Plans for Prodigal to become timber group

Press, 13 July 1989, Page 21

Plans for Prodigal to become timber group

By

NEVIN TOPP

Shareholders of Prodigal Gold must be wondering whether the company will finally come home like the prodigal son after news that two Australian companies plan to turn the miner into a timber group. Since it was launched in September, 1987, Prodigal has yet to return a bot-tom-line profit or pay a dividend to shareholders. Dr Alan Walker, of WGN Ventures, one of the two companies proposing to take control of Prodigal, said New Zealand’s timber resources were behind the move from Australia. Prodigal is seeking shareholder approval for a capital reconstruction at

an extraordinary meeting on July 31, to allow it to take up 70 per cent of Australian Hardwood Company, including Healesville Saw Mills, of Victoria, and 100% of Baltic Building Products, a big Victorian door-maker. The two Australian companies will end up holding 56% of Prodigal. Approval is also being sought to change Prodigal’s name to Consolidated Hardwood Industries. Dr Walker indicated that eventually listing would be sought in Australia. If shareholder approval is not given, it is proposed to issue 15.920 million 25c redeemable preference shares to WGN Ventures and Forest Systems, the two Australian companies,

to allow the deal to proceed. From Melbourne yesterday, Dr Walker said he and his brother, Dr Len Walker, had. visited New Zealand a number of times to study the timber industry, and they were taking a particular interest in the proposed asset sales by Forestcorp. The link with Prodigal had come about through Dr Len Walker, managing director of Western Gulf Oil and Mining, a Mel-bourne-based listed resource company, which had 2100 ha of gold-bear-ing tenements in Central Otago, Dr Alan Walker said. Western Gulf had experience in alluvial gold mining through Cromwell Alluvial Prospects (N.Z.),

and intended ultimately to acquire Prodigal’s gold interests and have the Hoki-tika-based company concentrate on the timber industry. ■ WGN Ventures was set up in May last year, with seed capital from Western Gulf to find new technologies for handling resources. A link was formed with Forest Systems, which had developed a kiln-drying system for Healesville Saw Mills. Australian Hardwood Company, a new firm, had access to mountain ash forests in the central highlands of Victoria. Hardwood timber was difficult to dry, and the kiln-drying system was developed. Dr Walker said he held doctorates in geology and chemistry, plus financial

degrees, and his brother held a Ph.D. in engineering and a master’s degre in business administration.

Prodigal was launched when shareholders in Aden Corporation, a West Coast investment group, received three Prodigal

shares for every 10 Aden shares, Como Holdings (now in receivership) holding 45%, and Goldcorp Holdings (also now in receivership) 25%. When Prodigal was launched the hope was it would be able to sell some of the 86 alluvial exploration, prospecting, and mining licences it had acquired,, in addition to obtaining cash-flow from its 10 working alluvial units. However, it appears the

company failed to sell the licence areas and it also failed to reach initial gold-forecast figures. The lower gold recovery was

blamed on delays in approvals on mining licence applications when the Department of Conservation took over this area.

Gold recovery, figures were later slashed when the company decided to contract out its excavatorfed mining to individual owner-operators. High production costs and the high value of the New Zealand dollar against the United States dollar were additional reasons given for the Prodigal’s profit performance. As reported, Kleinwort Benson Australia has valued 70% of Australian

Hardwood at sAusts.4M and all of Baltic Building at $3.06M. However, it said it has not inspected the accounting records or audited either company. Mr Warren Head, of Christchurch, who has been a spokesman on the deal, says shareholders will be able to inspect a copy of the Kleinwort Benson report at the Companies Office in Hokitika.