Barrick eyes last bite of Placer

Barrick Gold (ABX-T, ABX-N) plans to compulsorily acquire the balance of Placer Dome‘s (PDG-T, PDG-N) shares, after its bid breached the 90%-level required under the Canada Business Corporations Act.

The milestone was reached after Barrick recently took up an additional 61 million shares, which represent around 14% of Placer’s outstanding shares. In return, the world’s largest gold miner will fork over US$169 million in cash accompanied by 44 million of its own shares.

Combined with some 358 million Placer shares tendered in mid-January, Barrick now holds around 419 million shares, representing 94% of its rival’s outstanding issue. The company expects to wrap up the forced tender of Placer’s 25 million remaining shares in about a month.

“We are pleased to reach this significant milestone,” said Barrick chief executive Greg Wilkins in a statement. “The powerful combination of these companies will bring the assets, people and projects together to deliver value to all stakeholders.”

As part of Barrick’s US$10.4-billion takeover of Placer, it will inherit a 50% stake in the delayed South Deep gold mine, 45 km southwest of Johannesburg in the Witwatersrand basin.

Placer and equal partner Western Areas (WSA-T, WSA-A) recently completed a year-and-a-half review of the mine’s reserves and resources, which in the end will see Placer halve its share of year-end 2005 proven and probable gold reserves. Some of the trimmed ounces will be shifted to the measured and indicated category.

At the end of 2004, Placer’s share of South Deep reserves was pegged at 110.8 million tonnes running 7.8 grams gold per tonne, for 27.8 million contained ounces. The bulk of that tonnage is classified as probable. Measured and indicated resources amounted to around 15.6 million tonnes grading 11 grams gold.

Placer says the reduction is mostly owing to a new geological model incorporating new data and geological controls and refinements. It also reflects an enlargement of regional pillars aimed at improving their stability and reducing seismic risk. In addition, the introduction of long-hole stoping in certain areas of the mine plan meant increased tonnages of lower-grade material were included.

The changes will be most felt by the phase-2 mining plan, which focuses on reserves below existing infrastructure. Reserves there are expected to fall by a total of around 19 million oz. Phase-2 production isn’t slated to begin for at least 20 years. The company says phase-1 mining reserves, which can be mined via existing infrastructure, will likely be little changed.

On a brighter note, Placer says that seismic surveying has indicated a shallower-than-modelled dip in certain parts of the orebody, which should allow for exploitation from the existing shaft system. The material had previously been designated as below infrastructure. The change is expected to reduce longer-term capital requirements.

Placer will update its company-wide reserve and resource estimates later this month.

Placer’s share of production from South Deep in 2005 is estimated at 225,000 oz. at a cash cost of US$385 per oz.; in 2004, Placer took home 214,293 oz. produced at US$394 apiece. The South Deep twin-shaft expansion, which was commissioned in late 2004 after years of delay, is expected to boost total annual production to 750,000 oz. over 70 years.