& Placer Dome: Lughts to set up the mood:
canadianmarketwatch.com
The stock under PD is say what?
LOL
Hit me funny:
canadianmarketwatch.com
Chuclauldchucka get that also? Letters are goofed up.
OLD PD news in Jan 01: BY THE SECOND QUARTER 2002....they will need small JUNIORS! IMHO. Slash the EXPLORATION BUDGET?
VANCOUVER- Placer Dome Inc. has confronted the weak gold
priceby shifting some of the cash from a slashed exploration
budgetto a US$25-million fund for research and development
overtwo years.
"Thisindustry has not spent enough on research and
development,"said chief executive Jay Taylor. "Historically, we
[PlacerDome] might have spent US$1-million or US$2-million a
yearon R&D."
Theworld's fifth-largest gold producer, Placer Dome has made
allthe conventional moves to squeeze out costs, including
eliminatingabout 200 middle and senior managers earlier this
yearand requiring its 14 mines to attack operating costs.
Mr.Taylor, a 54-year-old engineer who joined the company in
1972,became Placer Dome president in September, 1999, and
CEOin February this year. He has had a major hand in the
toughdecisions forced on him by the low gold price.
"Themarket is therapeutic," Mr. Taylor said. "You adapt or you
survive.How many businesses do you know that can lose 25%
offthe top line and still survive? We have basically adapted to
agold price at US$275 an ounce."
Hequestions how much more room he has for slashing costs by the usual
methods.That
iswhy the company has mounted what likely is the largest R&D program in
PlacerDome's
history.
Theprojects underway target everything from more effective use of
energyto more
automationat the mines. For example, mining equipment underground is
poweredprimarily
byelectricity or by diesel engines, requiring a significant amount of
ventilation.At some of
itsmines, notably in Northern Ontario, Placer Dome burns huge amounts
ofexpensive
propaneto heat cold air before it is pumped down mine shafts.
Anotherinitiative is investigating whether some of the giant mining
trucksin open pit
minescould be operated by remote control.
Yetother initiatives are reviewing process technology, in search of
breakthroughs
comparableto the heap leaching methods that were developed in the
industry30 years
ago,making mineral extraction from ore much cheaper.
"I'manticipating we'll find something," he said.
Thecash for R&D came from redirecting exploration dollars. Placer Dome
hasspent as
muchas US$120-million a year on exploration around the world. In 2000
andagain in
2001,that budget will be about US$60-million and 60% of that is being
spentat properties
wherethe company already mines gold.
Sincethe gold price began its long skid four years ago, exploration
budgetshave been
slashedaround the world by about 50%.
"Inan already oversupplied market, does it make sense to find more?"
Mr.Taylor asks.
Annualglobal gold production is running at about 75% of demand -- but
thedifference is
satisfiedby central bank selling and by other stockpiles. The paradox
isthat the industry
continuesto produce prodigiously. Placer Dome's annual production has
leveledat three
millionoz. a year after rising by a third since 1995.
"Thewhole industry is chewing through its whole mineral inventory at an
incredibleclip,"
Mr.Taylor said. He believes that the gold price bottomed out in 2000,
albeitat an
"unacceptablelevel" that has put a chill on the industry. "You can't
findor buy assets
thatwill give an adequate return to our shareholders at US$275 gold,"
hesaid.
Withnearly US$400-million in cash and nearly US$500-million in its
hedgebook, Placer
Domeis ready to consider more acquisitions or major exploration
projectsbut, Mr. Taylor
said,not much of what is available is attractive.
"Thoselarge deposits that are undeveloped are undeveloped for good
reason,"he said.
Themost likely opportunity could arise in South Africa. Two years ago
PlacerDome paid
US$235-millionfor a 50% interest in the so-called South Deep gold
project.This is one of
thelargest gold deposits in the Witwatersrand basin, with proven and
probablereserves of
60million oz. The mine now produces about 300,000 oz. a year and is
beingexpanded by
Placerto 700,000 oz.
WesternAreas Ltd., its partner, recently has invited bids for the other
50%,attracting a
numberof potential suitors including Barrick Gold Corp., which is
reportedby Western
Areasto have made an "indicative bid."
"Wehave a strong right of first refusal," Mr. Taylor said. "We couldn't
buy100% two years
ago."
Theother property absorbing much of Placer Dome's exploration and
development
spendingis the Getchell project in Nevada. Placer Dome acquired
GetchellGold Corp. in a
shareexchange in May, 1999, and promptly stopped mining to resume
exploration.By the
secondquarter next year, underground work will have Placer Dome into
the high-grade
Northzone, which the company believes contains nine million oz.
"Weknew when we bought it that the previous owners did not have a
workinggeological
model,"Mr. Taylor said. "We've developed a very good model. We now
understandthis
area.It's getting to where I want it to be." |
