Vancouver — Looking to refinance costs associated with the recent acquisition of East African Gold Mines,
The major issued US$300 million of unsecured senior debentures with a 32-year maturity and US$200 million of unsecured senior convertible debentures with a 20-year maturity. The 32-year debentures will be sold at 99.7% of their principal amount to yield 6.5% at a yearly interest rate at 6.4%. The US$200-million offering will be sold as unsecured senior convertible debentures with interest payable at 2.75% a year. The holders of this debt will have the right to convert the debentures into shares, with each US$1,000 principal amount convertible into 47.79 shares, placing Placer’s share price at US$20.92 (or 55% above the US$13.50 closing price before the announcement of the deal).
Placer retains the right to buy the convertible debentures at any time after seven years. Meanwhile, the debt-holders may put the convertible debentures to Placer Dome in exchange for cash at 10 and 15 years from the date of issue. The convertible debentures will mature in 20 years.
In July, the major inked share purchase agreements to acquire 98% of privately owned Australian-based East African Gold Mines, thereby securing that company’s cornerstone operation, the North Mara gold mine in northeastern Tanzania. The price was US$3.01 per share in cash for a total of US$255 million, including debt.
The North Mara mine, 100 km east of Lake Victoria, was commissioned in September 2002. It consists of three deposits, all of which remain open at depth and along strike. The Nyabirama open pit feeds a 2-million-tonne-per-year processing plant, and the nearby Nyabigena and Gokona deposits are also being mined.
Total reserves are pegged at 2.9 million oz. contained in 24.6 million tonnes of material grading 3.7 grams gold per tonne. Measured and indicated resources, including reserves, are estimated to be 43.9 million tonnes grading 3 grams gold, or 4.25 million contained ounces. An additional 600,000 tonnes grading 5.2 grams gold, or 102,500 contained ounces gold, are classified in the inferred category.
Based on current reserves, production is estimated at 220,000 ounces per year at cash and total costs of US$200 and US$252 per oz., respectively. The average stripping ratio for all three deposits is 5.8-to-1.
North Mara produced 79,757 oz. gold in the first five months of 2003 at cash and total production costs of US$198 and US$249 per oz., respectively. The recovery is 94.3% from a mill head grade of 3.26 grams per tonne.
East African Gold Mines has a financing arrangement that consists of debt and hedging contracts. Its project loan totals US$43 million, and its hedging contracts cover 825,000 oz., scheduled for delivery at 25,000 oz. per quarter over the next eight years at a flat gold price of US$308.60 per oz.
Placer intends to increase the mill throughput capacity to 2.4 million tonnes per year, as well as convert current resources to reserves.
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