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Placer rises on Newmont bid talk; analysts divided

By Nicole Mordant

http://biz.yahoo.com/rc/031105/minerals_placer_stock_1.html

VANCOUVER, British Columbia, Nov. 5 (Reuters) -- Shares
in Placer Dome Inc. jumped on Wednesday on speculation
it could be in the takeover sights of rival Newmont Mining
Corp., but analysts were divided on whether the world's No.
1 gold producer was preparing to pounce.

The Vancouver-based miner's shares rose more than 5
percent in heavy volume to a 17-month high of C$21.01
on the Toronto Stock Exchange, a day after Denver-based
Newmont announced it was raising around $1 billion through
a public share offering.

Newmont said the money would be used for general corporate
purposes, which could include new project development costs,
other capital expenditures, and reducing its $1 billion-plus
debt burden. But its statement did not stop the rumor mill.

"The quick buzz around the street is that Newmont will go
after Placer," said Barry Allan, an analyst at Research
Capital in Toronto.

"I know that rumor's out there, but I think it's misplaced,"
Allan added.

An analyst who asked not to be identified told Reuters
shortly after Newmont announced the share issue on
Tuesday that the 7.5 million-ounce-a-year producer could
be looking at taking out Placer as a way to replace the
large chunk of reserves it mines out every year and to
expand output.

"Their biggest problem is, although they have organic
growth, that that growth won't allow them to increase
production by more than 5 percent over the next four
to five years," the analyst said.

Placer is regarded as an attractive target due to its
suite of resource-heavy development projects and its
relatively small hedge book. Newmont is a vocal critic
of forward gold sales.

But Allan said if Newmont did in fact have any designs
on Placer, the U.S.-based producer would not have
issued equity to raise cash to make a bid. It would more
likely make a straight share offer using its high-priced
stock, which has risen about 50 percent this year.

"Newmont is also not going to be telegraphing what
they are going to do," he said, referring to the miner's
public notice it planned to issue up to 22 million shares
-- about 5 percent of its share capital -- at a price to be
decided by the market on Wednesday.

Allan said it made sense for Newmont to replace debt
with some equity. A stronger gold price this year has
increased demand for the stock of gold companies, and
mining companies have wasted no time in taking advantage.

Michael Jalonen, an analyst at Merrill Lynch, said the stock
issue would be positive for Newmont as it would reduce its
net debt to virtually zero while also giving a boost to its
bottom line.

"The removal of high-cost debt will lower interest expense,
which should have a modestly positive impact on future
earnings per share and cash flow per share," he said.

By mid-afternoon, Placer's stock had eased from session
highs, but was up 80 Canadian cents at C$20.75. Newmont
shares in New York dipped 69 cents to $42.62.

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