AurionGold ups the heat on Placer June 20, 2002 A reserve upgrade by AurionGold (AOR) today has left the pressure squarely on would-be-acquirer, Placer Dome (PDG), to raise its $2 billion offer for the company. Analysts downplayed the news, saying it had been anticipated, but suggested it may raise pressure on the Canadian gold miner to increase its offer.
Aurion has raised its reserve base by 1.6 million ounces to 7.7 million ounces, while resources have been raised to 25 million ounces. Reserves differ from resources in that they reflect a higher degree of recovery certainty at the assumed gold price under standards laid out by the Australian JORC code.
Of Aurion’s mines, Kanowna Belle increased by 540,000 ounces to 2.14 million ounces, thanks to additional drilling at depth. At the 40%-owned Granny Smith deposit, drilling at the Wallaby project has delineated extra reserves so the total reserve base is now 3.0 million ounces.
At Paddington, Aurion said the feasibility study for Red Hill had increased the Paddington reserve by 532,000 ounces while a feasibility study on the high-grade Bullant resource raised reserves another 61,000 ounces.
Lastly, reserves at the Henty mine have been increased by 360,000 ounces to a total of 454,000 ounces.
AurionGold said that it used an assumed gold price of $A500 per ounce and noted this was well below today’s gold price of A$565 per ounce.
“The increase.. is a strong indication of the continued growth of AurionGold,” claimed managing director Terry Burgess. “The reserve increase more than replaces our 2001-02 production of one million ounces of gold.”
SHAW Stockbroking’s gold analyst Mr Andrew Richards commented: “The reserve upgrade had been expected by the market following Placer’s takeover offer. We note that in making the upgrade, the company also raised its gold price assumption to A$500 per ounce from A$450 in line with other Australian gold companies such as Newcrest."
Mr Richards also suggested the Canadian miner may have to lift its offer.
“Together with the market premium to implied value of the Placer Dome offer, today’s reserve upgrade may encourage Placer to make its offer more attractive.”
Placer Dome’s offer of 17.5 shares for every 100 Aurion is stubbornly maintaining its discount to the market price. At the close of trading on the Toronto Stock Exchange last night, the offer was worth $3.84 per share, compared to Aurion’s closing price on the ASX today of $4.21.
Another factor at work may be potential predators looking over Placer Dome. Yesterday it was reported that the giant North American gold miner Barrick had a team in Australia looking at mines jointly operated by Placer.
At the close of trading, AurionGold shares were trading 4c higher at $4.21.
AOR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
