Elders mix: N.Z. green and gold

Press, 28 December 1989, Page 18

Elders mix: N.Z. green and gold

By

NEILL BIRSS

Elders Resources NZFP, the heir to N.Z. Forest Products, is one of the three key forestry and forest products companies in New Zealand. It is also one of Australia’s leading mining companies, big in gold, big in coal, and witn oil and gas interests. Can the somewhat unnatural grouping last? The question is complicated by speculation that Elders IXL, which owns 49 per cent of Elders Resources NZFP, may have to sell this stake because of a cash shortage. Elders Finance Group, part of Elders IXL, has added to the rumours, by selling its local, treasury operation to Dresdner Bank, AG, of West Germany, and selling some sharebroking activities. In New Zealand Elders Resources NZFP has just sold its half share in Benchmark Building Supplies to co-owners Burns Philp. The Benchmark stores were significant to the forestry arm of Elders Resources NZFP (ERNZFP) because they sold its pinex board products.

At almost the same time, ERNZFP is lifting its ownership of the Australian gold miner, Mawson Pacific, from 48 per cent to 100 per cent. ERNZFP will issue up to 6 million of its shares to Mawson shareholders, subject to a members scheme of arrangement. This represents 0.8 per cent of shares on issue by ERNZFP. Mawson Pacific is a prominent gold miner in the Marvel Loch-Southern Cross Region of Western Australia.

The company’s gold output is expected to be expanded to 160,000 ounces a year (worth about SNZIIOM). . The company holds rights over 4500 sq km of land believed to contain IM tonnes of ore and IM ounces of gold (worth about SNZ7OOM at present prices). The company’s mining is managed by Australian Mine Management MRSA, an associate company of ERNZFP.

Mr George Wheeler, executive director of the forest products group of ERNZFP, is adamant that the company is committed to the New Zealand forest industry. He offers as evidence of this its S3OOM expansion of the NZFP pulp and kraft paper plant at Kinleith.

But the restructuring of the old NZFP activities with ERNZFP is believed to have slashed SNZI billion from the costs of the

forest products group. There have been heavy staff cuts, for example. Meanwhile, the coal arm of ERNZFP has been expanding, with some astute buying and consolidation of coal interests.

Money has been ploughed into gold development, as well. The giant Red Dome gold mine in northern Queensland has new extraction plant and its own power line. Now it is joined by the Mawson gold field. The company also has ambitions to mine gold prospects in Papua New Guinea.

ERNZFP’s recycling arm, Simsmetal, is being “grown” rapidly. It is reputed to be a special interest of ERNZFP’s chief executive, Mr Geoffrey Lord, a colleague of Mr John Elliott, chairman of Elders IXL, for many years. This is one of the most profitable and promising of all the groups of ERNZFP. Any synergy, as the company farmers say, between the forest products group of ERNZFP and Simsmetal is hard to find. Within the company they sometimes suggest the sizeable and profitable mill pulping old paper at Auckland has some points in common with Simsmetal. But that can be as close only as street is to paper. Metal is metal and trees are wood.

In many ways, the old N.Z. Forest Products shareholders can be grateful that Elders stepped in to mop up the mess of the company after it was brought down by its subsidiary, Rada Corporation, the investment company. Mr Elliott has been unfairly and illogically the target for some angry original shareholders at the annual meeting of ERNZFP.

Many good things have been happening to ERNZFP’s forestry products group under the

new regime. N.Z. Forest Products was an old and fairly bureaucratic company. The Elders management has allowed younger managers to take . over, giving them their head in many ways.

The atmosphere among managers at some of the plants is not unlike that in the new Government corporations. The managers are thriving under their new freedom and chafing at the bit for growth and expansion. In its dealings with labour, ERNZFP has quietly introduced contracting widely, The company has been spending on technology and research and development: laboratory duplication of ideal trees; machine vision in fingerjointing offcuts into panels for use in boxing; mechanising of timber mills with computers optimising cutting patterns. All these things NZFP should have been doing instead of playing the sharemarket.

But, though the headquarters of ERNZFP are in Auckland, the executive director, Mr Lord, is in Melbourne, where the mining groups are based.

And when the goals are set around the board table, the demands for capital and resources of New Zealand forests must compete with those of the exciting and addictive world of goldmining, and the rich world of recycling. Will New Zealand forestry be relegated? The answer given in Melbourne is no. It is a good investment, and the Aus-tralian-New Zealand group is ideal for the emerging C.E.R. economies of the tWo countries. Whatever happens to ERNZFP’s forest arm, it will be interesting to measure the result against what would have happened if thei country’s commercial watchdogs had not blocked Fletcher Challenge from taking over NZFP.