Placer Dome Attributes Takeover Costs to 44% Drop in Profits
By Tara Perkins
20 Feb 2006 at 02:02 PM EST
TORONTO (CP) -- Placer Dome Inc. [TSX:PDG; NYSE:PDG] released its last set of financial statements Monday, reporting a 44% drop in fourth-quarter profit while it prepares to be acquired by rival Barrick Gold Corp. in a $10.4-billion deal.
The company said it spent $21 million in relation to the takeover during the final three months of 2005 as its profits fell to $22 million, from $39 million a year earlier.
The Vancouver-based company reports in U.S. dollars.
The amalgamation of Placer and Toronto-based Barrick [TSX:ABX; NYSE:ABX] should be finished by the end of March, and Placer's results for the final three months of 2005 were released ''for information purposes'' only, said spokeswoman Gayle Stewart.
Barrick is scooping up the last of Placer's shares by compulsory acquisition, having received 94% of the stock by the time its takeover offer expired in the first week of February.
The deal turns Barrick into the world's biggest gold producer.
Barrick is set to release its financial results after markets close Wednesday and the consensus forecast by analysts surveyed by Thomson Financial is for fourth-quarter earnings of 26 cents per share.
Barrick appears to have already exerted its influence on Placer's gold-price hedge book.
In its release Monday, Placer said: ''Following a change in control of the company, Placer Dome reduced and restructured its gold sales commitments, primarily through the repurchase of approximately one million call options and gold lease rate ounce obligations at a cost of approximately $222 million.''
As a result of delivering into gold contracts and the repurchase of call options, the company's maximum committed ounces were trimmed to about 6.2 million at Feb. 17, or about 10% of the company's 2005 year-end gold reserves.
At Sept. 30, the combined hedge book of Barrick and Placer would have been 20.9 million ounces - the largest hedge book in the industry.
Gold hedging lends stability to earnings when gold prices are low, but cuts into profits when prices are high. As gold prices have soared to 25-year highs recently, it has been a contentious issue.
Meanwhile, Placer said its fourth-quarter earnings amounted to five cents per share, down from nine cents a share in the same period of 2004.
Mine operating earnings rose 95% to $152 million, helped by higher metal prices and gold production. But that increase was offset by costs related to Barrick's takeover, and higher spending on resource development, technology, and other items.
Placer spent $21 million in connection with the Barrick deal. That's ''certainly a lot of money to spend when there was really not much of a fight,'' said Research Capital Corp. analyst Barry Allan.
Barrick launched a hostile offer for Placer last Halloween. Placer's board accepted a higher offer Dec. 22 after no rival suitors came forward publicly.
Placer's fourth-quarter cash cost per ounce of gold was $290 and its cash cost per pound of copper was 66 cents.
''The cost base for Placer is too high,'' Allan said. ''It is really Barrick's agenda to shake some costs out.''
Placer said its gold mining costs were as expected, while production of 919,000 ounces of gold exceeded expectations.
Costs at the South Deep mine in South Africa came in above the company's guidance by $10 an ounce, at $382 per ounce, due to higher maintenance and transport costs.
Placer's copper mines ''underperformed guidance,'' the firm said, as production fell short while costs were higher than planned.
Sales for the three-month period ended Dec. 31 rose to $539 million, from $460 million in the year-earlier period.
On Monday afternoon, Placer shares were up 13 cents at C$27.25 on the Toronto Stock Exchange, while Barrick shares rose 37 cents to C$33.25.
© The Canadian Press 2006 |
