Placer revives takeover plans for Highlands

Vancouver-based Placer Dome (PDG-T) has fallen back on its original plan for a hostile takeover of Australian-based Highlands Gold now that a proposed underwriting of a new company has failed.

The underwriting was to have raised A$160 million (or A30 cents per share) for independently owned Highlands and would have given Placer Dome a 43.8% interest in the massive Porgera gold mine in Papua New Guinea. The division of Highlands responsible for Porgera would have become a subsidiary of Placer Dome, whereas Highlands Pacific would have controlled the remainder of the former firm’s assets.

“We are all disappointed that this underwriting failed, but we remain committed to our A75 cents-per-share offer for Highlands,” said John Willson, Placer Dome’s president. That cash offer was to have remained open until Jan.

18. Highlands, however, is showing no signs of throwing in the towel and has said it will try to organize another restructuring.

The company agreed to sell its 25% stake in the Porgera mine to Placer Dome for US$250 million, ending a hostile takeover bid for the entire company by the major.

Placer currently holds an 18.8% stake in the mine. Since announcing its bid for Highlands in November 1996, the major has seen its stake in the company rise to 46% from 33%.

“We’re disappointed that [the proposed underwriting] failed, because it would have delivered Porgera to us a bit more cheaply,” said Hugh Leggatt, a spokesman for Placer Dome. “But we’re still going ahead.”

He added that Placer Dome expects shareholders of Highlands to react favorably to the offer.

Porgera’s total proven and probable reserves are estimated at 78.7 million tonnes grading 4.5 grams gold per tonne (equivalent to 11.5 million contained ounces). Measured and indicated resources stand at 16.4 million tonnes of 2.2 grams, based on a cutoff of 1.5 grams.

Porgera, a combined open-pit and underground operation, has produced more than 6 million oz. since entering production six years ago. The mine produced 848,872 oz. in 1995 at a cash cost of US$197, and a total cost of US$267 per oz.

In other developments, Placer will proceed with its US$576-million Las Cristinas gold mine in Venezuela once the government there passes a law exempting the company from a proposed tax.

The tax, which concerns consumables used in construction, would increase the cost of the project considerably.