Placer prevails as AurionGold caves in (October 21, 2002)

Vancouver — After five long months, Placer Dome (PDG-T) has finally won over AurionGold’s management team in its $1.2-billion takeover offer.

The Australian miner reversed its rejection of the takeover bid by telling shareholders to accept the hostile offer and declaring a special dividend of A10.

“Each of the directors of AurionGold recommends that shareholders either accept Placer’s offer or sell their shares on the market while the offer remains open,” says AurionGold’s managing director, Terry Burgess.

The about-face effectively delivers Australia’s largest gold producer, capable of mining 1 million oz. per year, to Placer, which has steadily gained a bigger piece of the Aussie company since launching the offer in May.

With Placer already holding 45% of its shares, AurionGold said it was no longer in the best interests of its shareholders to reject the offer of 17.5 Placer shares for every 100 AurionGold shares, plus A28 cash. The special dividend, to be paid on Oct. 24, reduces Placers’ cash contribution to A18.

Australia’s largest gold miner cited several reasons for its change of heart, including a failure to attract rival bids, the prospects of reduced stock liquidity due to Placer’s increasing ownership, and concerns that the company’s shares would decline once the offer closed.

Placer’s original, all-scrip offer valued AurionGold at A$4.51 a share, but Placer shares have since dropped in line with weaker equity markets, diluting the value of the offer, despite the addition of the cash incentive in late July.

The bid, which had already been extended nine times, was slated to close Oct. 25, but at AurionGold’s request, Placer Dome has extended the offer yet again, to Nov. 1. The latest extension is to allow shareholders adequate time, following payment of the special dividend, to consider their position in light of the change in recommendation.

The recent decision also prompted the two companies to waste no time in changing the look of AurionGold’s board of directors. Four of Placer’s nominees, David Karpin, Arthur Hood, Bob Humphris and Pat Sankey, will be added to the current 8-person board. Following AurionGold’s annual general meeting on Oct. 30, current Managing Director Terry Burgess will step down, along with five other directors.

“Placer Dome aims to increase its ownership so that tax rollover relief will become available to qualifying AurionGold shareholders and so that, on reaching 100% ownership, the full benefit . . . will be available to the combined group,” says Placer President Jay Taylor.

The combined company will be the fifth-largest gold miner in the world, with interests in 17 gold mines on four continents and significant land positions in key gold-producing regions in Western Australia, Nevada, northern Ontario and South Africa. The new company would have annual production of 3.8 million oz. gold.

Placer, which produced 2.8 million oz. gold last year and has assets of about US$2.7 billion, expects to generate at least US$25 million in annual savings from combining the two companies.

Meanwhile, in South Africa, the latest draft of the mine charter is not expected to materially and adversely impact Placer’s South Deep gold operations over the long term.

“In the context of the overall economic policy framework for mineral development, we believe this will lead to increased stability and an improved investment climate over the long term,” states Taylor.

While still in draft form, the revised charter contains targets to increase black ownership of South African mining industry assets to 26% in 10 years.

“At this point, we believe there will be both costs and longer-term benefits associated with this proposal, but with the information we currently have, we cannot quantify these,” says Taylor. “A key missing element is the scorecard, which will measure the level and type of HDSA [black] participation that is needed.”

The company also reports having resumed operations at the Porgera mine in Papua New Guinea.

Gold production at the site had been halted since mid-July, when election-related vandalism targeted the power grid from the Hides gas field in the country’s southern highlands.

Power was restored to the property in early October, and the process of restarting the plant is under way. The interruption is expected to cut Porgera’s 2002 gold production by 120,000 oz., to 560,000 oz. That will reduce Placer Dome’s share by 60,000 oz., to 280,000 oz.

Porgera is held 50% by Placer, with the remaining half split equally between Oil Search and AurionGold.

See PLACER Page 3