PDG Pendragon Plc

Placer Dome announces continued strong operating performance in the second quarter (United States ("U.S.") dollars, in accordance with U.S. generally accepted accounting principles ("GAAP")) VANCOUVER, July 28 /PRNewswire-FirstCall/ -- Placer Dome Inc. (NYSE, TSX, ASX: PDG) generated second quarter earnings of $33 million, or $0.08 per share, on gold production of 908,000 ounces during the three months ended June 30. Quarterly mine operating earnings were $137 million and cash from operations totalled $107 million. Earnings for the quarter included an after- tax non-cash charge of $34 million relating to cumulative foreign exchange losses on Placer Dome's investment in Misima. President and CEO Jay Taylor said the company's strong financial and operating results reflect a continued emphasis on accretive growth and financial discipline. "We are seeing the returns on the investments we have made in exploration with discoveries like Cortez Hills and acquisitions that include the North Mara mine," he said. "Our assets are performing well, and we continue to build shareholder value with our portfolio of high-quality mines around the world. This recent quarter puts us in an excellent position to meet our 2004 gold production target of 3.6 million ounces and achieve record financial results." MANAGEMENT'S DISCUSSION AND ANALYSIS (United States ("U.S.") dollars, in accordance with U.S. generally accepted accounting principles ("GAAP")) Throughout this document, "Placer Dome" is defined to be collectively Placer Dome Inc., its consolidated subsidiaries and its proportionate share of unincorporated joint venture interests. Placer Dome's share is defined to exclude minority shareholders' interests. The "Corporation" refers to Placer Dome Inc. This Management's Discussion and Analysis ("MD&A") was made as of July 28, 2004. Highlights Consolidated net earnings in accordance with U.S. GAAP for the first half of 2004 and three months ended June 30, 2004 were $97 million ($0.23 per share) and $33 million ($0.08 per share), respectively, compared with $121 million ($0.30 per share) and $58 million ($0.15 per share) for the same periods in 2003. During the second quarter of 2004 an after-tax non-cash charge of $34 million, previously recognized in accumulated comprehensive income, relating to the cumulative foreign exchange translation loss on Placer Dome's investment in Misima was recognized on cessation of commercial production from the property. The 2003 second quarter consolidated net earnings included $17 million of unrealized non-hedge derivative gains and were also positively impacted by the recognition of a $39 million non-cash tax asset for previously unrecorded tax benefits related to Placer Dome's U.S. operations. Mine operating earnings increased to $295 million and $137 million for the first half of 2004 and three months ended June 30, 2004, respectively, representing increases of 79% and 99% over the prior-year periods as both gold and copper generated stronger mine operating earnings. Cash from operations increased by $98 million and $49 million to $241 million and $107 million in the first six months and second quarter of 2004, respectively, compared with $143 million and $58 million in the corresponding periods in 2003. Placer Dome's share of gold production in the first six months of 2004 was 1,837,000 ounces, an increase of 2% compared with the prior-year period. The increase was due to the acquisition of the North Mara mine in July 2003, combined with higher production from the Porgera and Henty mines, partially offset by the temporary closure at Golden Sunlight, the focus of mining operations at Bald Mountain on stripping, and reduced production from the Kalgoorlie West and Granny Smith mines. Copper production was 218 million pounds, an increase of 4% from the same period in 2003 due to increased production from the Zaldivar mine. New mineral reserve and mineral resource estimates have been prepared for the Cortez joint venture. These indicate that Placer Dome's 60% share of the estimated proven and probable mineral reserve, after allowance for current year depletion, has increased from 7.6 million ounces to 9.0 million ounces. Included in this is an increase in Placer Dome's share of the Cortez Hills estimated proven and probable mineral reserves from 3.2 million ounces to 4.5 million ounces (see the Strategic Update section of this document for details). Drilling at Cortez Hills during the second half of the year will focus on expansion of the mineral resource, which is open along strike to the south and down plunge. Placer Dome's realized average prices were $392 and $386 per ounce of gold in the first half and second quarter of 2004, respectively, versus average spot prices of $401 and $393 per ounce, respectively. As a result of continuing to deliver into all positions and through early deliveries, the precious metal sales program was reduced by 710,000 ounces and 310,000 ounces of gold in the first six months and second quarter of 2004, respectively, to maximum committed ounces of 9.75 million at June 30, 2004. Placer Dome's share of unit cash and total costs during the six months ended June 30, 2004 were $230 and $284 per ounce, respectively, an increase of 7% and 4%, respectively, from the comparative prior-year period. The increase in cash costs per ounce was due primarily to the continued appreciation of foreign currencies against the U.S. dollar. Cash and total copper production costs were $0.51 and $0.65 per pound, respectively. Cash costs were approximately 4% lower than the first half of 2003 as stronger production offset foreign exchange and input commodity cost pressures. ----------------------------------------------- June 30 ----------------------------------------------- For the Second Quarter six months ended ----------------------------------------------- 2004(i) 2003(ii) 2004(i) 2003(ii) ------------------------------------------------------------------------- Financial ($ millions, except per share amounts) Sales 467 398 975 807 Mine operating earnings Gold 82 69 179 154 Copper 57 5 124 18 Other (2) (5) (8) (7) ------------------------------------------------------------------------- 137 69 295 165 ------------------------------------------------------------------------- Net earnings 33 58 97 121 Per share 0.08 0.15 0.23 0.30 Cash from operations 107 58 241 143 Per share(iii) 0.26 0.14 0.58 0.35 ------------------------------------------------------------------------- Operations - Gold (000s ozs) Production (Placer Dome's share) 908 905 1,837 1,808 Production (consolidated) 892 893 1,798 1,779 Sales (consolidated) 892 897 1,806 1,828 Cash production costs ($/oz)(iii) 229 223 230 215 Total production cost ($/oz)(iii) 283 283 284 274 Sales price realized ($/oz) 386 365 392 361 London spot price ($/oz) 393 347 401 350 ------------------------------------------------------------------------- Operations - Copper (millions lbs) Production 109 108 218 209 Sales 113 101 237 209 Cash production costs ($/lb)(iii) 0.49 0.54 0.51 0.53 Total production cost ($/lb)(iii) 0.63 0.69 0.65 0.67 Sales price realized ($/lb) 1.13 0.75 1.16 0.75 London spot price ($/lb) 1.26 0.75 1.25 0.75 ------------------------------------------------------------------------- (i) During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, with respect to deferred stripping to exclude the recording of liabilities on the balance sheet (see note 2(a) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change through December 31, 2003, was to increase earnings on an after tax basis by $4 million ($0.01 per share). The effect of the change in 2004 was to increase earnings on a pre and after tax basis before the cumulative effect of the accounting change by $4 million ($0.01 per share) and $2 million ($0.01 per share), respectively. The above items combined to increase net earnings by $6 million ($0.02 per share) in 2004. As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. Also during the second quarter of 2004, Placer Dome changed its accounting policy, prospectively from April 1, 2004, with respect to mineral rights to reclassify them from intangible to tangible assets. Due to this change in accounting policy, Placer Dome will now cease amortization of the excess of the carrying value over the residual value of these assets and account for them according to its accounting policy for property, plant and equipment. If this change had been adopted January 1, 2003, it would have increased Placer Dome's earnings on a pre and after tax basis in the following periods: for the first half of 2003 by $7 million ($0.02 per share) and $5 million ($0.01 per share), respectively; for the second quarter of 2003 by $2 million (nil per share) and $1 million (nil per share), respectively, and for the first quarter of 2004 by $3 million ($0.01 per share) and $2 million (nil per share), respectively. (ii) With the finalization of the AurionGold Limited ("AurionGold") purchase price allocation in the fourth quarter of 2003, there were several adjustments to the fair values assigned to the acquired assets and liabilities from the initial purchase price allocation. Accordingly, the results for the first half and first quarter of 2003 have been restated to reflect these changes. (iii) Cash from operations per share and cash and total production costs per ounce and pound are non-GAAP measures that do not have any standardized meaning as prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other entities. Please refer to the Non-GAAP Measures section for further detail. Outlook For 2004, Placer Dome expects its share of production to be approximately 3.6 million ounces of gold and 400 million pounds of copper. Gold cash and total costs are forecast at between $230 and $235 per ounce (previously between $225 and $230 per ounce) and $290 to $295 per ounce, respectively. Copper cash and total costs are forecast at about $0.51 and $0.67 per pound, respectively. Capital expenditures remain forecast at $295 million, excluding pre- stripping and deferred stripping expenditures of $30 and $55 million, respectively. On July 5, 2004 a bill for a mining royalty in Chile was submitted to Congress from the President. The proposed calculation for the royalty was changed from the prior draft legislation. The royalty is now proposed as 3% of net sales. Net sales is defined as gross sales less direct operating costs. For the first three years, the royalty will be creditable against income tax payments. Thereafter, it will be a deductible cost. The nature of the proposed legislation will require a super majority of four-sevenths of the vote in both the Chilean House and Senate in order to pass and then require a review in Constitutional Court. If enacted, the legislation would have a cost impact on Zaldivar and La Coipa and may impact the potential development of the Cerro Casale project. On July 21, 2004, the Lower House of the Chilean Legislature failed to pass the article containing the royalty. Strategic Update Overview Placer Dome's strategy is to increase shareholder value by continuing to build upon its high quality portfolio of gold producing assets, development and exploration projects to achieve long-term growth in cash flow and earnings per share. Placer Dome has a strategy with the main components having measurable objectives and deliverables. These components are: 1. Optimizing the performance and value of existing assets through productivity improvements, cost-cutting, and minesite exploration programs which add value by reducing costs, increasing production and/or extending the mine life through mineral reserves additions; 2. Investing in new high-quality assets through exploration, project development and acquisition; and 3. Improving the business through innovation to lower costs and provide a competitive advantage -technically, environmentally and socially. The strategy is being implemented by: - Making business decisions based on disciplined financial criteria that appropriately balance costs, benefits and risks; - Investing in people, technology and systems to ensure Placer Dome has the skills, information and expertise to maximize the value of and control the risks at all minesites; - Building land positions near current infrastructure and in geological systems where gold discoveries have been repetitive; and - Exploring aggressively on these land packages. Consistent with these strategic objectives, in the first half of 2004 Placer Dome continued to advance these three components of its strategic plan as evidenced by the items noted below. Asset Optimization An expansion of the North Mara mine's nominal mill throughput from approximately 2.0 million to 2.8 million tonnes per annum is scheduled for completion in the fourth quarter of 2004 and is expected to increase estimated annual production to between 280,000 and 300,000 ounces. Activities at the Golden Sunlight mine are focused on pre-stripping of stage 5B, which started in September 2003. Gold production is scheduled to commence in March 2005. Development work at Turquoise Ridge continues with the operations now expected to reach annualized production of 300,000 ounces (Placer Dome's share 225,000 ounces) of gold by December 2005. At the Granny Smith mine, the Wallaby underground feasibility study and related underground development continued during 2004. The study will be completed in the first quarter of 2005, with the primary goal of justifying the exploitation of the Zone 60 ore body. Delineation drilling has been conducted from surface within the Wallaby open pit and will continue from an underground drill drive currently under development. The study will also include trial underground mining in two of the upper areas of the proposed underground. This trial is expected to result in the production of approximately 75,000 additional ounces during the life of the feasibility study resulting in the study being cost neutral. At Porcupine, the proposed Pamour open pit mine was approved in the first quarter of 2004. Overburden removal at the site is expected to commence in the fourth quarter of 2004 with gold production expected to start in the third quarter of 2005. Placer Dome's share of the capital cost of the Pamour mine is estimated at $30 million (including deferred stripping costs) and it is expected to produce 1.6 million ounces of gold (Placer Dome share 800,000 ounces) over the next 10 years at estimated cash and total costs per ounce of approximately $245 and $295, respectively. Development work on Campbell's DC zone to provide access to over 300,000 ounces of mineral resources and allow exploration in surrounding areas continued in the first half of 2004. The development program calls for an overall investment of $19 million through 2005, $14 million of which has been expended to date. The development program is proceeding on plan. In December 2003, the development of Kalgoorlie West's Raleigh underground mine was approved subject to joint venture negotiations which were completed in July of this year. The underground mine will be an extension of the Raleigh open pit mine with production scheduled to commence in 2005 and continue through 2011. The Raleigh mine is located partially on a mining lease owned 100% by Placer Dome and partially on a mining lease owned by a joint venture in which Placer Dome has a 51% interest. Placer Dome's share of the capital cost is estimated at $17 million, with the majority of this expenditure in 2005. Placer Dome's share of production over the six-year mine life is expected to be approximately 250,000 ounces at estimated cash and total costs per ounce of $220 and $290, respectively. During the first half of 2004, work continued on the development of the South Deep Twin Shaft project with completion and commissioning scheduled for late 2004. Investment in New High-quality Assets Drilling at Cortez Hills continued throughout the first half of 2004. At June 30, 94 holes were completed with assays received for 72 holes. Recent drilling has discovered a high-grade zone of mineralization to the west and down dip from the known areas of mineralization. The zone, as currently defined, is approximately 1,800 feet by 1,000 feet by 400 feet thick and is at a depth that ranges from 350 to 2,000 feet. Infill and step-out drilling is ongoing to better define and extend the zone. Placer Dome's 60% share of the estimated proven and probable gold mineral reserves, after allowance for current year depletion, for the entire Cortez joint venture site has increased from 7.6 million ounces to 9.0 million ounces. Included in this is an increase in Placer Dome's share of the Cortez Hills estimated proven and probable mineral reserves from 3.2 million ounces to 4.5 million ounces. Incorporating the drilling completed since year-end, including the new high-grade zone of mineralization has resulted in an increase in the mineral reserve grade from 4.36 grams per tonne to 5.4 grams per tonne. Placer Dome's share of the estimated measured and indicated mineral resources and estimated inferred mineral resources for the entire joint venture have decreased from 5.6 million ounces and 0.9 million ounces, respectively, to 4.9 million ounces and 0.5 million ounces, respectively, with the majority of the decrease being due to reclassification of mineral resources to mineral reserves, partially offset by additions to mineral resources. ------------------------------------------------------------------------- Proven Probable mineral reserves mineral reserves ------------------------------------------------------------------------- Contained Contained Tonnes Grade oz. Tonnes Grade oz. (000s) (g/t) (000s) (000s) (g/t) (000s) ------------------------------------------------------------------------- Cortez (60%)(1) 69,790 2.2 5,004 75,105 1.7 4,035 ------------------------------------------------------------------------- Cortez Hills (60%)(1) 11,586 6.1 2,269 14,175 4.8 2,203 ------------------------------------------------------------------------- ---------------------------------------------------------- Total proven and probable mineral reserves ---------------------------------------------------------- Contained Tonnes Grade oz. Recovery (000s) (g/t) (000s) (%)(1) ---------------------------------------------------------- Cortez (60%)(1) 144,895 1.9 9,039 78.9 ---------------------------------------------------------- Cortez Hills (60%)(1) 25,761 5.4 4,472 75.8 ---------------------------------------------------------- ------------------------------------------------------------------------- Measured Indicated mineral resources mineral resources ------------------------------------------------------------------------- Contained Contained Tonnes Grade oz. Tonnes Grade oz. (000s) (g/t) (000s) (000s) (g/t) (000s) ------------------------------------------------------------------------- Cortez (60%)(1) 35,119 1.4 1,602 127,009 0.8 3,285 ------------------------------------------------------------------------- Cortez Hills (60%)(1) 350 3.5 39 848 3.8 105 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total measured Inferred and indicated mineral resources ------------------------------------------------------------------------- Contained Contained Tonnes Grade oz. Tonnes Grade oz. (000s) (g/t) (000s) (000s) (g/t) (000s) ------------------------------------------------------------------------- Cortez (60%)(1) 162,128 0.9 4,887 19,033 0.8 487 ------------------------------------------------------------------------- Cortez Hills (60%)(1) 1,198 3.7 144 4,988 1.4 227 ------------------------------------------------------------------------- (1) The Cortez mineral reserve and mineral resource estimates include the Cortez Hills mineral reserve and mineral resource estimates. (2) The mineral reserves and resources are estimated as at June 30, 2004 using appropriate cut-off grades associated with an average long-term gold price of $350 per ounce. Cut-off grades can vary depending on rock types, metallurgical processes and mining methods. Cut-off grades are therefore quoted as a range to reflect the variability of these parameters. The range of cut-off grades for Cortez and Cortez Hills is 0.17 grams per tonne to 4.90 grams per tonne. (3) The mineral reserve and mineral resource estimates are based on information prepared by or under the supervision of Britt Buhl, Manager, Strategy and Business Support, who is a qualified person as that term is defined in National Instrument 43-101 ("NI 43-101") of the Canadian Securities Administrators. Mr. Buhl has verified the underlying data as appropriate in his professional opinion (including sampling, analytical and test data). (4) For further information regarding Placer Dome's mineral reserve and mineral resource estimation, refer to the notes to the Mineral Reserves, Reconciliation of Mineral Reserves, Mineral Resources and Mineral Resources - Exploration Properties tables included in Placer Dome's Annual Report and Annual Information Form/Form 40-F for the year ended December 31, 2003. Drilling at Cortez Hills during the second half of the year will focus on expansion of the mineral resource, which is open along strike to the south and down plunge, collection of geotechnical and hydrological information, and condemnation drilling of potential infrastructure sites. The Cortez mine has commenced a feasibility study on the Cortez Hills deposit. Based on currently known data, the study will determine plans for mine development and optimal processing arrangements for the property considering both the existing Pipeline/South Pipeline complex and the Cortez Hills/Pediment complex. Information from the feasibility study will be used to resume permitting of Pediment deposit (including Cortez Hills) by the end of the year. At Pueblo Viejo, the planned 11,000-metre infill drill program was completed during the first half of 2004. The information is being compiled into the existing mineral resource database to enable a new mineral resource model and estimate to be completed by year-end. An additional 1,900 metre drill program has been proposed to test boundaries of newly identified mineralization and define controls of high-grade mineralization within the pit stages. It is expected this drilling will be complete in the third quarter. Geotechnical drilling for pit designs (3,000 metres) was also completed. Metallurgical test work on whole ore autoclaving ceased during the second quarter to enable analysis of the results and preparation of flowsheets, layouts and input parameters required for the pre-feasibility study. The pre- feasibility study remains scheduled for completion by the fourth quarter of 2004. On June 30, 2004, Placer Dome delivered a certificate to the Bema Shareholder Group indicating the Cerro Casale project is not currently financeable on the terms contemplated by the Shareholders' Agreement. In response, our partners, the Bema Shareholder Group, served Placer with a notice of default on July 2, 2004 respecting certain non-monetary obligations. Under the terms of the Shareholders' Agreement the Participant not in default has the right to seek any remedy that may be available to it under the Shareholders' Agreement, unless such default is in the process of being cured, or otherwise ceases to be a default within 30 days of receipt of the notice of default. Placer Dome believes that it has fulfilled and continues to fulfill its obligations under the Shareholders' Agreement. Placer Dome intends to discuss these issues with the Bema Shareholder Group over the coming weeks. As per the Compania Minera Casale press release of April 6th, 2004, Placer Dome continues to evaluate a range of financing options to identify terms and conditions that would produce an acceptable financing structure and enable a decision on project development. In parallel, this work includes advancing discussions on key commercial contracts and long-term marketing off-take arrangements. See the Outlook section of this document for a discussion of the royalty recently proposed by the government of Chile. The Donlin Creek project evaluation continues. Work has focused on the continued evaluation of power supply alternatives and condemnation drilling to confirm facility locations. Baseline environmental data collection and preliminary engineering activities are ongoing. Placer Dome continues to focus on optimizing the use of its mines' infrastructures by exploring to expand mineral reserves at existing operations. During the first six months of 2004, exploration expenditures totaled $33 million, $24 million of which related to existing mines with major focuses on the Cortez, Kalgoorlie West, Musselwhite, North Mara and Porcupine operations. In addition to the mine site focus, drill programs have been completed or are under way at eight projects and drill target definition is proceeding on a further 12 properties. Innovation The Cortez mine continues to evaluate the viability of treating carbonaceous, preg-robbing ore from the Pipeline deposit using two novel competing processes. One method uses a thiosulfate-based heap leaching process that has been researched to the demonstration level, and the other uses a modified cyanide-based leaching process that is in the piloting stage. At the current time, engineering for both processes is at pre-feasibility level. Testing continues on both processes with a recommendation on process selection to occur by the end of the year. The selected alternative may reduce Cortez's need to sell carbonaceous ore, thereby reducing costs and increasing the potential to add mineral reserves. Trial testing of the "MiniMole", also named GARTH, has commenced in an underground site at the Campbell Mine. This research program is pursuing the development of novel hardrock excavation equipment that will allow selective mining of narrow vein and reef-type deposits. During the two month underground program it is planned to test rock cutting and cutter wear rates, machine capability in actual mine conditions and geology, and overall equipment availability. As part of its previously announced enterprise-wide business process improvements initiative, Placer Dome has entered into strategic sourcing agreements for tires, cyanide, explosives and fuels and lubricants that are expected to result in estimated total savings of $15 million to Placer Dome over the next three years. Placer Dome is now actively pursuing potential opportunities for savings in other consumables. Placer Dome has also completed its review of maintenance processes and has identified improvements which will be implemented over the next two years and are expected to result in estimated annualized benefits of $30 million per year by 2006. Detailed Review of Financial Results Earnings Consolidated net earnings in accordance with U.S. GAAP for the first half of 2004 and three months ended June 30, 2004 were $97 million ($0.23 per share) and $33 million ($0.08 per share), respectively, compared with $121 million ($0.30 per share) and $58 million ($0.15 per share) for the same periods in 2003. In the first six months and the second quarter of 2004, Placer Dome's net earnings were impacted by an unrealized non-hedge derivatives after-tax loss of $4 million (2003 - gain of $51 million) and gain of $1 million (2003 - gain of $17 million), respectively. The first six months and second quarter of 2004 net earnings included an after-tax non-cash charge of $34 million, previously recognized in accumulated comprehensive income, relating to the cumulative foreign exchange translation loss on Placer Dome's investment in Misima as that mine ceased commercial production during the second quarter. The first six months of 2004 net earnings also included the effect of the adoption of a new accounting policy relating to accounting for deferred stripping activities. The cumulative effect of this change to January 1, 2004 was a non- cash increase in year to date after-tax earnings of $4 million. The first six months of 2003 net earnings included the effect of the adoption of a new accounting standard relating to accounting for post mining related asset retirement obligations. The cumulative effect of this change was a non-cash decrease in after-tax earnings of $17 million. During the second quarter and first six months of 2003, Placer Dome's net earnings were positively impacted by the recognition of a $39 million non-cash tax asset for previously unrecorded tax benefits related to its U.S. operations, an amount that was estimated more than likely than not to be realized beyond 2003. The recognition reflected a more positive outlook for Placer Dome's U.S. operations including an improved gold price environment and the approval of Top Pit Stage 7 at the Bald Mountain mine. Mine operating earnings for the first six months and second quarter of 2004 were $295 million and $137 million, respectively, increases of 79% or $130 million and 99% or $68 million over the comparative 2003 periods due to higher contributions from both copper and gold. Gold operating earnings increased by 19% to $82 million in the second quarter of 2004 compared with $69 million in the second quarter of 2003. Gold sales revenue for the quarter was $341 million compared with $324 million in the prior-year period, an increase of 5% reflecting a $21 per ounce increase in the average realized price. The increase in the average realized sales price was due to a 13% increase in the average market price, partially offset by a decrease in the contribution from Placer Dome's precious metals sales program to negative $6 million in the second quarter of 2004 from positive $16 million in the second quarter of 2003. Placer Dome's share of cash and total production costs per ounce for the second quarter of 2004 were $229 and $283, respectively, compared with $223 and $283 in the prior-year period. The increase in cash costs per ounce was due primarily to the appreciation of the South African rand, the Canadian and Australian dollars, the Papua New Guinean kina and the Chilean peso against the U.S. dollar (cumulatively $11 per ounce), partially offset by a positive $2 million contribution from Placer Dome's currency hedging program. Copper operating earnings of $57 million in the second quarter of 2004 were $52 million higher than in the comparative 2003 period. Copper sales revenue for the quarter was $125 million compared with $73 million in the 2003 period, reflecting a 68% increase in the average spot price and a 12% increase in sales volume, partially offset by a negative contribution of $10 million (2003 - nil) from Placer Dome's copper hedging program. Consolidated copper production in the second quarter of 2004 was 109.2 million pounds (49,545 tonnes), up 1% from the prior-year period. Placer Dome's share of cash and total production costs per pound of copper for the quarter were $0.49 and $0.63, respectively, compared with $0.54 and $0.69, respectively, in the second quarter of 2003. The decrease in unit production costs primarily reflected the lower maintenance, acid and other operating costs at the Zaldivar mine and higher production, partially offset by the appreciation of the Australian dollar and the Chilean peso against the U.S. dollar and higher shipping costs. Cash from Operations Cash from operations increased by $98 million and $49 million to $241 million and $107 million in the first six months and second quarter of 2004, respectively, compared with $143 million and $58 million in the corresponding periods in 2003. Excluding the impact of non-cash working capital, cash from operations was $226 million and $89 million in the first half and second quarter of 2004, respectively, compared with $158 million and $55 million in the prior-year periods. The increases of 43% and 62%, respectively, primarily reflect an increase in mine operating earnings, partially offset by an increase in cash taxes. Expenditures on property, plant and equipment in the first six months and second quarter of 2004 amounted to $149 million and $80 million, respectively, increases of $56 million and $26 million from the comparative prior-year periods. The expenditures for the six months included outlays of $30 million for the main shaft and underground development at the South Deep mine (2003 - $29 million), $18 million for underground development at Turquoise Ridge (2003 - $2 million), $12 million for pre-stripping at Golden Sunlight, $11 million for the mill upgrade at North Mara and $11 million for processing enhancements and sustaining capital at Zaldivar (2003 - $17 million). Financing activities in the second quarter of 2004 included net debt additions of $2 million and proceeds of $5 million on the exercise of common share stock options. Financing activities in the second quarter of 2003 included the redemption of $185 million of 8.625% preferred securities and the repayment of $200 million of 7.125% unsecured bonds. Additional financing activities in the first half of 2003 included the repayment of $137 million of debt assumed in the AurionGold acquisition and the issuance of $200 million of 6.375% 30-year unsecured bonds, both in the first quarter of the year. There were $21 million of dividend payments in the first half and second quarter of 2004, respectively (2003 - $21 million). Consolidated short-term and long-term debt balances at June 30, 2004, were $1,192 million, compared with $1,189 million at December 31, 2003. On June 30, 2004, consolidated cash and short-term investments amounted to $688 million, an increase of $97 million from the beginning of the year. Of the consolidated balance of cash and short-term investments, $668 million was held by Placer Dome and its wholly owned subsidiaries. At June 30, 2004, Placer Dome also had $775 million of undrawn bank lines of credit available. Placer Dome entered into a new unsecured revolving credit agreement with a syndicate of lenders effective July 20, 2004. The facility is available for use for general corporate purposes. The agreement permits borrowings of up to $850 million, with a $300 million sub-limit for letters of credit, until its maturity on July 20, 2009. The agreement requires the Corporation to maintain a consolidated tangible net worth of $1.5 billion. This agreement replaced a two-tranche credit facility of $685 million, a portion of which was scheduled to be renewed on September 8, 2004 ($285 million) and a portion that was scheduled to expire on September 8, 2005 ($400 million). Forward Sales and Options During the first half and second quarter of 2004, Placer Dome reduced the maximum committed ounces under its precious metals sales program by 710,000 and 310,000 ounces, respectively to a total of 9.75 million ounces at June 30, 2004. Committed ounces were reduced during the periods by delivering into hedge contracts and through early delivery of forward sales. This represents maximum committed ounces as a percentage of reserves at December 31, 2003 of 16% at an average expected realized price of approximately $381 per ounce for delivery over 13 years. Looking forward, Placer Dome expects to reduce its maximum committed ounces to nine million by December 31, 2004. This would represent a decrease of approximately 14% for the year. See note 9 of the unaudited interim consolidated financial statements for detailed allocation of the metals sales and currency programs. The mark-to-market value of Placer Dome's precious metals sales program at June 30, 2004, based on spot prices of $395.80 per ounce for gold, $5.945 per ounce for silver and an Australian to U.S. dollar ("AUD/USD") exchange rate of $1.4430, and the period-over-period change in the mark-to-market value is detailed below. The mark-to-market value reflects the amount that would have been paid to counterparties if the contracts were closed out on June 30, 2004 under prevailing market conditions without allowance for market illiquidity. At July 26, 2004, based on spot prices of $390.75 per ounce for gold, $6.295 per ounce for silver and an AUD/USD exchange rate of $1.4100, the mark-to-market value was negative $424 million. ----------- $millions ------------------------------------------------------------------------- Mark-to-market value at December 31, 2003 (705) Cash value realized 29 Change in spot price (December 31, 2003 - $417 per ounce) 188 Change in the AUD/USD exchange rate (December 31, 2003 - $1.3319) (29) Accrued contango 75 Change in volatility, interest rates and gold lease rates (54) ------------------------------------------------------------------------- Mark-to-market value at June 30, 2004 (496) Provision included in Deferred Commodity and Currency Sales Contracts and Derivatives liability relating primarily to the fair value of the AurionGold and East African Gold precious metal hedge books remaining from the acquisitions by Placer Dome 189 ------------------------------------------------------------------------- Net unrealized mark-to-market value at June 30, 2004 (307) ------------------------------------------------------------------------- The net unrealized mark-to-market value of negative $307 million reflects the income statement effect that Placer Dome could expect to incur had it closed out its contracts at June 30, 2004 under prevailing metal prices, foreign exchange rates, interest rates and volatilities. The mark-to-market and unrealized mark-to-market amounts are not estimates of future gains or losses which depend on various factors including contango and interest rates, gold lease rates and the then prevailing spot price. For the copper sales and currency derivative programs, the mark-to-market value of forward and option contracts on June 30, 2004, was negative $34 million based on a spot copper price of $1.209 per pound (December 31, 2003 - negative $25 million based on a spot copper price of $1.053 per pound) and positive $27 million based on a foreign exchange rate of AUD/USD - 1.4430 (December 31, 2003 - positive $45 million based on a foreign exchange rate of AUD/USD - 1.3319), respectively. At July 26, 2004, the mark-to-market value of forward and option contracts was negative $35 million for copper based on a spot copper price of $1.271 per pound and positive $31 million for currencies based on a foreign exchange rate of AUD/USD - 1.4100, respectively. Other Income Statement Items Costs related to general and administrative, exploration, technology, resource development and other totalled $95 million and $50 million in the first six months and second quarter of 2004, respectively, representing increases of $4 million and nil from the prior comparative periods. Resource development, technology and other expenses were similar to the prior-year periods as the cessation of Turquoise Ridge holding costs and the reduced amortization of purchased undeveloped mineral interests offset the increase in expenditures on the Pueblo Viejo development study and the Wallaby underground feasibility study. The increases in general and administration costs was primarily due to the weakening U.S. dollar and costs associated with increased corporate activities. Pre-tax non-hedge derivative losses in the first half and second quarter of 2004 were $14 million and $7 million, respectively (2003 - gains of $77 million and $29 million). Included in these amounts are net unrealized non-cash losses of $2 million and gains of $4 million for the first six months and second quarter of 2004, respectively (2003 - gains of $75 million and $26 million). The realized losses in 2004 were largely due to the appreciation in the price of copper. The 2003 gains were primarily related to the mark-to-market value changes on foreign currency forward and option contracts and Australian dollar denominated metal derivative instruments acquired with AurionGold, which do not qualify for hedge accounting, covering future periods. Investment and other business income in the first six months and second quarter of 2004 were expenses of $25 million and $27 million, respectively, compared with expenses of $8 million and $9 million in the comparative prior- year periods. The increased losses were due to an after-tax non-cash charge of $34 million, previously recognized in accumulated comprehensive income, relating to the cumulative foreign exchange translation loss on Placer Dome's investment in Misima, which ceased commercial production during the second quarter. This was partially offset by the absence of the foreign exchange losses recorded in the comparative periods. Interest and financing expenses were $37 million and $18 million in the first half and second quarter of 2004, respectively, compared with $33 million and $15 million in the comparative prior-year periods. The increase relates to higher average debt levels in the 2004 period, partially offset by lower interest rates. The effective tax rate during first half and second quarter of 2004 increased to 28% and 9%, respectively, compared to negative 22% and 133% in the prior-year periods. The $34 million charge in the second quarter of 2004 relating to the Misima cumulative foreign exchange loss was not deductible for tax purposes. Income and resource tax recoveries during the quarter and six months ended July 2003 were largely due to the recognition of a $39 million non-cash asset for previously unrecorded tax benefits related to Placer Dome's U.S. operations. At December 31, 2003, the majority of the valuation allowance against the U.S. tax assets had been reversed. Net earnings in the first half of 2004 included the effect of a change in accounting policy related to deferred stripping. During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, with respect to deferred stripping to exclude the recording of liabilities relating to the Cortez joint venture on Placer Dome's balance sheet (see note 2(a) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change through December 31, 2003, was to increase earnings on an after-tax basis by $4 million ($0.01 per share). As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. Also during the second quarter of 2004, Placer Dome changed its accounting policy, prospectively from April 1, 2004, with respect to mineral rights to reclassify them from intangible to tangible assets. Due to this change in accounting policy, Placer Dome will now cease amortization of the excess of the carrying over the residual value of these assets and account for them according to its accounting policy for property, plant and equipment (see note 2(b) to the unaudited interim consolidated financial statements for more details). If this change had been adopted January 1, 2003, it would have increased Placer Dome's earnings on a pre and after tax basis in the following periods: for the first half of 2003 by $7 million ($0.02 per share) and $5 million ($0.01 per share), respectively; for the second quarter of 2003 by $2 million (nil per share) and $1 million (nil per share), respectively, and for the first quarter of 2004 by $3 million ($0.01 per share) and $2 million (nil per share), respectively. Net earnings in the first half of 2003 included the effect of the adoption of a new standard (SFAS 143 'Accounting for Asset Retirement Obligations') relating to accounting for post mining-related asset retirement obligations. The new standard requires that the fair value of liabilities for asset retirement obligations be recognized in the period in which they are incurred (see note 2(c) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change was a non- cash reduction in earnings on a pre- and after-tax basis of $23 million and $17 million, respectively. Share Capital As at July 26, 2004, Placer Dome had 413,440,526 common shares outstanding. As at the same date, it had $230 million in convertible debentures outstanding, none of which were in a position to be converted on July 26, 2004. If conversion were possible, the total number of common shares the Corporation would have to issue on conversion on that date would be 10,991,631. As at July 26, 2004, Placer Dome had 15,863,865 share options outstanding under its stock-based incentive plans. If all of these options were exercised on that date, the Corporation would have to issue 15,863,865 common shares. Critical Accounting Policies In the second quarter of 2004, Placer Dome finalized the purchase price allocation for its July 2003 acquisition of East African Gold Mines Limited. This resulted in several adjustments to the fair values assigned to the acquired assets and liabilities from the initial purchase price allocation. Accordingly, Placer Dome's December 31, 2003 consolidated balance sheet has been restated to reflect these changes. In particular, the allocation of value for purchased undeveloped mineral interests has increased by $93 million (including $28 million for the tax gross-up) while the allocation to mineral properties, mine development has decreased by $6 million (including $2 million for the tax gross-up) and the deferred tax liability has increased by $26 million for the tax gross-up. Net earnings for 2003 and the first quarter of 2004 were not re-stated as the effect on the post-acquisition period in those periods was not material. The key factors that gave rise to the changes were increased environmental and sustainability costs and increased processing capacity. Recent Accounting Developments The Emerging Issues Task Force of the Financial Accounting Standards Board ("FASB") is currently discussing stripping costs for mining operations. Should the Task Force reach a consensus, Placer Dome may be required to make further changes to its related accounting policies. On March 31, 2004, FASB published an Exposure Draft, "Share-Based Payment, an Amendment of FASB Statements No. 123 and 95." The proposed change in accounting would replace the existing requirements under SFAS 123 and APB 25. Under the proposal, all forms for share-based payments to employees, including employee stock options and employee stock purchase plans, would be treated the same as other forms of compensation by recognizing the related cost in the statement of income. This proposed Statement would eliminate the ability to account for stock-based compensation transactions using APB 25 and generally would require instead that such transactions be accounted for using a fair-value based method, with a binomial or lattice model preferred to the Black-Scholes valuation model. The comment period for the exposure draft ended June 30, 2004. The Corporation is investigating what impact the adoption of the exposure draft will have on its financial position and results of operations. Canadian GAAP Placer Dome also prepares a reconciliation highlighting the material differences between its interim financial statements as prepared in accordance with U.S. GAAP as compared to interim financial statements prepared under Canadian GAAP as well as a Management's Discussion and Analysis focusing on these differences (see note 13 to the interim unaudited consolidated financial statements). Review of Mining Operations ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the six months ended June 30 ------------------------------------- Placer Dome's Share -------------------------- Mine Placer Mine Dome's share operating Millfeed (% of mine earnings (000s Grade Recovery production) (1)(4)(7) tonnes) (g/t,%) (%) ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 $ 6 215 14.5 95.7 2003 $ 7 187 17.4 95.9 ------------------------------------------------------------------------- Musselwhite 68% 2004 4 496 5.2 95.5 2003 - 432 5.4 95.4 ------------------------------------------------------------------------- Porcupine 51% 2004 12 1,010 3.7 91.8 2003 7 1,044 3.6 92.1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 2 580 0.7 - 2003 3 3,419 0.7 - ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 66 10,862 1.3 - 2003 61 5,522 2.4 - ------------------------------------------------------------------------- Golden Sunlight(5) 100% 2004 1 - - - 2003 23 1,153 3.9 82.6 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 4 173 12.8 94.4 100% 2003 1 37 14.8 96.9 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 (5) 2,155 1.5 88.5 2003 9 1,956 2.3 88.1 ------------------------------------------------------------------------- Henty(7) 100% 2004 12 144 18.5 96.7 2003 (1) 145 9.8 94.1 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 6 1,542 2.9 95.9 2003 (4) 1,725 3.8 94.9 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 9 955 3.9 89.6 2003 10 943 4.7 89.4 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Osborne(9) 100% 2004 - 780 1.0 83.4 2003 - 745 0.9 79.3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 6 1,850 0.8 87.5 2003 4 2,209 0.8 87.3 ------------------------------------------------------------------------- Porgera(7) 75% 2004 59 2,419 5.7 87.1 2003 9 2,049 4.9 87.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 8 1,595 1.2 82.4 2003 2 1,537 1.0 85.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- South Africa South Deep 50% 2004 (6) 524 5.9 97.3 2003 3 432 7.8 96.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 12 1,026 3.2 92.9 2003 - - - - ------------------------------------------------------------------------- Metal hedging loss 2004 (16) 2003 22 ------------------------------------------------------------------------- Currency hedging gain 2004 7 2003 - ------------------------------------------------------------------------- TOTAL GOLD 2004 $ 179 2003 $ 154 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 20 780 2.8 95.6 2003 1 745 2.9 95.6 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 122 9,253 1.2 - 2003 17 8,325 1.0 - ------------------------------------------------------------------------- Metal hedging loss 2004 (18) 2003 - ------------------------------------------------------------------------- TOTAL COPPER 2004 $ 124 2003 $ 18 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other(1) 2004 (8) 2003 (7) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 $ 295 OPERATING EARNINGS(1) 2003 $ 165 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the six months Estimated annual ended June 30 2004/Actual 2003 ------------------------------------------------- Placer Dome's Share ------------------------------------------------- Cost per Mine Placer Production Cost per Prod- unit(13) Dome's share ---------------- unit(2) uction ($/oz, (% of mine (ozs, % ($/oz, $/lb) (ozs, $/lb) production) 000s lbs) change Cash Total 000s lbs) Cash Total ------------------------------------------------------------------------- ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 95,910 -4% 266 340 208,000 230 300 2003 100,364 199 268 197,114 202 264 ------------------------------------------------------------------------- Musselwhite 68% 2004 79,191 +11% 263 341 157,000 240 320 2003 71,660 260 338 151,422 250 330 ------------------------------------------------------------------------- Porcupine 51% 2004 109,381 -2% 225 294 205,000 230 300 2003 111,933 219 278 233,101 206 262 ------------------------------------------------------------------------- ------------------------------------------------------------------------- United States Bald Mountain (3) 100% 2004 25,401 -53% 277 308 65,000 230 290 2003 53,792 241 285 90,601 228 279 ------------------------------------------------------------------------- Cortez (3),(4),(8) 60% 2004 342,548 -0% 152 188 600,000 160 200 2003 343,109 124 160 639,241 135 172 ------------------------------------------------------------------------- Golden Sun- light(5) 100% 2004 2,419 -98% - - - - - 2003 118,716 146 161 234,946 143 151 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 72,099 +378% 286 293 125,000 280 290 100% 2003 15,092 215 219 92,965 215 220 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 93,703 -27% 361 444 286,000 310 370 2003 128,312 208 278 280,129 246 320 ------------------------------------------------------------------------- Henty(7) 100% 2004 83,003 +91% 152 255 135,000 190 300 2003 43,372 223 340 102,070 204 308 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 143,857 -28% 308 372 245,000 320 390 2003 198,639 260 362 396,254 271 364 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 106,956 -17% 265 333 230,000 260 340 2003 128,988 202 284 262,889 204 283 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Osborne(9) 100% 2004 21,294 +31% - - 40,000 - - 2003 16,211 - - 37,357 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 39,094 -17% 275 281 39,000 275 281 2003 47,264 266 279 94,837 276 310 ------------------------------------------------------------------------- Porgera(7) 75% 2004 380,135 +33% 193 226 710,000 210 250 2003 285,595 272 324 638,940 256 301 ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 49,060 +22% 235 310 87,000 240 320 2003 40,323 234 318 99,637 208 291 ------------------------------------------------------------------------- South Africa South Deep 50% 2004 97,298 -7% 412 455 210,000 390 430 2003 104,384 272 314 220,371 301 342 ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 95,596 n/a 226 281 215,000 240 300 2003 - - - 89,525 225 301 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- Currency hedging gain 2004 (4) (4) 2003 - - ------------------------------------------------------------------------- TOTAL GOLD 2004 1,836,945 +2% 230 284 3,550,000- 230- 290- 3,650,000 235 295 2003 1,807,754 215 274 3,861,399 218 274 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 45,960 +0% 0.62 0.73 90,000 0.60 0.72 2003 45,896 0.56 0.69 93,638 0.56 0.69 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 172,101 +5% 0.48 0.62 315,000 0.50 0.66 2003 163,315 0.52 0.67 331,720 0.51 0.66 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- TOTAL COPPER 2004 218,061 +4% 0.51 0.65 400,000- 410,000 0.51 0.67 2003 209,211 0.53 0.67 425,358 0.52 0.67 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other(1) 2004 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 OPERATING EARNINGS(1) 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the Second Quarter ---------------------------------------- Placer Dome's Share Placer ---------------------------- Dome's share Mine Millfeed Mine % of mine operating (000s Grade Recovery production earnings(1) tonnes) (g/t,%) (%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 $ 5 117 14.6 95.8 2003 $ 3 91 17.2 96.2 ------------------------------------------------------------------------- Musselwhite 68% 2004 2 248 5.4 96.4 2003 - 233 5.4 95.5 ------------------------------------------------------------------------- Porcupine 51% 2004 6 508 3.7 92.0 2003 5 541 3.9 92.5 ------------------------------------------------------------------------- ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 - 364 0.3 - 2003 1 1,483 0.8 - ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 35 4,788 1.4 - 2003 25 3,364 1.8 - ------------------------------------------------------------------------- Golden Sunlight 100% 2004 - - - - 2003 11 579 3.5 82.4 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 - 67 11.2 92.8 100% 2003 1 37 14.8 96.9 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 (1) 1,114 1.3 87.8 2003 3 987 2.2 87.2 ------------------------------------------------------------------------- Henty(7) 100% 2004 9 71 23.3 97.4 2003 (1) 77 10.4 94.4 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 (1) 748 2.7 95.6 2003 (1) 878 4.2 96.2 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 4 482 3.9 89.7 2003 5 493 4.6 88.8 ------------------------------------------------------------------------- Osborne(8) 100% 2004 - 405 1.0 84.0 2003 - 387 1.0 81.7 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 3 714 1.0 87.7 2003 2 1,140 0.8 86.7 ------------------------------------------------------------------------- Porgera (7) 75% 2004 23 1,223 5.2 86.0 2003 (2) 1,028 4.7 86.2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 3 798 1.0 82.4 2003 - 773 0.9 85.1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- South Africa South Deep 50% 2004 (3) 266 6.1 97.3 2003 1 225 8.0 97.1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 6 527 3.1 92.4 ------------------------------------------------------------------------- Metal hedging loss 2004 (6) 2003 16 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Currency hedging gain 2004 2 2003 - ------------------------------------------------------------------------- TOTAL GOLD 2004 $ 82 2003 $ 69 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 10 405 2.7 94.8 2003 - 387 3.1 95.6 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 57 4,709 1.1 - 2003 5 4,137 1.0 - ------------------------------------------------------------------------- Metal hedging loss 2004 (10) 2003 - ------------------------------------------------------------------------- TOTAL COPPER 2004 $ 57 2003 $ 5 ------------------------------------------------------------------------- Other(1) 2004 (2) 2003 (5) ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 $ 137 OPERATING EARNINGS(1) 2003 $ 69 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the Second Quarter ------------------------------------------------ Placer Dome's Share ------------------------------------------------ Placer Production Cost per Dome's share --------------------- unit(2)(12) Mine % of mine (ozs, % ($/oz, $/lb) production 000s lbs) change Cash Total ------------------------------------------------------------------------- ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 52,704 +9% 242 310 2003 48,322 204 277 ------------------------------------------------------------------------- Musselwhite 68% 2004 41,778 +8% 240 316 2003 38,562 239 315 ------------------------------------------------------------------------- Porcupine 51% 2004 55,397 -11% 207 276 2003 62,410 194 250 ------------------------------------------------------------------------- ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 12,489 -52% 345 387 2003 25,851 239 281 ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 173,041 +13% 154 186 2003 152,700 133 175 ------------------------------------------------------------------------- Golden Sunlight 100% 2004 200 -100% - - 2003 53,001 158 175 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 29,605 +96% 323 330 100% 2003 15,092 215 219 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 43,891 -29% 349 425 2003 61,971 212 283 ------------------------------------------------------------------------- Henty(7) 100% 2004 51,425 +120% 124 226 2003 23,424 214 334 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 63,539 -43% 328 412 2003 111,471 243 348 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 51,331 -21% 266 335 2003 65,051 220 263 ------------------------------------------------------------------------- Osborne(8) 100% 2004 11,431 +26% - - 2003 9,101 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 16,854 -30% 247 252 2003 24,135 281 300 ------------------------------------------------------------------------- Porgera (7) 75% 2004 186,898 +33% 206 239 2003 140,027 304 357 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 19,943 +10% 254 326 2003 18,200 251 336 ------------------------------------------------------------------------- ------------------------------------------------------------------------- South Africa South Deep 50% 2004 51,441 -8% 399 440 2003 55,830 274 316 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 46,176 n/a 206 260 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- Currency hedging gain 2004 2003 ------------------------------------------------------------------------- TOTAL GOLD 2004 908,143 +0% 229 283 2003 905,148 223 283 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 22,977 -9% 0.59 0.71 2003 25,133 0.53 0.65 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 86,251 +4% 0.47 0.61 2003 82,840 0.55 0.70 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- TOTAL COPPER 2004 109,228 +1% 0.49 0.63 2003 107,973 0.54 0.69 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other(1) 2004 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 OPERATING EARNINGS(1) 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Notes to the Production and Operating Summary Tables: (1) Mine operating earnings represent 100% of the results of mines owned by Placer Dome and its subsidiaries and a pro-rata share of joint ventures. Consolidated mine operating earnings, (and the related sub-totals), in accordance with accounting principles generally accepted in the U.S., exclude the pro-rata share of La Coipa, a non- controlled incorporated joint venture. Mine operating earnings comprises sales, at the spot price, less cost of sales including reclamation costs, depreciation and depletion for each mine, in millions of U.S. dollars. Pursuant to SFAS 109 - Accounting for Income Taxes, on business acquisitions, where differences between assigned values and tax bases of property, plant and equipment acquired exist, Placer Dome grosses up the property, plant and equipment values to reflect the recognition of the deferred tax liabilities for the tax effect of such differences. Other mine operating earnings included charges of $5 million and $3 million in the six months and three months ended June 30, 2004, respectively (2003 - $3 million and $1 million), related to the amortization of the gross up of the property, plant and equipment allocation. (2) Components of Placer Dome's share of cash and total production costs in accordance with the Gold Institute Standard: ---------------------------------- For the period ended June 30 ---------------------------------- Second Quarter Six Months ---------------------------------- 2004 2003 2004 2003 $/oz $/oz $/oz $/oz --------------------------------------------------------------------- Direct mining expenses 236 202 227 195 Stripping and mine development adjustment (24) 10 (15) 7 Third party smelting, refining and transportation 1 1 1 1 --------------------------------------------------------------------- By-product credits (1) (1) (1) (1) --------------------------------------------------------------------- --------------------------------------------------------------------- Cash operating costs per ounce 212 212 212 202 --------------------------------------------------------------------- Royalties 15 11 15 12 Production taxes 2 - 3 1 --------------------------------------------------------------------- Total cash costs per ounce 229 223 230 215 --------------------------------------------------------------------- Depreciation 33 37 33 32 Depletion and amortization 17 19 17 23 Reclamation and mine closure 4 4 4 4 --------------------------------------------------------------------- --------------------------------------------------------------------- Total production costs per ounce 283 283 284 274 --------------------------------------------------------------------- (3) Recovery percentage is difficult to accurately measure at heap leach operations. (4) During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, with respect to deferred stripping to exclude the recording of liabilities on the balance sheet. The cumulative effect of this change through December 31, 2003, was to increase earnings on a pre and after tax basis by $4 million ($0.01 per share). The effect of the change in 2004 was to increase earnings on a pre and after basis before the cumulative effect of the accounting change by $4 million ($0.01 per share) $2 million ($0.01 per share), respectively. The above items combined to increase net earnings by $6 million ($0.02 per share) in 2004. As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. (5) Production from Golden Sunlight was suspended in December 2003 and will recommence when ore is delivered from Stage 5B (pre-stripping started in September 2003 with production scheduled to commence in March 2005). (6) Production from Turquoise Ridge relates to third party ore sales. On December 23, 2003, Placer Dome and Newmont Mining Corporation formed the Turquoise Ridge Joint Venture. Results prior to this represent 100% of the mine's results, and 75% thereafter. The cash and total cost per ounce balances do not include the cost of processing the ore. (7) On October 22, 2002, Placer Dome gained control of AurionGold. This increased Placer Dome's ownership in the Granny Smith mine to 100% and the Porgera mine to 75% from 60% and 50%, respectively, and added the Henty, Kalgoorlie West and Kanowna Belle mines to Placer Dome's holdings. With the finalization of the AurionGold purchase price allocation in the fourth quarter of 2003, there have been several adjustments to the fair values assigned to the acquired assets and liabilities from the initial purchase price allocation. Accordingly, the results for the first quarter of 2003 have been restated. (8) The Cortez mine processes material by way of carbon-in-leach ("CIL") and heap leaching. Millfeed Prod- (000s Grade Recovery uction tonnes) (g/t) (%) (ozs) --------------------------------------------------------------------- Carboninleach For the six months ended June 30 2004 924 6.3 88.9 165,728 2003 1,025 7.5 90.4 223,102 For the second quarter of 2004 455 6.4 88.9 83,655 2003 474 5.9 89.4 79,331 --------------------------------------------------------------------- Heap leach For the six months ended June 30 2004 9,814 0.8 Note 3 156,089 2003 4,322 1.0 Note 3 85,641 For the second quarter of 2004 4,267 0.8 Note 3 77,965 2003 2,800 0.9 Note 3 57,721 --------------------------------------------------------------------- Sale of carbonaceous ore For the six months ended June 30 2004 124 6.1 85.7 20,731 2003 175 7.2 84.9 34,366 For the second quarter of 2004 66 6.2 86.1 11,421 2003 90 6.6 81.1 15,648 --------------------------------------------------------------------- Total For the six months ended June 30 2004 10,862 1.3 Note 3 342,548 2003 5,522 2.4 Note 3 343,109 For the second quarter of 2004 4,788 1.4 Note 3 173,041 2003 3,364 1.8 Note 3 152,700 --------------------------------------------------------------------- (9) Osborne produces copper concentrate with gold as a by-product. Therefore, gold unit costs are not applicable. (10)Silver is a by-product at the Misima mine. For the six and three months ended June 30, 2004, Misima produced 195,000 and 78,000 ounces of silver, respectively, compared with 355,000 and 133,000 ounces for the respective prior-year periods. Mining was completed at Misima in May 2001, but processing of stockpiled ore continued until May 2004. (11)Gold and silver are accounted for as co products at La Coipa. Gold equivalent ounces are calculated using a ratio of the silver market price to gold market price for purposes of calculating costs per equivalent ounce of gold. The equivalent ounces of gold produced at La Coipa were 72,871 and 32,321 ounces, respectively for the six and three month periods ended June 30, 2004 and 67,165 and 32,848 ounces, respectively, for the comparative prior-year periods. At La Coipa, production for silver was 1.5 million and 0.8 million ounces for the six and three months ended June 30, 2004, respectively, and 2.0 million and 1.1 million ounces for the comparative prior-year periods. (12)On July 23, 2003, Placer Dome completed the acquisition of East African Gold Mines Limited which owned 100% of the open pit North Mara mine in northern Tanzania. (13)Estimated 2004 annual unit costs for the Canadian, Australian, Papua New Guinean, Chilean and South Deep mines are based on Canadian and Australian dollar, Papua New Guinean kina, Chilean peso and South African rand exchange rates to the U.S. dollar of 1.33, 1.30, 3.27, 670, and 6.50 to 1, respectively. Any change from these exchange rates would have an impact on the unit costs. At June 30, 2004 these exchange rates were 1.34, 1.45, 3.17, 636, and 6.23 to 1, respectively. Review of Mining Operations Canada Production at the Campbell mine increased by 9% in the second quarter of 2004 compared to the prior-year period due to increased throughput, partially offset by a decrease in grade. Cash costs per ounce increased by $38 or 19% from the prior period primarily related to the processing of lower-grade ore. At the Musselwhite mine, Placer Dome's share of production for the second quarter was 8% higher than the prior-year period due to increased throughput and higher recoveries. Cash costs per ounce were approximately the same as the prior-year period as the increased production offset increased short-term mine development activities. Placer Dome's share of production in the second quarter for the Porcupine Joint Venture was 11% lower than the prior-year period due primarily to lower throughput. Cash costs per ounce were 7% higher than the prior-year period primarily due to lower production. The joint venture's updated forecast for 2004 calls for an increase in Placer Dome's share of production of 12,000 ounces from that previously disclosed to 205,000 ounces with no change in previously forecast cash and total costs per ounce. The Dome underground mine closed, as planned, in late May 2004. The Dome open pit mine is scheduled to close in the second quarter of 2005 at which point mill feed will be supplemented by stockpiled ore until ore feed from the Pamour mine is achieved. Overburden removal at the Pamour mine is expected to commence in the fourth quarter of 2004, with gold production expected to start in the third quarter of 2005. United States Placer Dome's share of production from the Cortez mine increased by 13% in the second quarter of 2004 compared with the 2003 period. This was due primarily to higher grades in the CIL process and higher production from the heap leach operations due to increased tonnes placed on the leach pads, partially offset by lower heap leach grades. Cash costs per ounce were 16% higher than in the prior-year period, primarily due to an increased proportion of production from the relatively lower grade heap leach ore. The joint venture's updated forecast for 2004 calls for an increase in Placer Dome's share of production of 37,000 ounces from that previously disclosed to 600,000 ounces and its cash and total costs per ounce forecast has been decreased to $160 and $200 from $170 and $220, respectively. New mineral reserve and mineral resource estimates have been prepared for the Cortez joint venture. These indicate that Placer Dome's 60% share of the estimated proven and probable mineral reserve, after allowance for current year depletion, has increased from 7.6 million ounces to 9.0 million ounces. Included in this is an increase in Placer Dome's share of the Cortez Hills estimated proven and probable mineral reserves from 3.2 million ounces to 4.5 million ounces (see the Strategic Update section of this document for details). Placer Dome's share of production from Turquoise Ridge in the second quarter of 2004 was 96% greater than the prior-year period as operations continued to ramp up. Cash costs per ounce were 50% higher than in the prior-year period, primarily due to lower grades and increased start-up costs. Construction delays have prevented the mobilization of an additional contractor and deferred the timing for accessing high-grade stopes. These delays, combined with a shortage of experienced miners, have caused the joint venture to update its forecast for 2004, which now calls for a decrease in Placer Dome's share of production of 35,000 ounces from that previously disclosed to 125,000 ounces and its cash and total costs per ounce forecast has been increased to $280 and $290 from $235 and $250, respectively. The delays and the shortage of experienced miners available for employment have caused a change in the expectation for the operation to reach annualized production of 300,000 ounces (Placer Dome's share 225,000 ounces) of gold from December 2004 to December 2005. The mine has established a training academy, which will start in August, to address the shortage of skilled underground miners in Nevada. Australia and Papua New Guinea On average, the Australian dollar and the Papua New Guinean kina appreciated 11% and 14%, respectively, against the U.S. dollar for the second quarter of 2004 compared to the second quarter of 2003. At the Porgera mine, Placer Dome's share of production in the second quarter of 2004 was 33% above 2003 levels due to higher grade and increased throughput. Cash costs per ounce were $98 or 32% lower than the prior period, primarily due to the increase in production and lower maintenance activities than in the comparative period, partially offset by the appreciation of the Australian dollar and Papua New Guinean kina. At the Granny Smith mine, Placer Dome's share of production for second quarter was 29% below that of the prior-year period due to the planned processing of low-grade stockpiled ore while stripping activities continued on Stage 3 of the Wallaby open pit in preparation for ore production in the third quarter of the year. Cash costs per ounce were $349, representing a 65% increase over the prior period primarily due to the lower gold production, the processing of stockpiled ore and the appreciation of the Australian dollar. Production from the Henty mine in the second quarter was 120% above that of the prior-year period due to higher grades. Cash costs per ounce were $124 or a 42% decrease over the prior period primarily due to the higher gold production, partially offset by the appreciation of the Australian dollar. The positive production experience has caused the mine to update its forecast for 2004 increasing production by 31,000 ounces to 135,000 ounces and decreasing its cash and total costs per ounce forecast to $190 and $300 from $220 and $340, respectively. Production from Kalgoorlie West during the second quarter of 2004 was 43% below that of the prior-year period as changes in production scheduling and processing of lower grade stockpiled ore due to a reduction in ore sources resulted in lower throughput and grade. Cash costs per ounce in the quarter increased by 35% compared to the prior-year period due to the appreciation of the Australian dollar and lower production levels. At the Kanowna Belle mine, production for the three months ended June 30, 2004 was 21% below that of the prior-year period due to a combination of lower grades and delays in processing caused by the high sulphur content of the ore. Cash costs per ounce were $46 or 21% higher than the prior year quarter due primarily to the appreciation of the Australian dollar and decreased production levels, partially offset by lower levels of development work than in the comparative period. Expectations of continued elevated sulphur content in the ore has caused the mine to update its forecast for 2004 decreasing production by 15,000 ounces from that previously disclosed to 230,000 ounces and its cash and total costs per ounce forecast has been increased to $260 and $340 from $240 and $330, respectively. At the Osborne mine, copper and gold production in the second quarter of 2004 were 23.0 million pounds and 11,431 ounces, a decrease of 9% and an increase of 26%, respectively, from the prior-year period due to higher throughput and gold recoveries, offset by lower copper grades. Cash and total costs per pound of copper (Osborne produces copper concentrate with gold as a by-product) were $0.59 and $0.71, respectively, 11% and 9% above prior period levels due to higher shipping costs and the appreciation of the Australian dollar. This cost experience has caused the mine to update its forecast for 2004 which now calls for an increase cash and total unit costs per pound from that previously disclosed to $0.60 and $0.72 from $0.57 and $0.69, respectively. Africa At the South Deep mine, Placer Dome's share of production for the second quarter of 2004 was 51,441 ounces, an 8% decrease over the prior-year period primarily due to lower milled grades. Ongoing issues relating to the implementation of continuous operating working arrangements and the cessation of mining in uneconomic stopes resulted in the need to use low-grade surface ore to supplement mill feed. Unit cash costs increased by 46% due to a 14% appreciation in the rand relative to the U.S. dollar for the second quarter of 2004 compared to the second quarter of 2003, lower production levels and general inflationary operating cost increases. These production and cost issues have caused the joint venture to update its forecast for 2004 which now calls for a decrease in Placer Dome's share of production of 17,000 ounces from that previously disclosed to 210,000 ounces and its cash and total costs per ounce forecast has been increased to $390 and $430 from $320 and $370, respectively. During the quarter, work on the mineral resource and mineral reserve estimates continued with an announcement of the revised estimates currently expected in the third quarter of this year. The legislative regime governing the South African mining industry has undergone a series of significant changes over the past two years, culminating in the commencement of the Mineral and Petroleum Resources Development Act No. 28 of 2002 ("the Act") on May 1, 2004. The Act legislates the abolition of private mineral rights in South Africa and replaces them with a system of state licensing based on the patrimony over minerals being vested in the state, as is the case with the bulk of minerals in other established mining jurisdictions such as Canada and Australia. Provision is made in the Act for compensation to be paid to any person who is able to establish that their property has been expropriated under the Act. On May 3, 2004 the Department of Minerals and Energy (the "DME") announced that it was seeking legal advice on the implications of the Act in light of South Africa's international agreements. Holders of old-order mining rights, of the type held by the Placer Dome Western Areas Joint Venture for its South Deep mine, are required within five years of the May 1, 2004 commencement date to lodge their rights for conversion into new order mining rights in terms of the Act. Old order mining rights will continue in force during the conversion period subject to the terms and conditions under which they were granted. Once a new order right is granted, security of tenure is guaranteed for a period of up to 30 years, subject to ongoing compliance with the conditions under which the right has been granted. A mining right may be renewed for further periods of up to 30 years at a time, subject to fulfilment of certain conditions. In order to be able to convert old order mining rights to new order mining rights, a holder must primarily: - apply in the correct form for conversion at the relevant office of the DME before May 1, 2009; - submit a prescribed social and labour plan; and - undertake to "give effect to" the black economic empowerment and socio-economic objectives of the Act (the "Objectives") and set out the manner in which it will give effect to the Objectives. If the above requirements have been met, the Minister must grant the conversion of the old order right to a new order mining right. In general, the Objectives are embodied in the broad-based socio-economic empowerment charter which was signed by the DME, the South African Chamber of Mines and others on October 11, 2002 (the "Charter"), and which was followed on February 18, 2003 by the release of the appendix to the Charter known as the Scorecard. The Charter is based on seven key principles, two of which are focused on ownership targets for historically disadvantaged South Africans ("HDSAs") and beneficiation, and five of which are operationally oriented and cover areas focused on bettering conditions for HDSAs. Regarding ownership targets, the Charter (as read with the Scorecard) requires each mining company to achieve the following HDSA ownership targets for the purpose of qualifying for the grant of new order rights: (i) 15% ownership by HDSAs in that company or its attributable units of production by May 1, 2009, and (ii) 26% ownership by HDSAs in that company or its attributable units of production by May 1, 2014. The Charter states that such transfers must take place in a transparent manner and for fair market value. It also states that the South African mining industry will assist HDSA companies in securing financing to fund HDSA participation, in the amount of 100 billion rand within the first five years. The Charter does not specify the nature of the assistance to be provided. Placer Dome is actively engaged in discussions with DME officials and others to ensure that South Deep fulfils the ownership requirements for conversion under the Act; however, the finalization of the means of achieving that end will require greater certainty regarding the operation and interpretation of the Act and pending related legislation. At present, the financial implications and market-related risks brought about by the various pieces of the new legislation (including the Mineral and Petroleum Royalty Bill, a revised draft of which is expected to be released toward the end of 2004) cannot be assessed. Material impacts on both the ownership structure and operational costs at South Deep are possible. Placer Dome continues to explore its options and monitor closely the implementation and interpretation of the Act and the progress of other ancillary regulations and legislation. Chile At the Zaldivar mine, copper production for the second quarter of 2004 was 86.2 million pounds, an increase of 4% from the prior-year period due to increases in leached tonnes and grade. Cash costs per pound during the period were $0.47, 15% lower than in the prior-year period as increased production and lower maintenance, acid and other operating costs combined to offset the average 13% appreciation of the Chilean peso to the U.S. dollar compared with the second quarter of 2003. Non-GAAP Measures Placer Dome has included certain non-GAAP performance measures throughout this document. These non-GAAP performance measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Placer Dome believes that as well as conventional measures prepared in accordance with U.S. GAAP, certain investors use this information to evaluate Placer Dome's performance and its ability to generate cash flow for use in investing and other activities. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Set out below are definitions for these performance measures and reconciliations of the non-GAAP measures to reported GAAP measures. Cash from Operations per Common Share Cash from operations per common share is determined by dividing the cash from operations by the weighted average number of common shares outstanding during the period, as follows: ------------------------------------ June 30 ------------------------------------ Second quarter Six months ------------------------------------ 2004 2003 2004 2003 ------------------------------------------------------------------------- Cash from operations ($ millions) 107 58 241 143 ------------------------------------------------------------------------- Weighted average number of common shares (millions) 413.2 408.9 412.6 408.8 ------------------------------------------------------------------------- Cash from operations per common share $0.26 $0.14 $0.58 $0.35 ------------------------------------------------------------------------- Unit Costs A reconciliation of costs per ounce of gold produced, calculated in accordance with the Gold Institute Standard, and costs per pound of copper produced to the Cost of sales and Depreciation and depletion income statement lines is included below: (in millions of dollars except production and unit costs)(i) ------------------------------------ For the six months ended June 30 ------------------------------------ 2004 ------------------------------------ Gold Copper ------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------------------------------------- Reported 557 123 - - Copper (125) (31) 125 31 Corporate (ii) (2) (8) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metal produced 430 84 125 31 La Coipa 17 5 - - Minority interest (3) - - - By-product (3) - (9) - Roast ore costs (24) - - - Reclamation (7) 7 (1) 1 Inventories 1 (2) (9) (2) Other (iii) (10) - 5 1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 401 94 111 31 ------------------------------------------------------------------------- Production reported (i) 1,837 1,837 218 218 Osborne gold ozs. (21) (21) - - Roast ore (ozs.) (93) (93) - - Golden Sunlight ozs. (2) (2) - - La Coipa gold equivalent ozs. 24 24 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 1,745 1,745 218 218 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs (i) 230 54 0.51 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------ For the six months ended June 30 ------------------------------------ 2003 ------------------------------------ Gold Copper ------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------------------------------------- Reported 512 130 - - Copper (108) (29) 108 29 Corporate(ii) - (7) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metal produced 404 94 108 29 La Coipa 15 5 - - Minority interest (4) - - - By-product (3) - (5) - Roast ore costs (3) - - - Reclamation (10) 10 (1) 1 Inventories (12) (3) - 1 Other(iii) 1 - 8 (2) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 388 106 110 29 ------------------------------------------------------------------------- Production reported (i) 1,808 1,808 209 209 Osborne gold ozs. (16) (16) - - Roast ore (ozs.) (15) (15) - - Golden Sunlight ozs. - - - - La Coipa gold equivalent ozs. 26 26 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 1,803 1,803 209 209 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 215 59 0.53 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------ For the three months ended June 30 ------------------------------------ 2004 ------------------------------------ Gold Copper ------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------------------------------------- Reported 270 60 - - Copper (59) (14) 59 14 Corporate(ii) (1) (4) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metals production 210 42 59 14 La Coipa 9 2 - - Minority interest (1) - - - By product (1) - (4) - Roast ore costs (11) - - - Reclamation (3) 3 (1) 1 Inventories 5 - (1) - Other(iii) (9) - 1 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- 199 47 54 15 ------------------------------------------------------------------------- Production reported(i) 908 908 109 109 Osborne gold ozs. (11) (11) - - Roast ore (ozs.) (41) (41) - - La Coipa gold equivalent ozs. 12 12 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 868 868 109 109 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 229 54 0.49 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------ For the three months ended June 30 ------------------------------------ 2003 ------------------------------------ Gold Copper ------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------------------------------------- Reported 265 64 - - Copper (55) (15) 55 15 Corporate(ii) (3) (3) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metals production 207 46 55 15 La Coipa 8 2 - - Minority interest (2) - - - By product (1) - (2) - Roast ore costs (3) - - - Reclamation (4) 4 (1) 1 Inventories (4) - 3 1 Other(iii) (1) 2 3 (2) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 200 54 58 15 ------------------------------------------------------------------------- Production reported(i) 905 905 107 107 Osborne gold ozs. (9) (9) - - Roast ore (ozs.) (15) (15) - - La Coipa gold equivalent ozs. 15 15 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 896 896 107 107 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 223 60 0.54 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (i) Gold production is in thousands of ounces and unit costs for gold are in dollars per ounce. Copper production is in millions of pounds, and unit costs for copper are in dollars per pound. (ii) Corporate depreciation includes the amortization of the tax gross ups (note 3(a) to the unaudited consolidated financial statements). (iii) Other consists of management fees and unusual costs such as significant severance or costs incurred during a temporary mine shut down, which are excluded from the determination of unit costs and smelting charges which are netted against sales revenue but included in the determination of unit costs. FIRST AND FINAL ADD TO FOLLOW DATASOURCE: Placer Dome Inc. CONTACT: Investor Relations: Greg Martin, (604) 661-3795; Media Relations: Theresa Coles, (604) 661-1911

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