Placer Dome disappoints with US$7 million Q2 loss

Vancouver – With an acknowledgment of poor performance, Placer Dome (PDG-T) announced a loss of US$7 million, or 1 per share, for its 2005 second quarter.

In light of strong gold prices, the loss is indicative of the increased cost base and currency issues being borne by mining companies. Placer Dome was also impacted by a drop in copper output and increased hedging losses.

A US$15-million tax charge on an Australian valuation allowance pushed the company into the red for the quarter.

Gold production improved slightly in the latest quarter at 916,000 oz., up from 908,000 oz. in the same quarter of 2004, at significantly higher total production costs of US$349 per oz., versus US$283 in 2004. Despite an average London spot price of US$427 per oz. over the quarter, the company realized a gold sale price of US$391 per oz. due to its maturing hedge positions. Losses attributable to hedge position servicing are expected to drop in the second half of 2005.

Operational issues at the Zaldivar mine impacted Placer’s copper production, off significantly on the quarter at 90 million pounds versus 109 million pounds last year. Total production costs were US80 per pound, up 27% from the US63 per pound incurred in Q2-2004. Copper was sold at an average of US$1.36 per pound, below the average London spot price of US$1.54 per pound. The copper hedge position will drop by about half over the remainder of 2005, allowing the company to benefit more from strong prices for the metal.

In a prepared statement, President and CEO Peter Tomsett commented: “This quarter does not reflect the performance our assets are capable of delivering. The combination of a challenging cost environment and operating issues at a number of mines are impacting our results and we are addressing these issues.”

North American operations generally performed well, however a 9% appreciation in the Canadian dollar against the U.S. dollar added to increased production costs at Canadian mines.

Production from the Porgera mine, in Papua New Guinea, was 11% below the prior-year’s quarter due to ongoing erosion and slides in the pit, thwarting access to a higher-grade ore zone. Additionally, production costs grew due to currency appreciation and higher fuel prices.

Australian operations were buoyed by performance from the Granny Smith mine where production was up 74%, over the corresponding quarter of the prior year, due to processing of higher-grade ore. Output from Osborne was up marginally this latest quarter, with production from the Kalgoorlie and Henty operations down 4% and 38% respectively.

At the South Deep mine, in South Africa, performance improved with Placer’s 50% share of production up 10% over Q2-2004. The North Mara mine in Tanzania also performed well over the quarter with output up 13% due to a recently completed mill expansion; however total operating costs swelled 75%.

Copper production from Zaldivar, in Chile, saw a 23% drop versus the prior year period due to mining of a lower grade zone and pit wall failure, hampering access to a higher-grade zone. Additionally, problems in the ore conveying system impacted the amount of ore stacked on the leach pads.

The company has earmarked US$30 million this year for ongoing feasibility and pre-feasibility studies on its five advanced stage projects. Reviewing development plans, Tomsett stated, “We remain on track to make decisions in the second half of the year on three of the projects in our development portfolio: Cerro Casale (Chile), Cortez Hills (Nevada) and Pueblo Viejo (Dominican Republic).”Advanced exploration work will also continue on Donlin Creek, in Alaska, and at Mount Milligan, in B.C.

Annual production for 2005 is on track for 3.6 million oz. of gold and 380 million pounds of copper.

Investors punished the senior gold miner, which shed as much as $1.58 per share before closing down 58 at $17.30 per share on TSX volume over 6.3 million.