Fluor to Sell Gold Properties for $500 Million
In a move that will give it a sorely needed financial infusion, Fluor Corp. said Tuesday that it has agreed to sell its 90% interest in St. Joe Gold and other gold properties to an Australian mining company for $500 million in cash.
The buyer, a subsidiary of Dall-hold Investments Pty., was described as the second-largest gold producer in Australia. It has made a $50-million “earnest money” deposit on the deal, which is expected to close by Oct. 31. Dallhold is a holding company owned by the family interests of Australian industrialist Alan Bond.
Earlier this summer, Irvine-based Fluor said it wanted to sell its gold assets as part of a corporate-wide effort to refocus on expansion of its core engineering and construction business.
The $500-million price is near the top of the range that analysts anticipated Fluor could get for its interest in St. Joe Gold, which is based in Clayton, Mo. The cash will help Fluor sharply reduce its $400-million debt--much of which it acquired when it bought St. Joe Minerals in 1981 for $2.2 billion.
“We will have our debt under control so that debt is no longer the driving force of what we do,” said Fluor Chairman David S. Tappan Jr., noting that last year the company was burdened with about $50 million in interest payments.
In retrospect, Fluor and Wall Street analysts have referred to Fluor’s 1981 entry into mineral mining and production as a big mistake. Combined with a drastic slowdown in oil-related construction projects, a slump in the minerals business has contributed to staggering corporate losses of $780 million in the 2 1/2 years ended April 30. Results for the third fiscal quarter ended July 31 have not been reported.
St. Joe Gold is a publicly traded unit that Fluor spun off from St. Joe Minerals last year by selling 10%, or 3 million shares, of the gold operation’s stock to public investors.
Tappan observed that a recent resurgence in gold prices has made St. Joe Gold a prime sales candidate. The price received by St. Joe for its gold production has increased from an average of $343 an ounce in the second quarter of fiscal 1986 to $416 an ounce during the same period in 1987. Gold has risen above $460 in recent weeks.
According to Fluor, St. Joe Gold’s earnings dropped to $2.6 million in the six months ended April 30 from $5.2 million a year earlier despite the increase in gold prices. The company attributed the decline to reduced gold production from existing mines. However, a Fluor spokesman said Dallhold intends to step up production by tapping new areas believed to have significant potential.
St. Joe stock, which was originally offered at $13 a share, closed Tuesday at $16.75. In the last six months, it has risen as high as $20.
