Placer prevails as AurionGold caves in (October 15, 2002)

Vancouver — It may have taken five long months but Placer Dome (PDG-T) has finally won over AurionGold’s management team in its $1.2-billion hostile takeover battle for the Australian miner.

AurionGold reversed its 5-month long rejection of the takeover bid by telling shareholders to accept the hostile offer and declaring a special dividend of A$0.10

“Each of the directors of AurionGold recommends that shareholders either accept Placer’s offer or sell their shares on market while the offer remains open,” says AurionGold’s managing director, Terry Burgess.

The about face effectively delivers Australia’s largest gold producer, capable of mining one million oz a year, to Placer, which has steadily gained a bigger piece of the Aussie company since launching the offer in May.

With Placer already holding 45% of its shares, AurionGold said it was no longer in the best interests of its shareholders to reject the offer of 17.5 of its shares for every 100 AurionGold shares, plus A$0.28 cash. The special dividend, to be paid on October 24, reduces Placers’ cash contribution to A$0.18.

Australia’s largest gold miner cited several reason for its change of heart including, a failure to attract rival bids, the prospects of reduce stock liquidity due to Placer’s increasing ownership and the prospect that the company’s shares could decline once the offer closed.

Placer’s original all-scrip offer valued AurionGold at A$4.51 a share, but Placer shares have since dropped in line with weaker equity markets, diluting the value of the offer despite adding the cash incentive in late July.

The bid, which has been extended nine times, is slated to close Oct. 25, but AurionGold has requested that Placer Dome extend the offer, yet again, in order to allow shareholders adequate time, following payment of the special dividend, to consider their position in light of the change in recommendation. Placer Dome is considering the request.

“Placer Dome aims to increase its ownership so that tax rollover relief will become available to qualifying AurionGold shareholders and so that, on reaching 100% ownership, the full benefit of synergies will be available to the combined group,” says Placer’s president, Jay Taylor.

The combined company will be the fifth largest gold miner in the world with interests in 17 gold mines on four continents and significant land positions in key gold-producing regions in western Australia, Nevada, northern Ontario and South Africa. The new company would have production of 3.8 million oz of gold a year.

Placer, which produced 2.8 million oz of gold last year and had assets of about US$2.7 billion, expects to generate at least US$25 million in annual savings from combining the two companies.

In South Africa, the latest draft of the mine charter, is not expected to materially and adversely impact Placer’s South Deep gold operations over the long term.

“In the context of the overall economic policy framework for mineral development, we believe this will lead to increased stability and an improved investment climate over the long term,” states Taylor.

While still in draft form, the revised charter contains targets to increase black ownership of South African mining industry assets to 26% in 10 years.

“At this point we believe there will be both costs and longer-term benefits associated with this proposal, but with the information we currently have, we cannot quantify these,” says Taylor. “A key missing element is the scorecard, which will measure the level and type of HDSA (black) participation that is needed.”

Canada’s second largest gold miner also resumed operations at the Porgera mine in Papua New Guinea. Gold production at the site has been halted since mid-July, when election-related vandalism targeted the power grid from the Hides gas field in the country’s southern highlands.

Power was restored to the property on October 9 and the process of restarting the plant is underway. Full production is expected by October 12. The interruption is expected to cut Porgera’s 2002 gold production by 120,000 oz. to 560,000 oz. That will reduce Placer Dome’s share by 60,000 oz. to 280,000 oz.

Porgera is held 50% by Placer with the remaining half split equally between Oil Search and AurionGold.