Placer CEO won't be pressured into takeovers
(UPDATE: Adds details throughout; U.S. dollars unless noted)
By Lesley Wroughton
TORONTO, Jan 24 (Reuters) - Placer Dome Inc.'s (Toronto:PDG.TO - news) chief executive said on Thursday he will not be coaxed into costly acquisitions to keep up with Newmont Mining Corp's (NYSE:NEM - news) $2.1-billlion takeover of Australia's Normandy Mining, which created the world's biggest gold miner.
``I am under no pressure to do a bad deal. We have done bad deals because we had (gold) price expectations and I am not going to get suckered into that,'' Placer CEO Jay Taylor said in an interview amid speculation that his firm or Barrick Gold Corp. (Toronto:ABX.TO - news) were aiming for Australia's Newcrest Mining Corp. (Australia:NCM.AX - news) in a consolidation sweep that began last year.
Placer, already a global player with assets in Australia, Chile, South Africa, Canada and the United States, has had its share of bad deals and Taylor is openly gunshy.
Last year, Placer took a $292 million write-off of the Getchell deposit in Nevada after acquiring it in 1999 via a stock offering worth $1 billion. It later admitted it had been too optimistic about the mine's prospects and the gold price.
``The market likes the sizzle of the big deals but I have a value-creation strategy,'' Taylor said. ``I am interested in building value from core assets based on a disciplined reinvestment program in exploration and the acquisition of outstanding interests in projects.''
He said Placer was eager to look at assets that will be spun off after the three-way merger of Newmont, Franco-Nevada Mining Corp. (Toronto:FN.TO - news), and Normandy. The merger will produce about 30 mines and Newmont has said not all fit its profile.
Among the assets are the La Coipa gold-silver project in Chile which is owned 50-50 by TVX-Normandy and operator Placer Dome. The other joint venture with TVX-Normandy is the Musselwhite project in Canada.
TVX Gold (Toronto:TVX.TO - news) controls 50 percent plus a share in TVX-Normandy Americas and any decision to sell a stake in any of the mines will require TVX's permission.
NO BETS ON GOLD
Taylor said it would not be easy to convince partners to sell assets at the current gold price of $278.60 an ounce.
``A lot of the properties we have are obvious quality and joint venture partners know that, and they are not willing to sell that especially at the bottom of the cycle,'' he said, adding Placer has a war chest of about $450 million in cash.
And Taylor is not betting on gold moving outside the $275 to $285 an ounce range in the next three years -- unlike many in the industry who believe it could climb to $300 this year.
``I think gold is increasingly behaving like a commodity in supply-demand fundamentals and is increasingly disengaged from war, insurrection and fiscal instability that has traditionally driven it,'' he said.
Taylor said he was committed to a ``measured'' program of hedging that locks in higher prices.
``I am a realist and we have a lot of gold in loose hands that is being bled into the market and we need to get that into more secure hands,'' he said. ``There has to be more rationalization of the primary mine site supply -- and consolidation fits into that picture -- but until the fundamentals of the paradigm change, you are not going to see gold move up,'' he said.
Placer's forward sales program realized $60 an ounce premium over the spot price of $274 for the third quarter. The company is expected to produce 2.7 million ounces of gold and 405 million pounds of copper in 2001.
Taylor is determined to replace maturing mines with quality deposits and maintains one of the biggest gold exploration budgets in the business-- at around $50 million a year.
Analysts remain concerned about the decline in Placer's production profile but Taylor said he has a multi-pronged program to deal with it.
It includes optimizing assets, spending on exploration in areas where it already has processing plants in prolific gold belts, and applying new techniques to mining.
He said Placer was still considering closing its Golden Sunlight mine in Montana, now in its final years of production. However, it may be avoided through a combination of open pit and underground mining, he added.
(Reuters Toronto newsroom +416-941-8100, toronto.newsroom@reuters.com)
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