Placer moves to complete AurionGold takeover

With more than 91% of AurionGold‘s shares in its grasp, Placer Dome (PDG-T) intends to exercise its rights to acquire the remainder.

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

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

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

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

“With completion of the Aurion 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 Sept. 30, Placer had 7.1 million oz., or about 16% of reserves, hedged at an average price of US$410 per oz. over 14 years. The Aurion deal adds 5.9 million oz. to the book. Those ounces counted for about 78% of Aurion’s reserves and have 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 expects cash flow from operations to ring in at $450 million (or $1.11 per share), and operating earnings to total $375 million. Both figures are based on a gold price of US$325 per oz.

Cash and total costs are projected at 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 Aurion.

As a result of the acquisition, Standard & Poor’s boosted the relative weight of Placer by 0.14% in the S&P/TSX Composite and S&P/ TSX Capped Composite indices after markets closed 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, at year-end, to report increased reserves along with its 2002 financial results.

After underperforming for most of the takeover period, Placer’s shares rebounded strongly from below $13 in early October to trade at $15.62 at presstime. The rise has been driven in part by renewed rumours citing Placer as a possible takeover target.