Placer Dome posts weak quarter

Shares in gold-mining heavyweight, Placer Dome (PDG-T), were off sharply on the Toronto Stock Exchange, as the company’s fourth quarter earnings slumped on lower production and higher costs. The shares fell by $1.64 to close at $21.86, a 7% drop, the day following the announcement, and another 2.5% a day later.

The company earned US$39 million, or 9 per share, on revenue of US$460 million for the fourth quarter of 2004, compared with a profit of US$81 million, or 20 a share, on sales of US$492 million a year earlier.

The weak fourth quarter had a dampening effect on Placer’s yearly results, over which the company produced less gold and copper, and both at higher costs.

Placer reported earnings of US$284 million for 2004, (68 a share) on revenues of US$1.89 billion, which represents a 24% rise over 2003 earnings of US$229 million (56 a share) on revenues of US$1.76 billion.

Placer produced 3.65 million oz. gold at cash costs of US$240 per oz. versus 3.86 million produced at cash costs of US$218 per oz. last year.

The company realized a gold price of US$391 per oz. for the year, which is US$18 below the average gold spot price. Placer Dome reduced its hedge by 1.5 million oz. which leaves 9 million oz. sold forward, which it aims to trim back to 7.5 million oz. this year.

Over the 12-month period, Placer produced 423 million lbs. copper at costs of US55 per lb. compared with 425 million lbs. at US52 in 2003.

Looking forward, the company aims to increase gold production slightly, to 3.7 million oz. at total costs of US$315 to US$325 per oz. this year. Total costs for gold production in 2004 were US$298 an oz.

Meanwhile, copper production will be in the 410-420 million lbs. range, at higher cash costs of US60-65 per lb.

This year, the company expects to make long-awaited decisions on its Cortez Hills project in Nevada, its Pueblo Viejo mine in the Dominican Republic, and at Cerro Casale in Chile.

On its home turf, Placer is dusting off its Mount Milligan copperproject, in northern British Columbia. The company will gear the prefeasibility work to determine whether Mount Milligan should move forward to the feasibility stage. Mount Milligan is a large-scale copper porphyry project that has been sitting idle for the past decade.

The company has budgeted US$90 million for exploration this year, the bulk of which will be spent in the vicinity of the company’s operating mines.

The company’s US$452 million equity financing late last year, gave it more than US$1 billion in cash at the end of 2004.