Gold stocks up as Placer launches $1.1B bid


The gold industry is continuing to consolidate through takeovers

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Shares in Australian takeover target AurionGold surged Monday as the market reacted to a $1.1 billion unsolicited bid from Canada's Placer Dome.

Aurion closed more than 30 percent higher to A$4.53, a gain of A$1.05 on Friday's close. It went as high as A$4.60.

Other gold stocks Lihir Gold and Newcrest Mining were also sharply higher, with Lihir up 6 percent and Newcrest up almost 10 percent. But Placer closed 3.2 percent lower at A$24.20.

Vancouver-based Placer, the world's No. 5 gold producer, is offering 17.5 of its shares for every 100 AurionGold shares.

That equates to A$4.51 a share, a 29 percent premium to Friday's closing price of A$3.48, and values the bid at $1.1 billion.

Placer said in a statement to the Australian Stock Exchange Monday that South Africa's Harmony Gold Mining Co Ltd, which holds 9.8 percent of Aurion, has agreed to the offer.

Aurion responded late Monday, telling its shareholders to take no action for now. Although the bid is at a handsome premium, a rival bid is regarded as a possibility.

Joint ventures

Placer said buying Aurion would add 1 million ounces of annual production and would consolidate existing joint venture interests in the Granny Smith mine in Western Australia and the Porgera mine in Papua New Guinea.

If the Aurion takeover proceeds, Placer would leapfrog Gold Fields Ltd to become the world's No. 4 producer, behind U.S.-based Newmont Mining, Canada's Barrick Gold and South Africa's AngloGold.

Placer's move comes at a time when gold prices are at a two and a half year high of more than $320 an ounce, and possibly headed for $330 as investors revisit its traditional role as a safe haven in troubled times.

The bid also continues the push for consolidation in the gold industry that saw Newmont swallow Australia's Normandy Mining in January after a long tussle with AngloGold.

Aurion itself was formed from the December 2001 merger of Goldfields Ltd and Delta Gold Ltd.

Placer actually began the process with its acquisition of Getchell Gold Corp in December 1998 for just over $1 billion. That was followed in June 2001 by Barrick's takeover of Homestake Mining for about $2.3 billion.

Briefly No. 1

After AngloGold sold two mines in February 2001, that made Barrick the world's No. 1 producer until Newmont's $2.35 billion takeover of Normandy at the start of this year.

Leading Sydney-based gold analyst Keith Goode told CNN last week that terrorism fears in the United States were reinforcing gold's status as a safe haven and, via gold stocks, as a necessary component of a diversified investment portfolio.

According to Goode, managing director of Eagle Research, the main factor driving the gold price higher is the U.S. dollar's recent weakness.

The U.S. dollar is down about 6 percent against most major currencies so far this year.