A day after deciding to reduce its hedgebook, Placer Dome (PDG-T) has extended its takeover offer for AurionGold, an Australian producer that is itself heavily hedged.
Placer now has nearly a third of AurionGold, making it the single largest shareholder. The next two largest holders hold about 10% each, and it is this new ownership structure that prompted the extension.
“We strongly believe our offer is attractive…and that an investment in Placer Dome provides significantly more liquidity globally than AurionGold and greater leverage to an increasing gold price,” stated Placer President Jay Taylor in a prepared release.
Placer also noted that AurionGold’s weighting in various indices will be reduced to reflect its final holding, forcing index investors to sell their shares. This, in turn, may reduce the company’s market value.
The conditions of the offer remain unchanged: 17.5 Placer Dome shares and $28 for every 100 AurionGold shares. On August 28, that put Placer’s implied value of AurionGold at A$3.38 per share, or roughly 3% more than the actual closing price.
Meanwhile, Placer expects to enter 2003 with 6.8 million ounces hedged at more than US$400 per oz.. This represents a 20% reduction to the book, reflecting both production over the remainder of the current year and the elimination of 1 million ounces committed to call options having maturity dates in 2003 or 2004.
Placer’s forward sales program contributed US$54 million to earnings in the first half of 2002 and, as of June 30, had a positive mark-to-market value of US$223 million.
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