Officials of British Petroleum Co. said Tuesday they have agreed to sell its huge mineral interests, including Kennecott Utah Copper, to the international mining group RTZ Corp. Plc for $4.4 billion.
The oil multinational, Britain's biggest company, said the deal would not include BP Canada Inc. and certain other small units. News of negotiations between the companies on the sale surfaced last month, but details on how the transaction would affect various mining operations were sketchy.Patrick Gillam, a managing director of British Petroleum, parent company of BP Minerals America, the firm's mineral development arm, said, "The proposal to dispose of BP Minerals is a reflection of our strategic determination to concentrate increasingly on the group's core businesses."
British Petroleum acquired the Utah copper operation through its former subsidiary, Standard Oil Co. of Ohio. The workers were idled beginning in August 1985 but started returning to work in December 1986.
"We have nurtured and developed our minerals interests very successfully in recent years and this is reflected in the excellent price we have achieved. We are pleased to have sold this fine business to a company which is the major force in international mining," Gillam said.
He said the sale is scheduled for completion within six months following further investigation by RTZ officials, and it is subject to approval by RTZ shareholders. It also is conditioned on a number of regulatory, fiscal and other third-party approvals and, in some instances, pre-emption rights, Gillam said.
In addition to the copper operation, the proposed sale includes a gold mining operation in Barney's Canyon, which is 100 percent owned by BP. Production at the mine, located west of the new concentrator and four miles north of the copper mine, will begin this year with an expected life of seven years.
Company officials expect an annual production of 79,000 ounces of gold.
BP Minerals also has mining interests in Nevada, South Carolina, Alaska, Montana, Canada, Brazil, Norway, Zimbabwe, South Africa, Australia, Indonesia and New Guinea that are part of the proposed sale.
In an attempt to get the copper operation running again after the layoff, labor unions made some concessions and BP Minerals America announced in December 1985 a $400 million modernization program to make the operation better able to compete with worldwide copper companies.
In December 1986, the Bonneville and Magna concentrators were restarted and workers gradually began to be recalled. The work force now totals 2,200, down considerably from the mine's heyday when more than 7,000 people were employed.
Last autumn, the company held a dedication ceremony in the parking lot of the new concentrator building following tours of the new facilities.
The modernization included elimination of the old rail system that took ore from the mine, installation of a five-mile conveyor belt to transport the ore to the new concentrator and two new slurry lines that carry concentrated copper to the smelter and water back to the concentrator.
Wayne Holland, subdirector, United Steelworkers of America, said union officials have discussed the sale and don't think it would have much effect on the employees.
"We do feel that since the new firm is a mining company, they may pay more attention to the mining problems we have. However, what is bothering us is the continual sale of our natural resources to foreign companies. We question America's interests being served when people outside of the United States retain control of such a vital industry as copper," Holland said.
"We feel that this new firm, because of its mining experience, may pay more attention to the long-range mining of Bingham Canyon. We have been particularly disturbed for some time with the mining plan and stripping ratios (removal of the ore) at Bingham Canyon," he said.
Holland said, "Now the sale has been announced, we intend to look into the legalities of the entire transaction as it relates to the employees."
Ed Mayne, director of the Utah AFL-CIO, said he was cautiously optimistic about the mining operation's future and would have to wait and see what effect the sale will have at the mine.
Jack Christensen, president of the Utah Mining Association, said, "We feel quite comfortable about the transaction, although we know very little about RTZ." He said Rio Algom, which operated uranium mines in southeastern Utah, was owned by RTZ, and they were good operators.
He said he hopes RTZ will become a member of the mining association.
The announcement came as BP also said it would buy back 790 million of its own shares from the Kuwait Investment Office, which would lower the Kuwait government's controversial stake in the company from 21.6 percent to 9.9 percent.
The Kuwaiti deal was valued at about $3.56 billion.
The British government last October ordered KIO, the London-based overseas investment arm of the gulf state, to slash its holding in the British firm to 9.9percent within a year. The decision followed a Monopolies and Mergers Commissionfinding that the size of the share holding posed a threat to British interests.
On the minerals deal, a BP statement said RTZ would assume responsibility for project financing of $66 million. The announcement followed news last month that both companies were discussing a deal.
BP has important interests, including gold and copper, in the United States and Australia as well as in South Africa and Latin America.
Since BP's acquisition of British oil company Britoil Plc last year, the company has made several major disposals as part of chairman Sir Peter Walters' pledge to raise $1.83 billion in asset sales.
The proposals will be put to BP shareholders for approval at an extraordinary meeting on Jan. 31.
Trade and Industry Secretary Lord Young last fall extended the initial one-year deadline for divestment of the Kuwaiti holding to three years to take account of prevailing market conditions.
The KIO, which had been seeking a five-year deadline, built up its stake after a huge 7.2 billion pound ($13 billion) flotation of BP shares was poorly received by investors following the October 1987 stock market crash.
The announcements on Tuesday were widely anticipated on the stock exchange and made little immediate impact on the two companies' share prices. BP shares were steady at 2.56 pounds ($4.70) following the news, while RTZ rose 3 pence (5 cents) to 4.18 pounds ($7.65).