Biggest gold producer

Barrick Gold sweetened its takeover offer for Placer Dome to US$10.4 billion ($15.5 billion) yesterday, winning Placer's approval for a deal that would turn the two Canadian miners into the world's biggest gold producer.

The higher offer - raised to US$22.50 a share from US$20.50 a share - will be open until January 19.

It will catapult Toronto-based Barrick ahead of US-based Newmont Mining and South Africa's AngloGold Ashanti in world gold producer rankings with 2005 pro forma production of 8.3 million to 8.4 million ounces at a cash cost of US$245 to US$250 an ounce.

"Today represents a milestone day in the gold mining industry," said Barrick chief executive Greg Wilkins.

The agreement, negotiated late on Wednesday night, won support from Placer's board of directors and comes after Barrick repeatedly said it would not sweeten its bid.

Placer stock closed down around 1 per cent at $22.34 on the New York Stock Exchange, while Barrick shares fell 10 cents to $27.12.

The takeover includes a side deal under which Goldcorp, another Canadian producer, will pay US$1.485 billion for Placer's Canadian assets. Placer's Campbell mine in Ontario is adjacent to Goldcorp's Red Lake mine.

Placer, which had been looking for other suitors since Barrick unveiled its bid in October, said it had a good understanding of its alternatives when Barrick raised its offer.

"This put our board and its financial advisers in a strong position to consider all the alternatives and negotiate with Barrick," said Placer chief executive Peter Tomsett.

Placer had rejected the initial $9.2 billion bid as inadequate and opportunistic.

Under the terms of the latest agreement, Placer shareholders will receive $22.50 in cash per share up to a maximum of $1.344 billion, or 0.8269 of a Barrick share plus 5 cents in cash, with the number of Barrick shares to be issued capped at around 333 million.

"I didn't think there was anybody else that could pay the same kind of value," said Kerry Smith, an analyst at Haywood Securities.

Smith said Barrick was shelling out more than he hoped it would, but recommended that Placer shareholders accept the offer.

Wilkins said shareholders support the transaction and are "glad to see that it went friendly".

Wilkins said he expected most of the integration to be completed by mid-2006, but would not comment on potential job cuts.

Barrick will look at building a strong team with Placer's employees. As for Tomsett's involvement in the combined company, Wilkins said it was too early to say.

Placer has the right to consider "superior" proposals from other parties - something analysts don't think is likely.

"It looks like the fight is all over," said Michael Fowler, an analyst at Desjardins Securities. "I don't think someone else will come in and disrupt it."

Barrick has the right to match an alternative offer for Placer, and will under certain circumstances receive a US$260 million break fee if the deal does not go through.

It agreed to appoint three of Placer Dome's present directors to Barrick's board.

Goldcorp shares closed up 4.75 per cent at C$24.25 on the Toronto Stock Exchange.

Canadian mergers have soared to a five-year high in 2005, led by mining and energy companies. Canadian firms have been involved in 2129 announced deals this year valued at $151 billion, the highest total since 2000.

Seven of the 10 biggest takeovers have involved mining or energy companies, including Inco's bid for Falconbridge.

- REUTERS, BLOOMBERG