Canada's Placer Dome says done with acquisitions
(All dollar figures U.S. unless noted)
By Paul Simao
TORONTO, April 30 (Reuters) - Canadian gold producer Placer Dome Inc. (PDG.TO - news) said on Friday it was turning away from the acquisition arena to focus on its growing stable of mines in the United States, South Africa and Venezuela.
Vancouver-based Placer embarked late last year on an ambitious acquisition program in a bid to increase its gold production and challenge Toronto-based Barrick Gold Corp. (ABX.TO - news) for second place among North American gold producers.
The $1.1-billion all-stock takeover of Denver-based Getchell Gold Corp. in December and an earlier $235-million investment in South Deep, South Africa's largest gold mine, branded Placer as one of the most aggressive firms in the hard-pressed gold sector.
The shopping spree occurred at a time when Placer was also busy financing construction of its 70-percent-owned Las Cristinas gold mine, located deep within the Venezuelan jungle.
The $575-million project is expected to begin production in 2001 with an initial annual output of about 370,000 ounces at a total cost of about $240 an ounce.
The senior gold producer expects to produce 3.2 million ounces of gold this year at a cash cost around $170 an ounce.
Placer Chief Executive John Willson said the company would now focus on developing its existing properties and high-level grass-roots exploration projects rather than chasing further mergers and acquisitions.
''We are very concentrated on what we have done and are not thinking about any major acquisitions at this point in time,'' Willson told analysts in a conference call on Friday.
Placer said it did not anticipate taking any writedowns in the second quarter, though it acknowledged it would likely have to swallow merger costs of about $20 million related to the Getchell transaction.
Despite analysts' warnings that it was taking on too much risk with its U.S. and South African acquisitions, Placer continued to post solid quarterly results.
The company posted a profit of $25 million, or 10 cents a share in the three months ended March 31, 1999, compared to a profit of $17 million, or 6 cents a share, in the same period last year.
Cash flow dipped to $100 million in the first quarter from $103 million in the same period last year.
But production climbed to 683,996 ounces of gold at a cash cost of $154 an ounce in the first quarter from 638,000 ounces at a cash cost of $184 an ounce in the same period last year.
Placer's solid performance is a rare bright spot in the anemic gold sector where weak bullion prices and mounting debt have pushed smaller, high-cost producers to the brink of collapse.
''The critical things that people focus on in gold companies are costs and cash flows and I think (Placer's) numbers are within an acceptable range,'' said Terence Ortslan, analyst with TSO & Associates in Montreal.
The outlook for gold, which last tested the psychologically important $300-an-ounce level six months ago, has deteriorated as markets brace for possible bullion sales by the International Monetary Fund and the Swiss central bank.
Gold traded at $286.40 an ounce on Friday, down from a 1998 high near $315 an ounce.
Placer fell 40 Canadian cents to C$20.25 a share, or almost 2 percent, on Friday in late afternoon trading on the Toronto Stock Exchange.
($1=$1.46 Canadian)
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