Placer pumps production projection

With more than 91% of AurionGold’s shares in its grasp, Placer Dome (PDG-T) intends to compulsorily acquire the rest of the Aussie gold miner’s shares.

Placer expects to have the remaining shares within two months, at which time it will seek to have them de-listed.

Placer originally launched its bid for AurionGold in late May, but AurionGold’s board rejected the offer of 17.5 Placer shares for every 100 AurionGold shares and wrangled for a cash sweetener. The A35-per-share sweetener came in late July, but AurionGold’s board still wasn’t satisfied, citing Placer’s slumping shares price – the board again recommended that shareholders reject the offer.

Not until Placer had about 45% of AurionGold’s shares (and after umpteen bid extensions) did the Australian company’s board finally submit and recommend acceptance. The board also announced a special dividend of A10 per share, reducing Placers’ cash outlay.

With the AurionGold acquisition all but wrapped up, Placer has boosted its 2003 production target by 40% to 3.5 million oz.

“With the completion of the AurionGold acquisition, approximately 70% of our gold production in 2003 will come from Australia and North America,” says Placer’s chief executive officer Jay Taylor.At the end of September, Placer had 7.1 million oz. hedged, or about 16% of reserves, at an average price of US$410 per oz. over 14 years. The Aurion deal adds another 5.95 million oz. to the book (as of the end of June). Those ounces counted for about 78% of Aurion’s reserves and had a mark-to-market value of negative A$393 million. The hedge book is dominated by Australian-dollar-denominated purchased put options and sold call options. Aurion is not subject to margin calls from its counterparties.

Taylor also expects cash flow from operations to ring in at $450 million or $1.11 per share, and operating earnings to come in at $375 million. Both figures are based on a gold price of US$325 per oz. Cash and total costs are expected to be approximately US$185 and US$255 per oz., respectively. That’s up from US$182 and US$230 per oz. in 2002. The increase is attributed to the fair-value accounting treatment of the production gained from AurionGold.

As a result of the acquisition, Standard & Poor’s announced that it will boost the relative weight of Placer Dome by 0.14% in the S&P/TSX Composite and S&P/TSX Capped Composite indices after markets close on Nov. 11.

The company’s weight will also rise by 0.19% in the S& P/TSX 60 and S&P/TSX 60 Capped indices, by 0.17% in the TSX 100, by 0.89% in the S&P/TSX Canadian Materials Sector, and by 2.86% in the S&P/TSX Canadian Gold Sector index.

Placer expects to report increased reserves along with its 2002 financial results at year-end.

Placer’s shares stood out form the pack trading 38 higher at $15.88 in mid-afternoon trade in Toronto on Monday. Rumours citing Placer as a possible takeover target have boosted shares of late.