Placer Dome circular gives merger reasons

Further details on the proposed merger of Placer Development, Dome Mines and Campbell Red Lake Mines are now available in a half-inch-thick information circular that is being mailed to shareholders. Listing reasons for the merger, the companies emphasize that Placer Dome Inc. (the merged company) will be the world’s largest gold producer outside South Africa and the Soviet Union with near- term production of more than one million ounces. It will also have a broad portfolio of operating gold mines plus development and exploration properties in North America and internationally.

They also conclude that Placer Dome’s size and the geographic diversity of assets and personnel should provide it with greater exposure to potential investment opportunities. From the operational standpoint, the merger will also combine Placer Development’s open pit mining expertise with Dome’s and Campbell’s underground experience which spans several decades.

Placer Dome’s balance sheet will be stronger and the company expects substantial cash flow and a greater capability of financing future expansion. The larger entity will also use the “pooling-of- interests” method of accounting without the impact on earnings associated with purchase method accounting.

Lastly, there will be no increase in the consolidated indebtedness of Placer Dome which should enhance the potential for increased earnings and cash flow from the combined business, they state. Higher production, reserves

The merger will give Placer Development higher gold production and reserves per share, a lower average cost per oz, a higher percentage of gold production within Canada and North America, and equity in the Campbell mine, one of the lowest-cost operations in North America.

Dome Mines, on the other hand, will join a company with a history of growth (Placer Development) and be part of its plans to develop new mining operations in countries like Papua New Guinea. The new company will have higher earnings and cash flow and a lower cash cost per oz, they add. Dome’s exposure through its loan guarantee to Dome Petroleum will also be diminished by the merger.

The benefits to Campbell are almost identical but minority shareholders will no longer hold equity in a company controlled by another company. (Dome Mines currently holds a 50.01% interest in Campbell but that shareholding will be cancelled with the merger.)

Incidentally, the government of Papua New Guinea recently granted approval for Placer Development’s Misima gold project subject to finalization and signing of documentation. Placer Pacific, a subsidiary, recently secured a $93.6- million private placement which will be used to finance part of the $278-million project. The government will be able to purchase a 20% interest in the development. Merger details

Under the merger proposal, Placer shareholders will receive one share in the new company for each Placer share held previously. Dome shareholders will receive 0.851 shares and Campbell shareholders 1.702 shares. Approval for the merger will be sought at extraordinary meetings to be held Aug 12. If approved, the merger would become effective Aug 13. Proxy forms have to be submitted to The Royal Trust Co. by 12.01 p.m. Toronto time Aug11.