AOR

AurionGold Limited - BUY (AOR A$3.14)
Will Placer’s Next Move Be Later This Week?
Until the dive in global equity markets, and prior to the last two days when its share price dropped 9%
each day, and to the gold price doing a quick retreat from around US$325 last night, we had been
thinking that Placer (PLD, US$8.91, BUY) may sweeten its offer for AurionGold this week when it
reports June results. On reflection, we believe Placer may wait until the deadline of next Tuesday. Its
share price has declined quite savagely recently and the seethrough price was A$2.91 overnight,
compared to AurionGold at A$3.14 today, maintaining the 7-8% average premium, of AurionGold to
Placer. Placer needs to extend or change its offer by 7pm on July 30 and, in the end, we expect an
increased offer of at least 25¢ cash and more scrip. Perhaps a modest cash sweetener will be the first
step, and more cash and scrip the follow up offer? AurionGold has a healthy outlook and can be
purchased in its own right but there is a risk (although we believe it is minor) that Placer will let its
offer lapse. AurionGold has delivered several positives since the Placer offer on May 27, it has: (1)
revised its forecast for FY02 up to A$63m, which is 22¢ and a 14x P/E; (2) increased reserves to
7.7moz; (3) added a further A$8m pa of synergy benefits; and (4) reported very good drilling results at
Kanowna Belle. As we have consistently said, the bid appears doomed unless a sweetener is
forthcoming, because Placer has yet to receive its first 1% of acceptances. The pressure is right back on
Placer and weak equity markets and a weak gold price do not help its cause. A rerating potentially
awaits a successful takeover by Placer.