Barrick targets Placer minorities

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 prepared 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 Johannesburg Stock Exchange-listed Western Areas recently completed a review of the mine’s reserves and resources, which in the end will see Placer halve its share of proven and probable reserves for yearend 2005. As a result, measured and indicated resources (excluding reserves) will increase compared with the end of 2004.

At the end of 2004, Placer’s share of proven and probable reserves at South Deep was pegged at 110.8 million tonnes running 7.8 grams gold, for 27.8 million contained ounces of gold. Some 104.7 million tonnes averaging 7.7 grams were classified as probable. Measured and indicated resources came to around 15.6 million tonnes grading 11 grams gold.

Placer says the change in reserves and resources 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. Additionally, the introduction of long-hole stoping in certain areas of the mine plan meant an inclusion of increased tonnages of lower-grade material.

Placer doesn’t expect the changes to impact the near-term mine plan. The biggest effect will be felt by the phase 2 mining plan, which focuses on reserves below existing infrastructure. Phase 2 production is not scheduled to begin for at least 20 years.

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

Placer will update its year-end mineral reserve and resource estimates for all of its properties later this month. The update is expected to

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 completed late last year is expected to boost total annual production to 750,000 oz. over 70 years.