Barrick Gold Corp bid $9.2 billion for rival Placer Dome Inc on Monday, a deal that would create one of the world's biggest gold miners with annual output of 8.3 or 8.4 million ounces.
Barrick, already Canada's biggest gold miner and the world's third-largest, offered $20.50 a share for Placer, a 24 percent premium over the Vancouver-based company's $16.51 closing price in New York on Friday.
Placer is the world No 5 gold miner.
"There is a natural fit between key Placer Dome assets and our own," Barrick chief executive, Greg Wilkens, said in a release. "We can combine all of these strengths and deliver value for all concerned."
Barrick, which will remain headquartered in Toronto should the deal succeed, said the combined company will have an estimated output of between 8.3 million and 8.4 million ounces of gold and about 370 million pounds of copper for 2005.
Industry leader Newmont Mining Corp last week forecast 2005 gold sales of 8.6 million ounces.
"We have been warning that (Placer) would get taken over for quite a long time. The stock has looked like the best value among the senior players, and so it is a transaction that will make a lot of sense," said Patrick Chidley, an analyst with Barnard Jacobs Mellett.
It's an asset rich company ... There are potentially other bidders of course. Newmont must be looking at this and in addition we think perhaps AngloGold Ashanti Ltd may have a look, if not just at the company at some of the assets."
Upon completion of the deal, fellow miner Goldcorp, will buy Placer Dome's Campbell, Porcupine, and Musselwhite gold mines in Ontario and the La Coipa silver mine in Chile and a 40 percent stake in the Pueblo Viejo development project in the Dominican Republic for about $1.35 billion.
That would boost Goldcorp 2006 output by 50 percent to over 2 million ounces, Goldcorp said.
Barrick said it estimated total cash costs per ounce of gold in a range of $245 to $250 this year.
The combined company, excluding the assets to be acquired by Goldcorp, would give Barrick nine projects over four continents and extensive land positions for exploration in 16 countries, it said.
Barrick said it will ask for a list of Placer Dome shareholders on Monday and will mail take-over bid documents as soon as possible. The offer will expire 35 days after the mailing of the documents.
Placer Dome jumped $3.04, or 18.4 percent to $19.55 on the New York Stock Exchange at the open, while Barrick shares dropped $1.33 to $25.87. Goldcorp was up 54 cents at $19.92.
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