Barrick reaches summit

Barrick Gold‘s (ABX-T, ABX-N) quest to become the world’s biggest gold miner is all but complete with the acquisition of an 81% stake in rival Placer Dome (PDG-T, PDG-N).

Barrick said that as of Jan. 19, some 358 million Placer shares had been tendered to its offer. The shares represent 81% of Placer’s common shares (78% on a fully diluted basis). Barrick plans to pay for the shares by Jan. 23.

The acquisition is accompanied by a change of control at Placer, where chief executive Peter Tomsett has resigned; Barrick president and CEO Greg Wilkins is his replacement. Eight other Placer officers also left. The three holdovers from the old Placer board include the company’s former chairman, Robert Franklin.

Payment for the shares taken up so far will take the form of around 260 million Barrick shares and US$992 million in cash. Under Barrick’s friendly bid, which was sweetened on Dec. 22, Placer shareholders are offered US$22.50 in cash or 0.8269 of a Barrick share plus a nickel for each share tendered. The cash portion of the bid is capped at US$1.34 billion, while the scrip is limited to 333 million shares.

The company has also extended its offer until Feb. 3 to give Placer shareholders more time to turn in their shares.

“If Barrick is successful in acquiring 90% of the shares of Placer Dome under the offer, it intends to acquire all remaining shares by compulsory acquisition,” the company said in a statement.

“We are pleased that Placer Dome shareholders have accepted our offer, and we welcome them as Barrick shareholders,” Wilkins said. “We look forward to working with Placer Dome’s talented employees and, with them, commencing the process of integrating these two great companies.”

On completion, the transaction would see Barrick leapfrog Denver-based Newmont Mining (NMC-T, NEM-N) to become the world’s largest gold producer, with annual output of roughly 8.3 million oz. and reserves of 150 million oz. The deal’s US$10.4-billion price tag would also set the new high-water mark for acquisitions in the gold mining industry.

As part of the deal, Goldcorp (G-T, GG-N) will pay US$1.5 billion in cash for Placer’s major Canadian assets, including the Campbell mine, adjacent to its flagship Red Lake gold mine in northwestern Ontario. Placer recently announced a downdip extension of Red Lake’s High Grade zone onto Campbell.

Despite focusing on the integration of Placer, the newly merged company has already inked a 3-way deal with Aussie juniors Gateway Mining (GML-A) and Red 5 (RED-A). Under the deal, Placer can earn a 60% stake in several tenements in the Gum Creek greenstone belt in Western Australia.

To do so, the major must spend A$2.5 million (US$1.9 million) over three years. Thereafter, the juniors would each be carried with a 20% stake. Placer could then pick up another 10% from Gateway for an additional A$1.5 million (US$1.1 million) over the subsequent 2 years.

Placer plans a campaign of rotary-air-blast (RAB) and reverse-circulation drilling along the Julia’s Fault-Victory Creek trend, and deep diamond drilling on the Victory Creek magnetic anomaly. Previous drilling at Victory Creek yielded up to 7 metres running 1.76 grams gold per tonne.

Gateway says Victory Creek shows similarities to Placer’s nearby Wallaby deposit. Production for 2005 at Wallaby was forecast at 350,000 oz. at US$430 per oz. Placer plans US$35 million worth of underground development aimed at converting gold resources immediately below the active pit.

Placer also plans follow-up drilling on Gateway’s Cup and Bypass prospects where previous RAB drilling returned up to 3.16 grams gold per tonne over 12 metres.