NEVADA & THE WESTERN STATES — Getchell, Placer complete merger — Full capacity projected at 800,000 oz. per year

In a deal valued at US$1.1 billion, shareholders of Getchell Gold (GGO-X) have agreed to merge with Placer Bullion Acquisition, a wholly owned subsidiary of Placer Dome (PDG-N).

The merger is the result of a silent bidding for the junior company late last year. Placer offered Getchell shareholders 2.45 shares of Placer for every Getchell share, for a total of 79 million shares. The offer valued Getchell shares at US$34.45 each at a time when they were trading at around US$16 per share.

“We took this company from US$8 per share, with reserves of 1.3 million oz. in 1988, and transformed it into US$28 per share, with reserves of 6.4 million oz. at a gold price of US$270,” said Getchell Chairman Kelley Williams at the company’s final annual meeting. “It was quite an accomplishment.”

Getchell’s sole asset is in northern Nevada, where it controls 50 sq. miles within the Getchell Trend, at the foot of the Osgood Mountains, northeast of Winnemucca.

In the mid-1990s, at at time when it was in the waning stages of mining the main Getchell deposit, the company located the huge Turquoise Ridge deposit. At the time, the company was known as FirstMiss, and was a wholly owned subsidiary of First Mississippi.

Getchell’s development of the deposit was not free of complications. For example, condemnation drilling and dewatering for the production shaft encountered ore-grade mineralization, which later became the Shaft zone. And although the company raised US$137 million in its initial public offering in 1995, construction costs proved higher than anticipated. Developing such a huge deposit was beyond the reach of a mid-size gold producer. Since its discovery, the property had grown to 6.5 million oz. in reserves (18.5 million tons averaging 0.35 oz. per ton), with the resource estimated at 9.4 million oz. Moreover, the company had explored only a fraction of the property.

Enter Placer Dome, which had the money and the experience to develop an underground mine the size of Turquoise Ridge.

Now that the merger is complete, Placer intends to carry on with development and increase mill capacity to 2,300 tons per day. Currently, the operation is hoisting only 640 tons of ore per day to the surface, and Placer hopes to raise that to 1,800 tons by year-end.

The cost of getting the mine up and running at full capacity (800,000 oz. per year) is pegged at US$230 million. Placer expects to achieve this by 2003. Indications are that cash operating costs will not exceed US$200 per oz.

Placer has also earmarked US$20 million in annual exploration expenses; as a result, the company expects reserves and resources to climb beyond 20 million oz.

In the recent first quarter, Getchell incurred a loss of US$15.5 million (or 50 cents per share), compared with a loss of US$4.9 million (8 cents per share) in the corresponding period of 1998. The loss in the 1999 first quarter reflects an accounting change — specifically, unamortized costs, net of revenue, incurred in production of development ore at Turquoise Ridge, and from the Getchell underground mine, in 1994 and 1995. Without the change, the company would likely have incurred a loss of only US$7.7 million (25 cents per share).

At the Getchell mine, longhole open-stoping succeeded in raising output to 1,250 tons per day, whle driving down mining costs to US$45 per ton.

The company produced 49,886 oz. gold in the recent first quarter, up from 31,953 oz. a year ago. Price protection allowed Getchell to realize US$307 per oz. gold sold, boosting revenues to US$14.5 million.

Placer Dome is no stranger to Nevada. The major already owns a 60% interest in the Cortez joint venture, which operates the Pipeline gold mine, southwest of Beowawe. Rio Tinto (RTP-N) owns the remaining 40% through its subsidiary, Kennecott Minerals. Placer also operates the smaller Bald Mountain mine, northwest of Ely.

Getchell represents the third leg in Placer’s plan to develop low-cost production at a time of lower gold prices.

Placer recently resumed construction on the US$575-million Las Cristinas mine in southeastern Venezuela, where 530,000 oz. annually are forecast over the first 10 years of operations at a cash operating cost of US$155 per oz.

Earlier in the year, the company formed a joint venture with South Africa’s Western Areas to develop the huge South Deep deposit. Scheduled for production in 2002, the operation should contribute 375,000 oz. annually at a cost of US$185 per oz.

In all, Placer hopes to boost its production to 3.5 million oz. by 2003, building reserves to more than 80 million oz. The company expects to produce 3.2 million oz. in 1999, including Getchell, at a cash operating cost of US$170 per oz., and at a total cost of US$240 per oz.

As a result of the merger, Getchell’s Kelley Williams joins Placer’s board of directors.