Barrick Bids $9.2 Billion to Acquire Placer Dome

Barrick Gold Corp. said Monday that it had offered to buy Placer Dome Inc. for about $9.2 billion in cash and stock in a deal that would create the world’s largest gold producer.

Placer Dome, meanwhile, said its board of directors would meet to consider what Barrick’s spokesman called a “friendly unsolicited offer.” Vancouver, Canada-based Placer Dome said it would not comment until it had reviewed Barrick’s offer.

The proposal by Toronto-based Barrick is partly driven by the rising costs of mining gold and processing it.

“Many mines for both companies are in similar regions, so there is the chance to lower costs and share engineering services,” said George Albino, an analyst with Orion Securities, a Canadian investment firm.

Michael Fowler, an analyst at Toronto-based Desjardins Securities Corp., said the proposed acquisition could help yield some cost savings.

“There are certainly some synergies. I’d imagine they could contain at least some of their costs,” Fowler said.

Barrick spokesman Vincent Borg said the company’s headquarters would remain in Toronto and a merger could result in staff cuts. “There may be, but it is too early to specifically know if or where,” Borg said.

Barrick, which entered the gold mining business in 1983, has made a series of acquisitions starting with Lac Minerals Ltd. in 1994, giving it a presence in Chile and Argentina. Its 1996 purchase of Arequipa Resources Ltd. involved Peruvian exploration properties, and in 1999, Barrick snapped up Sutton Resources Ltd., giving it a presence in Africa. In 2000, it bought Pangea Goldfields Inc., a company with properties in Tanzania, Canada and Peru.

In 2001, Barrick bought Homestake Mining Co., adding mines in North and South America as well as Australia.

Under the proposed deal, Placer Dome’s shareholders would get $20.50 in cash, or a combination of 0.7518 Barrick common share plus 5 cents in cash, for each Placer Dome share.

The offer represents a 24% premium over Placer Dome’s closing price Friday, and a 27% premium over its average closing price over the last 10 days.

Shares of Placer Dome jumped $3.44, or 20.8%, on Monday to $19.95. Barrick fell $1.95 to $25.25.

Barrick signed a separate agreement to sell some of the assets it would acquire from Placer Dome to Goldcorp Inc., also of Vancouver, for $1.35 billion in cash. Barrick plans to sell Placer Dome’s interest in three Ontario gold mines, a gold and silver mine in Chile, its Canadian exploration properties and a 40% stake in a development project in the Dominican Republic.

Analysts see Barrick’s latest acquisition as part of a drive to cut costs. Mining companies have enjoyed the benefits of rising gold prices, but they have seen their own fixed costs rise, among them energy and wage costs.

Most of the energy costs are related to the process of crushing ore and leeching gold from it.

Barrick said the combined company would have 149.8 million ounces in proven and probable gold reserves, and copper reserves of 6.54 billion pounds. As of Sept. 30, it would have had $2.4 billion in cash on hand, and earnings before interest, taxes, depreciation and amortization of about $1 billion.