An Irish story

WHAT a cast of characters is involved in the Arcon saga!There's Sir Tony O'Reilly, probably Ireland's best-known business personality, who seems to have lost a packet on his investment in the zinc producer. There's Prof Richard Conroy, a multifaceted personality if ever there was one. Ned Goodman, the Toronto financier, figured briefly in the story. And now Adolf Lundin seems ready to bring the saga to an end with a takeover that will see the Arcon name disappear (MJ, March 4, p11).A saga? Well, Arcon was once involved in bitter and vitriolic corporate manoeuvres that matched anything the current Harmony-Gold Fields or the recent Goldcorp-Wheaton-Glamis battles have thrown at us.Let's start with Prof Conroy. It was his company, Conroy Petroleum and Natural Resources, that in 1986 discovered the Galmoy zinc deposit in Ireland's County Kilkenny.Previously, in 1974, he had established Trans-International Oil. This Irish offshore oil exploration company merged with Aran Energy in 1979. His entrepreneurial spirit emerged before that. While doing his post-graduate medical studies, he and his brother spotted a gap in the market and set up, in Manchester, what he believes was the first medical deputising business, providing doctors on a short-term basis when required.Prof Conroy became professor of physiology at the Royal College of Surgeons in Dublin, and is now Emeritus Professor. His research included pioneering work on the effects of circadian rhythms, including jet lag, shift working and decisiontaking in business after intercontinental flights.And he had a political career as well. He served for two terms in the Irish Parliament as a member of the Senate. As senator, he was at various times front-bench spokesman for the government party in the upper house, on energy, industry and commerce, foreign affairs and Northern Ireland.When it became obvious that the Galmoy discovery was significant, Prof Conroy brought in Outokumpu of Finland as partner. Not only would Outokumpu bring mining and technical expertise, but it also needed zinc concentrate to feed its downstream operations.But the early 1990s brought upheaval. Ned Goodman's Dundee Bancorp built up a stake in Conroy Petroleum. Prof Conroy turned to Tony O'Reilly as a potential ‘white knight', and a merger between the then Mr O'Reilly's Atlantic Resources, an oil exploration company, and Conroy Petroleum was mooted.To prevent this, Dundee Bancorp called an extraordinary meeting to oust most of the Conroy Petroleum board, including Prof Conroy, then chairman and chief executive. And it persuaded Outokumpu to support the move.That extraordinary meeting, in 1992, lasted most of the day. Prof Conroy and his supporters on the board were booted out.Temporarily. Less than a month later, they were back. Mr O'Reilly bought the Dundee Bancorp stake in Conroy, on terms that gave Mr Goodman some profit. The ousted directors were reinstated. And Atlantic Resources and Conroy Petroleum merged into a company called Arcon. But they didn't live happily ever after.In 1994, Prof Conroy resigned and walked out, taking with him his right-hand people, Maureen Jones, an executive director, and her brother, James, the finance director.It wasn't long before Prof Conroy was back in the business. He founded Conroy Diamonds and Gold, now listed on London's AIM market, with Ms Jones – who qualified as a radiographer and specialised in nuclear medicine before getting involved in exploration – as managing director, and Mr Jones, once more as finance director.According to Prof Conroy, the break-up with Mr O'Reilly resulted mainly from differences of opinion about the Pogo gold project in Alaska. Conroy Petroleum was a founding member of the Stoneboy consortium, an exploration group put together by Watts, Griffis and McOuat which discovered Pogo in 1994.When the time came for Conroy Petroleum to put up the final payment for its share in the project, Mr O'Reilly argued that the company should instead focus entirely on Galmoy. Prof Conroy wanted to continue the interest in Pogo. It's worth speculating about what might have happened if Prof Conroy had had his way. Pogo turned out to be a world-class gold deposit. Today it has a probable resource of 7 Mt at a grade of 16.12 g/t. Teck Cominco, now project operator, says the mine should start up in the March quarter of 2006 and produce 400,000 oz/y over a ten-year mine life.Prof Conroy seems to have no hard feelings about events at Conroy Petroleum. But he says: “If I regret anything, it is losing Pogo.” After Prof Conroy's departure, one of Mr O'Reilly's sons, Tony O'Reilly Jnr, took over as chief executive, and later chairman, of Arcon.The Galmoy mine started production in 1997. The early years were extremely difficult. Not only was the zinc price at an all-time low, but in 1998 the management had to tough out a 14-week strike.By 2002, Arcon was in serious financial difficulties. Then Sir Tony O'Reilly's negotiating skills were put into good effect. Internationally known as chief executive of Heinz, the baked beans and 57 varieties group, for many years, his family interests include listed companies such as Independent newspapers, Waterford Wedgwood (fancy china), and Fitzwilton (food retailing). Sir Tony persuaded Arcon's banks to write off â‚¬60 million of loans in exchange for 10% of the enlarged equity.In return, Arcon had to have a rights issue which the O'Reilly family underwrote.Consequently, the O'Reilly stake in Arcon jumped from 44% to 72%. This cost Sir Tony â‚¬21 million. Some estimates suggest he has put about â‚¬90 million of family money into Arcon. But his spokesman says it was more like â‚¬60 million. The Lundin takeover terms will bring back â‚¬31.3 million in cash. And, instead of his present 65% shareholding in Arcon, Sir Tony will have a 9% stake in the enlarged Lundin Mining group.Meanwhile, Prof Conroy has been focusing his new company's attention on a major geological structure in Ireland known as the Longford-Down Massif, which he suggests might support a new gold province.Learning from the Conroy Petroleum days – he had failed to grab the area near to Galmoy where the Lisheen zinc mine was later developed by someone else – his new company has prospecting licences covering 1,300 km2. He says: “What we are doing now could have greater implications [than the Galmoy discovery] if we have found a new gold province. It would be very exciting for Ireland, and bring greater financial benefit to Ireland.”

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