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October 31, 2005

Placer Dome has been lit up, Mon., Oct. 31, 2005, 9:41 AM

The Barrick Gold proposed acquisition of Placer Dome has been well covered in the media. Goldcorp is proposing to be a party to this deal, and they too have reported. We'll just have to wait for the Placer Dome Group to give us their take, but regardless, their PDG has been lit up this morning.

Here is the 5-minute interactive chart link (20 minutes delayed) of the three players: PDG, ABX and GG. You should follow along.

As an aside, do you think somebody wasn't in the market late Friday with knowledge of this deal proposal? Look at the extra PDG bump. In cases like this the regulators have to step in and investigate all trades on Friday, starting with the major call option buys.

This deal, should it happen, will mean that ABX will increase production of gold and gold equivalents (mostly copper) to about 9.5 million troy oz. The benefits to ABX shareholders would not be apparent until the 2007 year. Another issue is that ABX cash costs for gold production (exclusive of management overheads) would rise from $225 to $246 per troy oz.

The ABX shareholders will not like this. At the open ABX went down "4 pct.

PDG went up close to +20 pct because this proposed deal is going to start a bidding war. Make no mistake about that.

GG also went up strongly because their part of the deal would be significantly accretive. That Ian Telfer, CEO of Goldcorp, is a terrific dealmaker, as I have repeatedly suggested here. The GG shareholders are hoping the deal goes through so that GG's cash cost can drop below $150 per troy oz, keeping the company as the industry's lowest cost gold producer.

The deal may or may not go through. Having selected PDG as a buy earlier in the year, I'm a happy camper. Isn't that what life's all about... seeking happiness before you meet your maker?

Posted by Posted by Bill Cara on October 31, 2005 09:41:56 AM | Category: Gold , Goldminer Producers

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