AurionGold rejects Placer's extended bid


Placer is the world's No 5 gold producer

By Jane Searle
CNN Sydney

SYDNEY, Australia (CNN) -- Australian gold miner AurionGold has rejected a $1.1 billion all-scrip offer from Canada's Placer Dome, saying the value of the bid has fallen and there is "considerable uncertainty" about it.

The rejection, released late Friday in a statement to the Australian Stock Exchange, follows Placer's decision to extend to July 24 the deadline for accepting the bid.

Aurion's board told shareholders that Placer had "failed to make any significant improvement" to its May 27 offer and so they were recommending that it be rejected.

Placer said Thursday the extension would give AurionGold time to "fully advise their shareholders", particularly in relation to any other bidders. But it left the bid unchanged.

Earlier this week, AurionGold urged Placer to raise its all-scrip offer, highlighting the change in value of the company's shares since the bid was made on May 27.

Placer last traded at $10.77 on the New York Stock Exchange. That compares with a price of $14.27 when the bid was launched.

In an open letter on July 2, AurionGold managing director Terry Burgess wrote to Placer chief executive Jay Taylor, telling him that Placer's bid was now "nowhere near the A$4.51 you quoted when you presented the offer to the investment community on May 29."

Burgess suggested "a material improvement" in the offer was needed, to compensate shareholders for "dilution of ownership of AurionGold assets".

'Significant value'

But in a statement Thursday, Taylor said the bid represented "significant value" for AurionGold shareholders, and pointed to Placer's strength in the global sharemarket as a strong incentive.

Vancouver-based Placer, the world's No. 5 gold producer, is offering 17.5 of its shares for every 100 AurionGold shares (Full Story).

At the time the bid was launched, that equated to A$4.51 a share, or a 29 percent premium. But Burgess said in his letter that share price changes meant the bid was nowhere near enough.

The letter released to AurionGold shareholders by its board Friday said the offer valued the shares at "just A$3.42". AurionGold closed Friday at A$3.73, a rise of 2.2 percent on the previous day's close.

Last week, AurionGold advised shareholders to take no action on Placer's offer. The market saw the move as a rejection of Placer's bid, and an invitation for other bidders. But no counter offers have been made.

More offshore buyers

A takeover of AurionGold would propel Placer to the world's No. 4 spot among gold producers with 3.8 million ounces a year, behind U.S.-based Newmont Mining, Canada's Barrick Gold and South Africa's AngloGold.

Placer's offer continues the interest by big miners in the Australian gold industry.

A successful bid by Placer would see offshore control of Australian gold producers rise to 70 percent, according to industry statistics group Surbiton Associates.

January saw Newmont take control of Australia's Normandy Mining after a prolonged tussle with AngloGold.

That $2.35 billion takeover made Newmont the world's No. 1 gold producer.

Leading Sydney-based gold analyst Keith Goode told CNN recently that terrorism fears in the United States had reinforced gold's status as a safe haven, and a necessary part of a diversified investment portfolio.

The price of gold is $310.40 an ounce Friday, after touching $331 on June 4.