Provided gold remains relatively steady (i.e. US$300 - $330), IMHO the bidding wars for AOR will take the final price closer to $6.
Who will the other bidders be (if any)? & how much further do others think AOR could go?
Reuters Company News ANALYSIS-Target AurionGold born to be prey
By James Regan
SYDNEY, May 27 (Reuters) - Whispers that Australian takeover target AurionGold Ltd's days as an independent company were numbered started long before Placer Dome Inc (Toronto:PDG.TO - News; NYSE:PDG - News) launched its A$2 billion scrip bid for the company on Monday.
AurionGold was assembled in December through a merger of Delta Gold and GoldFields, two medium-sized mining houses more attractive to investors -- and international predators -- as a single larger entity.
Since the merger, the price of gold has risen 15 percent to its current level of US$320 an ounce, making AurionGold even more attractive.
"Five months later and we're in a whole different place," Placer Dome President and Chief Executive Jay Taylor said.
As one of only a small cache of independent Australian gold miners capable of digging one million ounces or more of gold a year, following the acquisition of Normandy Mining by Newmont Mining Corp (Australia:NEM.AX - News), AurionGold makes a likely prey.
HIT LIST
AurionGold's relative peers, Newcrest Mining Corp (Australia:NCM.AX - News) and Lihir Gold Ltd (Australia:LHG.AX - News), are also high on the takeovers hit list, if analysts are correct.
But for Placer Dome, already a controlling stakeholder in AurionGold's most prized lodes in Australia and neighbouring Papua New Guinea, the choice was simple.
Taylor is banking on its partnerships with AurionGold to keep any counter bidders out of the picture.
"This deal makes sense for everyone," Taylor said.
Placer Dome is offering 17.5 of its shares for each 100 AurionGold shares. Based on closing prices Friday, that would value AurionGold at A$4.51 per share, representing a more than 30 percent premium to the company's closing price on Friday of A$3.48.
Placer Dome, like Newmont, AngloGold Ltd (ANGJ.J), Barrick Gold Corp (Toronto:ABX.TO - News) and other big gold miners with assets spread around the world, is under shareholder pressure to get bigger.
Despite global gold equities rising more than 60 percent this year, shares are illiquid, a malady that can only be cured by lifting market capitalisation and attracting more institutional investors.
AngloGold Chief Executive Bobby Godsell, who led his company's ill-fated four-month battle for Normandy, reckons gold miners need to be capitalised at US$10 billion to catch the eye of the institutions with the deepest pockets.
Placer Dome is capitalised at US$4.7 billion, while AurionGold is capped at A$2 billion (US$1.1 billion).
AurionGold, which has appointed advisers Credit Suisse First Boston, requested its shareholders take no action for now.
BACKFIRING
Such statements are standard, but AurionGold is well aware that a second bidder could emerge.
If so, Placer Dome's offer of shares rather than cash for AurionGold could backfire.
By his own admission, Taylor is at a loss to explain why Placer Dome's stock has underperformed against its North American peers.
"I can't say why our share price hasn't outperformed Barrick and Newmont," Taylor said.
In 1999, the then Delta was gazumped in the 11th hour by AngloGold for Acacia Resources, the one-time Australian gold arm of Royal/Dutch Shell (London:SHEL.L - News). And Newmont's unexpected blitz on Normandy is anything but forgotten.
Still, Placer Dome appears to have taken steps to clinch the deal, importantly by pitching the offer at a substantial premium and shoring up the endorsement of Harmony Gold Ltd (HARJ.J) of South Africa, AurionGold's largest shareholder with 9.8 percent.
"Placer Dome is by far the logical owner of AurionGold, hence this transaction represents another step towards achieving this goal," Harmony Chief Executive Bernard Swanepoel said.
"The question may not be will they get it, but rather how much will they pay for it," Eagle Mining gold analyst Keith Goode said.
A takeover would give Placer Dome full ownership of the rich Granny Smith gold mine and prospects in the West Australia outback and lift its half ownership in the Porgera mine in Papua New Guinea to 75 percent.
Aurion also runs a gold mine in Tasmania state and has a 21 percent stake in a Zimbabwean platinum mine.
Taylor, honing in on the gold assets, labelled the platinum mine "peripheral."
Reuters Company News Placer sees increased production at South Deep
TORONTO, May 27 (Reuters) - Placer Dome Inc. (Toronto:PDG.TO - News) said late on Sunday that it expects production at its South Deep mine in South Africa to almost double by 2007.
Placer Dome, which vaulted on Sunday to the fifth largest gold producer in the world with its $1.1 billion bid for Australia's AurionGold Ltd. (Australia:AOR.AX - News), said it expects gold production to increase to 700,000 ounces per year by 2007 at the mine, in which it owns a 50 percent stake, increasing gradually from 400,000 ounces per year in 2002 and averaging 600,000 ounces per year over the five-year period.
The company also said that beyond 2007 production is expected to exceed 750,000 ounces per year, about 50,000 ounces per year higher than earlier estimates.
Cash and total costs will be unchanged in 2002 at approximately $170 and $208 per ounce respectively. However, over the following five years cash and total costs will average $145 and $180 per ounce respectively.
After full production is achieved, cash and total costs are expected to average about $135 per ounce and $175 per ounce respectively. This is below the previous guidance of $160 per ounce and $180 per ounce.
The company said South Deep's expansion project timetable will not have any effect on its guidance for the full year 2002 and it expects to produce more than 2.5 million ounces of gold and 420 million pounds of copper this year.
