oz gold annually from the Cinola deposit in British Columbia’s Queen Charlotte Islands. As the deposit is one of Canada’s largest untapped gold sources (2.5 million oz), it will be a cornerstone of the company’s operations in this country.

The company says it bought a controlling interest in Canola because of its similarity to many classic epithermal deposits in the South Pacific. Following a feasibility study, production is expected to begin in 1989.

* East West Minerals, a wholly- owned subsidiary of East West Minerals, N.L. of Sydney, is planning to produce 88,000 tons rising to (176,000 tons) of bulk zinc-lead concentrates from the problem-plagued Caribou deposit 50 miles west of Bathurst, N.B.

Originally discovered and developed by Anaconda Canada Exploration, the base metal deposit, has been considered difficult in metallurgical terms due to its fine grained mineralization.

While the company hasn’t announced a production date, it plans to install an on-site plant capable of treating ore at a rate of 2,200 tons per day and production will begin at a rate of 1,100 tons per day.