The Canadians had pocketed a further 5 per cent of AurionGold for a total shareholding of 36.6 per cent by last Friday night as the gold price improved to above US$313/oz. The gold price firmed on the back of revived concerns that the US would make a pre-emptive military strike on Iraq, as well as the support Placer itself provided via the planned 20 per cent cut to its gold hedging program.
Placer announced its committed exposure should fall to 6.8 million ounces from 8.5Moz by the end of this year with an estimated realised gold price of more than US$400/oz. The company said the remainder of gold hedged, or sold under future contracts, would represent less than 40 per cent of its forecast production over the next five years or 15 per cent of reserves, and that it expected to have in excess of 90 per cent of its production uncommitted in 2003.
Meantime, a change of fortunes for Placer thanks to the higher gold price was certainly making its see-through takeover offer price look a lot better. After steadily rising during last week, the Placer share price eased on the last trading session on Wall Street before the US long weekend, but that didn't dampen the progress that had been made, with the implied value of its AurionGold takeover bid surging to a healthier.
Placer has extended the bid until the end of play next Tuesday 10 September, but if it continues to inch up the AurionGold register, then we could be here for another year because the now largest shareholder in the biggest Aussie-based gold producer was entitled to extend for that long. That's unlikely, but there was bound to be at least one more extension as Placer didn't declare that the fifth was the last. "One could consider this from the perspective of AurionGold as 'death by 1,000 cuts'," was how Canadian-based Scotia Capital analyst David Mallalieu put it.
What the predator continued to accentuate was perhaps starting to hit home for some AurionGold shareholders. "AurionGold's three largest shareholders (Placer and two institutions) combined own over 50 per cent of the company, markedly reducing the effective free float of AurionGold," Placer said. "There is a significant risk that the liquidity of AurionGold will fall further if Placer's shareholding increases and if the offer closes, causing further downward pressure on the (AurionGold) share price." Shareholders were either swallowing that or selling on-market, where the arbs were snaffling those shares and then accepting the Placer offer.
The analyst tended to lean towards Barrick as the leading contender. "Barrick … appears to have fully digested Homestake Mining and is ready to take on a new corporate challenge," he said. Assuming Placer gained full control of AurionGold, Barrick would – in the event of a successful takeover of Placer – become the largest producer in the world at about 9.2Moz per annum, and would have about 133Moz of proven and probable reserves. "About 47 per cent of the reserves and 84 per cent of production would be based in North America and Australia, and the average cash cost would be US$170/oz," Mallalieu said. "The Cortez mine and Getchell property would add to Barrick's Nevada presence, the South Deep mine would give Barrick the premier foothold in South Africa, and Placer's robust hedge book would augment Barrick's already strong book." ©