Since 1915, the Northern Miner weekly newspaper has chronicled Canada’s globally significant mining sector.
Peter Allen, president and chief executive officer of the Little Long Lac group of companies, smiles self-consciously as the photographer maneuvers around his office, snapping picture after picture. Mr. Allen obliges the request for “just one more shot,” but when the session is finished, he breaks into a spontaneous grin of relief.
Except when facing a camera, Mr. Allen smiles easily – and with good reason. He is seemingly only a few steps away from realizing his ambition to take Little Long Lac, whose fortunes have changed as frequently as the price of gold, into the mining major leagues. This year, with the gold price stalled at $US400 an oz., he has doubled his company’s operating income compared with 1980’s. This financial feat follows the start-up of two new gold mines in the past three years. And at a boyish 41, Peter Ackerman Allen is the youngest Man-of-the-Year ever selected by The Northern Miners.
He may also be the least-known recipient. Certainly the group of companies that he controls has been well-publicized in the past year, through its successful but initially controversial policy of selling gold forward., through subsidiary’s Willroy Mines’ $21.4-million lawsuit against New Cinch Uranium, through $12 million in dividend payments while other companies were cutting or dropping them altogether, and through the corporate reorganization completed in the fall.
Included in the little Long Lac family are: Little Long Lac Gold Mines, Lake Shore Mines, Wright-Hargreaves Mines, Willroy Mines and recently, Copper Giant Mining Corp., Silverstack Mines and Les Mines D’O Thompson-Bousquet were amalgamated into a company called Long Lac Mineral.
In fact, since Mr. Allen officially took over the group five years ago from his father John Allen, who took over the company in the 1950s, Little Long Lac has grabbed increasing attention in the marketplace.
Admittedly, not all the attention has been good. In February, Willroy launched a $21.4 million lawsuit to recover losses on its investment in New Cinch shares and warrants. In its statement of claim, Willroy named New Cinch and 14 other defendants, including that company’s two major shareholders, Dickenson Mines and Kam Kotia Mines.
When assay results from New Cinch’s Orogrande property in New Mexico turned out to be false, Willroy sold its interest at a $21.4-million loss. Does Little Long Lac see its involvement in New Cinch as a mistake in judgment? Although reluctant to discuss it with the lawsuit still in litigation, Mr. Allen says: “No. There was an experienced mining company behind it,” referring to the control block at New Cinch.
Most recently, the spotlight was on the group’s shining financial picture despite the recession-colored economy. For 1981, the group expects to record gross revenues of slightly less than $140 million with an operating income of $90 million before mining and income taxes. Gross revenues for 1982 are estimated at $125 million.
However, if Mr. Allen has never shied away from corporate press, he has handled personal publicity with some reticence.
His biography portrays a steady if unstartling course. Graduating in civil engineer from the University of Toronto in 1962, he went to work for Imperial Oil for three years; then he jumped to the family investment firm where he eventually moved up to the presidency.
He also began serving as a director for some of the Little Long Lac companies. In 1974, when the investment firm’s ties with the mining group were severed, Mr. Allen remained with Little Long Lac. Today as a CEO, he seems far more concerned with the position’s responsibility than its power.
It’s precisely this priority that could mean his days as a quiet-spoken chief executive are numbered, he admits. The changing political climate in Canada hints at a difficult future for the country’s mining industry, he believes. “The Canadian public today barely understands the plight of the mining industry. I’m sure they think we get huge tax breaks from the government,” he says.
“Industry leaders are going to have to speak out on a non-partisan basis, using the statistics available to show that in the long run, we have a very low rate of return as an industry. Yet we probably give the greatest benefits to Canada.”
People get caught up in the wild swings in the price of gold, he explains. “But in a 7-year cycle, you’ll have two good years only,” he says, “and that’s typical of the mining industry.” However, those two good years will convince the Canadian public that the mining companies are always experiencing record profits, he says. “Profit is almost a nasty word in Canada,” he adds with some concern. Mining companies should be given the chance to “grow the capital” they will need for future development, he says.
With the industry’s cyclical nature and the public’s attitude toward profit in mind, Mr. Allen follows a corporate strategy that seems to be a bit of an enigma. It combines an aggressive approach to mine development with a conservative attitude toward capital. “Ultra-conservative,” he stresses gently.
Management plans its financing of orebodies with painstaking caution, he says. The group prefers to finance from within its own cash resources, and “we try to get our money back in two years, the longest we want to wait is four year.” If the group began developing a property with heavy capital expenditures, Mr. Allen says he would probably bring in partners rather than take on excessive debt.
“We’re trying to survive in this business for the long run,” he says simply. “Why wouldn’t we bring in partners if the risk increases and the payment period becomes longer than four years?” His willingness to share risk is matched by his willingness to share responsibility within his own management team.
He prefers a decentralized, informal management approach, a style he developed in partial response to the extremely structured environment he experienced at Imperial Oil. “I feel a structured approach really stifles creativity and initiative,” he says. He believes that if people have the desire to do a job, a regimented environment simply isn’t necessary.
After years with a very small head office, Mr. Allen has strengthened Little Long Lac’s top management with such additions as J. Malcolm Slack, formerly of Pamour Porcupine Mines, as senior vice-president of mining and Ken Dalton, Judson Bay Mining and Smelting, as vice-president of finance. The challenge for management is obvious, says Mr. Allen. “With our asset base, and the potential development work, we will be busy for 10 years.”
He emphasizes he continuing need to develop new orebodies. Once a mining company loses its production base, “everything tends to fall apart,” he says. Personnel is harder to attract, poor cash flow forces a cutback in exploration and consequently, the orebodies aren’t found when they’re needed.
His strong attachment to the industry is obvious when he expresses admiration of mining pioneer Thayer Lindsley – “he was a genius the way he could almost see through the rock” – or when he discusses the excitement of developing the Thompson-Bousquet – “bringing on an orebody that you discovered yourself has got to be the biggest thrill that exists in this industry.”