/FIRST AND FINAL ADD - TO230 - Placer Dome Inc. Earnings/ PLACER
DOME INC. CONSOLIDATED STATEMENTS OF EARNINGS (millions of U.S.
dollars, except share and per share amounts, U.S. GAAP) (unaudited)
------------------------------------ June 30
------------------------------------ Second quarter Six months
------------------------------------ 2004 2003 2004 2003 (restated-
(restated- note note 3(c)) 3(c)) $ $ $ $
-------------------------------------------------------------------------
Sales (note 4) 467 398 975 807 Cost of sales 270 265 557 512
Depreciation and amortization 60 64 123 130
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mine operating earnings (note 4(b)) 137 69 295 165
-------------------------------------------------------------------------
General and administrative 16 13 31 25 Exploration 17 20 33 34
Resource development, technology and other 17 17 31 32
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating earnings 87 19 200 74
-------------------------------------------------------------------------
Non-hedge derivative gains (loss) (7) 29 (14) 77 Investment and
other business income (loss) (27) (9) (25) (8) Interest and
financing expense (18) (15) (37) (33)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings before taxes and other items 35 24 124 110
-------------------------------------------------------------------------
Income and resource tax recovery (provision) (note 7) (3) 32 (35)
24 Equity in earnings of associates 2 1 5 3 Minority interests (1)
1 (1) 1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earning before the cumulative effect of change in accounting
policy 33 58 93 138
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Changes in accounting policies (note 2) - - 4 (17)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings 33 58 97 121
-------------------------------------------------------------------------
Comprehensive income 69 64 105 127
-------------------------------------------------------------------------
Per common share Net earnings (and diluted net earnings) before the
cumulative effect of change in accounting policy 0.08 0.15 0.22
0.34 Net earnings 0.08 0.15 0.23 0.30 Diluted net earnings 0.08
0.15 0.23 0.30 Dividends - - 0.05 0.05
-------------------------------------------------------------------------
Weighted average number of common shares (millions) Basic 413.2
408.9 412.6 408.8 Diluted 421.4 408.9 420.8 408.8
-------------------------------------------------------------------------
(See accompanying notes to the unaudited interim consolidated
financial statements) PLACER DOME INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (millions of U.S dollars, U.S. GAAP) (unaudited)
------------------------------------ June 30
------------------------------------ Second quarter Six months
------------------------------------ 2004 2003 2004 2003 (restated-
(restated- note note 3(c)) 3(c)) $ $ $ $
-------------------------------------------------------------------------
Operating activities Net earnings 33 58 97 121 Add (deduct)
non-cash items Depreciation and depletion 60 64 123 130 Deferred
stripping adjustment (14) - (23) (3) Cumulative translation
adjustment 34 - 34 - Unrealized (loss) gain on derivatives (3) (26)
2 (75) Deferred reclamation (2) 14 1 19 Deferred income and
resource taxes (14) (47) (4) (46) Changes in accounting policies
(note 2) - - (4) 17 Other items, net (5) (8) - (5)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash from operations before change in non-cash working capital 89
55 226 158 Change in non-cash operating working capital 18 3 15
(15)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash from operations 107 58 241 143
-------------------------------------------------------------------------
Investing activities Property, plant and equipment (80) (54) (149)
(93) Short-term investments (3) (1) (4) (2) Other, net - (1) 3 2
-------------------------------------------------------------------------
(83) (56) (150) (93)
-------------------------------------------------------------------------
Financing activities Short-term debt 5 1 5 1 Long-term debt and
capital leases Borrowings (note 8) - - 5 196 Repayments (note 8)
(3) (387) (7) (526) Common shares issued 5 1 20 2 Redemption of
minority interest - (1) - (1) Dividends paid Common shares (21)
(21) (21) (21) Minority interest - (1) - (1)
-------------------------------------------------------------------------
(14) (408) 2 (350)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 10 (406) 93 (300)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents Beginning of period 665 643 582 537
-------------------------------------------------------------------------
End of period 675 237 675 237
-------------------------------------------------------------------------
(See accompanying notes to the unaudited interim consolidated
financial statements) PLACER DOME INC. CONSOLIDATED BALANCE SHEETS
(millions of United States dollars, U.S. GAAP) (unaudited) ASSETS
------------------- June 30, December 2004 31, 2003 (restated- note
3(b)) $ $
-------------------------------------------------------------------------
Current assets Cash and cash equivalents 675 582 Short-term
investments 13 9 Accounts receivable 119 131 Income and resource
tax assets 16 17 Inventories (note 5) 218 244
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1,041 983
-------------------------------------------------------------------------
Investments 43 51 Other assets (note 6) 180 168 Deferred commodity
and currency sales contracts and derivatives 32 48 Income and
resource tax assets 269 230 Deferred stripping 142 107 Purchased
undeveloped mineral interests 469 522 Goodwill (notes 3(b) and (c))
454 454 Property, plant and equipment Cost 4,159 4,165 Accumulated
depreciation and amortization (2,068) (2,143)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2,091 2,022
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4,721 4,585
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY ------------------- June 30,
December 2004 31, 2003 (restated- note 3(b)) $ $
-------------------------------------------------------------------------
Current liabilities Short-term debt 5 - Accounts payable and
accrued liabilities 225 243 Income and resource taxes liabilities
35 26 Current portion of long-term debt and capital leases (note 8)
10 10
-------------------------------------------------------------------------
-------------------------------------------------------------------------
275 279
-------------------------------------------------------------------------
Long-term debt and capital leases (note 8) 1,177 1,179 Reclamation
and post closure obligations 225 225 Income and resource tax
liabilities 248 216 Deferred commodity and currency sales contracts
and derivatives 213 209 Deferred credits and other liabilities 78
78 Commitments and contingencies (notes 9, 10) Shareholders' equity
2,505 2,399
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4,721 4,585
-------------------------------------------------------------------------
(See accompanying notes to the unaudited interim consolidated
financial statements) PLACER DOME INC. CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (millions of U.S. dollars, except share
amounts, U.S. GAAP) (unaudited)
------------------------------------ June 30
------------------------------------ Second quarter Six months
------------------------------------ 2004 2003 2004 2003 (restated-
(restated- note note 3(c)) 3(c)) $ $ $ $
-------------------------------------------------------------------------
Common shares (i), beginning of period 2,038 1,993 2,023 1,992
Exercise of options 5 1 20 2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common shares, end of period 2,043 1,994 2,043 1,994
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other comprehensive loss, beginning of period (63) (50)
(35) (50) Unrealized gain (loss) on securities (5) 1 (4) (1)
Unrealized gain (loss) on derivatives Copper 16 (1) (14) 1 Currency
(10) 7 (6) 7 Reclassification of (gain) loss on derivatives
included in net earnings Copper 3 - 4 - Currency (2) - (6) -
Unrealized change in the minimum pension liability - (1) - (1)
Reclassification of cumulative translation account loss included in
net earnings 34 - 34 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Accumulated other comprehensive loss, end of period (27) (44) (27)
(44)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contributed surplus, beginning of period 67 57 66 60 Stock-based
compensation 1 2 2 (1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Contributed surplus, end of period 68 59 68 59
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings, beginning of period 388 200 345 157 Net earnings
33 58 97 121 Common share dividends - - (21) (20)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings, end of period 421 258 421 258
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Shareholders' equity 2,505 2,267 2,505 2,267
-------------------------------------------------------------------------
(i) Preferred shares - unlimited shares authorized, no par value,
none issued. Common shares - unlimited shares authorized, no par
value, issued and outstanding at June 30, 2004 - 413,337,404 shares
(December 31, 2003 - 411,530,294). (See accompanying notes to the
unaudited interim consolidated financial statements)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX PLACER DOME INC. NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (all
tabular amounts are in millions of U.S. dollars, U.S. GAAP) 1.
Basis of Presentation The accompanying unaudited interim
consolidated financial statements have been prepared in accordance
with United States ("U.S.") generally accepted accounting
principles ("GAAP") for interim financial information. They do not
include all of the disclosures required by GAAP for annual
financial statements. In the opinion of management, the adjustments
considered necessary for fair presentation, all of which are of a
normal and recurring nature, have been included in these financial
statements. Operating results for the six months ended June 30,
2004 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2004 or future
operating periods. For further information, see Placer Dome's
consolidated financial statements, including the accounting
policies and notes thereto, included in the Annual Report and
Annual Information Form/Form 40-F for the year ended December 31,
2003. The Corporation 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). The consolidated net earnings under Canadian GAAP
were $129 million and $108 million for the six months ended June
2004 and 2003, respectively, and $66 million and $43 million for
the second quarter of 2004 and 2003, respectively. Certain amounts
for 2003 have been reclassified to conform with the current year
basis of presentation. 2. Changes in Accounting Policies and Other
Adjustments (a) 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. Previously, Placer Dome had, at
December 31, 2003, a liability in deferred stripping relating to
its share of the Cortez joint venture on Placer Dome's consolidated
balance sheet. This change was made as a result of deliberations by
the Financial Statement Accounting Board's ("FASB") Emerging Issues
Task Force ("EITF") at its July 1, 2004 meeting which concluded
that a deferred stripping liability did not meet the definition of
a liability under FASB Concept Statement No. 6. 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. The EITF is
currently discussing stripping costs for mining operations. Should
the EITF reach a consensus, Placer Dome may be required to make
further changes to its related accounting policies. 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. (b) 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. This change was made as a result of
deliberations by the EITF at its March 17-18, 2004 meeting,
subsequently approved by FASB, which concluded mining rights should
be classified as tangible assets. Prior to this change in
accounting policy, Placer Dome had recorded mineral rights as
intangible assets on its consolidated balance sheet as purchased
undeveloped mineral interests and amortized the excess of the
carrying value over the residual value on a straight-line basis
over the period that it expected to convert, develop or further
explore the underlying properties. Due to this change in accounting
policy, Placer Dome has ceased 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. 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. (c) On January 1, 2003,
Placer Dome adopted SFAS 143, "Accounting for Asset Retirement
Obligations" which requires that the fair value of liabilities for
asset retirement obligations be recognized in the period in which
they are incurred. A corresponding increase to the carrying amount
of the related asset is generally recorded and depreciated over the
life of the asset. The amount of the liability is subject to re-
measurement at each reporting period. This differs from the prior
practice which involved accruing for the estimated reclamation and
closure liability through annual charges to earnings over the
estimated life of the mine. The cumulative affect of the change
through January 1, 2003, was to increase Property, plant and
equipment by $9 million and increase deferred credits and other
liabilities by $32 million with a one time after-tax charge to net
earnings, booked in the first quarter of 2003, of $17 million
($0.04 per share). 3. Business Acquisitions and Joint Venture (a)
Effective December 23, 2003, Placer Dome and Newmont Mining
Corporation ("Newmont") formed the Turquoise Ridge Joint Venture.
The joint venture is limited to an area of influence surrounding
the Turquoise Ridge shaft. Placer Dome retains 100% ownership of
properties outside the area of influence. Placer Dome owns 75% of
the joint venture and is the operator. Newmont acquired a 25%
ownership position in the Turquoise Ridge Joint Venture. The 2% net
smelter return royalty of Placer Dome to Newmont which existed
prior to the formation of the joint venture has been eliminated.
Under an ore sale agreement, Newmont will purchase up to
approximately 1,800 tonnes per day of joint venture ore and process
it at its cost at its nearby Twin Creeks mill. Placer Dome and
Newmont will each contribute their pro-rata share of mine
development funding requirements, including capital costs and
environmental closure expenses related to future joint venture
operations. The Turquoise Ridge Joint Venture is an unincorporated
joint venture and, as such, is proportionately consolidated. (b) On
July 23, 2003, Placer Dome completed the acquisition of 100% of the
shares of East African Gold Mines Limited ("East African Gold").
The purchase price for the acquisition totalled $255 million,
comprised of $252 million in cash and approximately $3 million in
direct costs incurred by Placer Dome. In addition to this $3
million, East African Gold accrued in its pre acquisition results
charges relating to the transaction totalling approximately $7
million. A portion of the purchase price was paid from cash and
short-term investments with the majority of the purchase price
initially being financed. In addition to this consideration, the
acquisition included East African Gold's loan for project financing
of $43 million at the date of acquisition. The transaction provides
Placer Dome with the North Mara open pit gold mine in Northern
Tanzania and surrounding land packages. The results of operations
of East African Gold have been included in the accompanying
financial statements since July 23, 2003. The acquisition was
accounted for using the purchase method whereby assets acquired and
liabilities assumed were recorded at their fair market values as of
the date of acquisition. The excess of the purchase price over such
fair value was recorded as goodwill. During the second quarter of
2004, Placer Dome finalized the purchase price equation. The
following reflects the final purchase price allocation for the
acquisition of East African Gold (in millions, except per share
data):
---------------------------------------------------------------
Cash consideration $252 Plus - Direct acquisition costs incurred by
Placer Dome 3
---------------------------------------------------------------
Total purchase price 255 Plus - Fair value of liabilities assumed
by Placer Dome Current liabilities 13 Debt 44 Derivative instrument
liabilities 53 Other non-current liabilities 4 Less-Fair value of
assets acquired by Placer Dome Cash 2 Other current assets 21
Mineral properties and mine development 86 Mine plant and equipment
69 Purchased undeveloped mineral interests 146 Deferred tax asset
21 ---------------------------------------------------------------
Residual purchase price allocated to goodwill 24
--------------------------------------------------------------- In
addition to the asset allocations noted above, an additional $97
million of assets have been recorded as a result of the gross-up
requirement of FASB Statement of Financial Accounting Standards
No.109, "Accounting for Income Taxes". This standard requires the
establishment of a deferred tax liability for the estimated
increase in the net book value over and above the increase in
underlying tax basis of the assets acquired on the date of
acquisition. With the finalization of the purchase price allocation
there have been 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. The
residual goodwill amount has also decreased by $61 million to $24
million. Net earnings for 2003 and the first quarter of 2004 were
not re-stated as the effect on the post acquisition period in those
years was not material. The key factors that gave rise to the
changes were increased environmental and sustainability costs and
increased processing capacity. (c) On October 22, 2002, Placer Dome
gained control of AurionGold Limited ("AurionGold"). This increased
Placer Dome's ownership in the Granny Smith mine to 100% and in 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 were several
adjustments to the fair values assigned to the acquired assets and
liabilities from the initial purchase price allocation.
Accordingly, the operating results for the first three quarters of
2003 have been restated. 4. Business Segments Substantially all of
Placer Dome's operations are within the mining sector. Due to the
geographic and political diversity, Placer Dome's mining operations
are decentralized whereby Mine General Managers are responsible for
achieving specific business results within a framework of global
policies and standards. Regional corporate offices provide support
infrastructure to the mines in addressing local and regional issues
including financial, human resource and exploration support. Major
products are gold and copper produced from mines located in Canada,
the U.S., Australia, Papua New Guinea, South Africa, Tanzania and
Chile. (a) Product segments
---------------------------------------------------------------
Sales by metal segment ------------------------------- June 30
------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------
Gold 341 324 702 654 Copper 125 73 270 150 Other 1 1 3 3
---------------------------------------------------------------
--------------------------------------------------------------- 467
398 975 807
--------------------------------------------------------------- (b)
Segment sales revenue and mine operating earnings (loss)
------------------------------- Sales revenue by mine
------------------------------- June 30
------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------
Canada Campbell 17 15 38 33 Musselwhite 17 14 32 26 Porcupine 24 23
46 42
---------------------------------------------------------------
--------------------------------------------------------------- 58
52 116 101
---------------------------------------------------------------
United States Bald Mountain 4 8 9 20 Cortez 69 51 130 117 Golden
Sunlight(i) - 20 2 42 Turquoise Ridge(ii) 10 5 25 5
---------------------------------------------------------------
--------------------------------------------------------------- 83
84 166 184
---------------------------------------------------------------
Australia Granny Smith 18 21 39 48 Henty 22 8 34 14 Kalgoorlie West
24 38 62 71 Kanowna Belle 20 22 45 52 Osborne 28 11 62 31
---------------------------------------------------------------
--------------------------------------------------------------- 112
100 242 216
---------------------------------------------------------------
Papua New Guinea Misima 9 11 22 23 Porgera 72 50 150 101
---------------------------------------------------------------
--------------------------------------------------------------- 81
61 172 124
---------------------------------------------------------------
---------------------------------------------------------------
South Africa South Deep 20 22 38 36
---------------------------------------------------------------
---------------------------------------------------------------
Tanzania North Mara(iii) 19 - 40 -
---------------------------------------------------------------
---------------------------------------------------------------
Chile Zaldivar 110 63 235 124
---------------------------------------------------------------
---------------------------------------------------------------
Metal hedging gain (loss) (16) 16 (34) 22
---------------------------------------------------------------
--------------------------------------------------------------- 467
398 975 807
---------------------------------------------------------------
---------------------------------------------------------------
------------------------------- Mine operating earnings (loss) -
June 30 ------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------
Canada Campbell 5 3 6 7 Musselwhite 2 - 4 - Porcupine 6 5 12 7
---------------------------------------------------------------
--------------------------------------------------------------- 13
8 22 14
---------------------------------------------------------------
United States Bald Mountain - 1 2 3 Cortez (note 2(a)) 35 25 66 61
Golden Sunlight(i) - 11 1 23 Turquoise Ridge(ii) - 1 4 1
---------------------------------------------------------------
--------------------------------------------------------------- 35
38 73 88
---------------------------------------------------------------
Australia Granny Smith (1) 3 (5) 9 Henty 9 (1) 12 (1) Kalgoorlie
West (1) (1) 6 (4) Kanowna Belle 4 5 9 10 Osborne 10 - 20 1
---------------------------------------------------------------
--------------------------------------------------------------- 21
6 42 15
---------------------------------------------------------------
Papua New Guinea Misima 3 2 6 4 Porgera 23 (2) 59 9
---------------------------------------------------------------
--------------------------------------------------------------- 26
- 65 13
---------------------------------------------------------------
South Africa South Deep (3) 1 (6) 3
---------------------------------------------------------------
---------------------------------------------------------------
Tanzania North Mara(iii) 6 - 12 -
---------------------------------------------------------------
---------------------------------------------------------------
Chile Zaldivar 57 5 122 17
---------------------------------------------------------------
---------------------------------------------------------------
Metal hedging gain (loss) (16) 16 (34) 22 Currency hedging gain 2 -
7 - Amortization of tax gross up(iv) (3) (1) (5) (3) Stock-based
compensation (1) (1) (2) 1 Other - (3) (1) (5)
---------------------------------------------------------------
--------------------------------------------------------------- 137
69 295 165
--------------------------------------------------------------- (i)
Production from Golden Sunlight was temporarily 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). (ii) Results include 100% of
Turquoise Ridge's operating results up to December 23, 2003 and 75%
thereafter. (see note 3(a)). Results from Turquoise Ridge relate to
third party ore sales. (iii) Results include 100% of the operations
of the North Mara mine from July 23, 2003 (see note 3(b)). (iv)
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 assets and liabilities for the tax
effect of such differences. 5. Inventories comprise the following:
------------------------ June 30, December 31, 2004 2003 $ $
---------------------------------------------------------------------
Metal in circuit 90 98 Ore stockpiles 89 83 Materials and supplies
78 81 Product inventories 34 46
---------------------------------------------------------------------
---------------------------------------------------------------------
291 308 Long-term portion of ore stockpiles (73) (64)
---------------------------------------------------------------------
---------------------------------------------------------------------
Inventories 218 244
---------------------------------------------------------------------
6. Other assets consist of the following: ------------------------
June 30, December 31, 2004 2003 $ $
---------------------------------------------------------------------
Sale agreement receivable(i) 72 69 Ore stockpiles (note 5) 89 83
Debt issue costs and discounts 17 17 Pension asset 15 13 Other 12
14
---------------------------------------------------------------------
---------------------------------------------------------------------
205 196 Current portion of other assets (25) (28)
---------------------------------------------------------------------
---------------------------------------------------------------------
180 168
---------------------------------------------------------------------
(i) In December 2000, Compania Minera Zaldivar completed the sale
of some of its water rights for a sum of $135 million, receivable
in 15 equal annual installments of $9 million commencing July 1,
2001. On a discounted basis, this resulted in a pre-tax gain of $76
million and a corresponding receivable being recorded in 2000.
Imputed interest on the receivable is being accrued monthly. 7.
Income and Resource Taxes At December 31, 2002, Placer Dome had a
deferred tax asset of $165 million for tax benefits relating to its
United States operations. At that time a full valuation allowance
had been set up against the asset. During the first two quarters of
2003, Placer Dome utilized $16 million of this deferred tax asset.
As of June 30, 2003, Placer Dome determined that, due to a more
positive outlook for its United States operations including an
improved gold price environment and the approval of Top Pit Stage 7
at the Bald Mountain Mine, only $110 million of this valuation
allowance was required. Pursuant to this, a non-cash credit of $39
million to Income and resource tax recovery (provision) was
recorded in the income statement during the second quarter of 2003.
8. Long-term Debt Consolidated long-term debt and capital leases
comprise the following: June 30 December 31 2004 2003 $ $
---------------------------------------------------------------------
Placer Dome Inc. Bonds, unsecured June 15, 2007 at 7.125% per annum
100 100 June 15, 2015 at 7.75% per annum 100 100 March 3, 2033 at
6.375% per annum 200 200 October 15, 2035 at 6.45% per annum 300
300 Preferred Securities, unsecured Series B, December 31, 2045 at
8.5% per annum 77 77 Medium - term notes, unsecured 140 140 Senior
Convertible Debentures, unsecured, October 15, 2023 at 2.75% 230
230 East African Gold, non-recourse (note 3(b)) 31 36 Capital
leases 9 6
---------------------------------------------------------------------
---------------------------------------------------------------------
1,187 1,189 Current portion (10) (10)
---------------------------------------------------------------------
---------------------------------------------------------------------
1,177 1,179
---------------------------------------------------------------------
On January 31, 2003, Placer Dome repaid, from cash, $137 million of
debt, bearing LIBOR based interest rates, assumed in the purchase
of AurionGold. On March 3, 2003, Placer Dome completed a private
placement of $200 million 30 year debentures. The debentures carry
an interest rate of 6.375% and are not convertible. On May 27, 2003
a registration statement related to these debentures was filed with
and declared effective by the Securities and Exchange Commission.
As a result, the Corporation has complied with the Registration
Rights Agreements for the instruments. On April 24, 2003, Placer
Dome redeemed, for cash, all of the Corporation's outstanding $185
million 8.625% Series A Preferred Securities. On May 15, 2003,
Placer Dome, as scheduled, repaid, with cash, $200 million of
7.125% unsecured bonds. On April 16, 2004, Placer Dome announced
that two registration statements related to its $230 million 2.75%
Convertible Debentures and $300 million 6.45% Debentures, both
originally issued in October 2003, had been filed and declared
effective by the Securities and Exchange Commission. As a result,
the Corporation has complied with the Registration Rights
Agreements for the instruments. 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). 9.
Consolidated Metals Sales and Currency Programs At June, 2004,
based on the spot prices of $395.80 per ounce for gold, $5.945 per
ounce for silver and $1.209 per pound for copper and an Australian
to U.S. dollar ("AUD/USD") exchange rate of $1.4430, the
mark-to-market values of Placer Dome's precious metal and copper
sales programs were negative $496 million and negative $34 million,
respectively. This does not take into the account the $189 million
liability in Deferred commodity and currency sales contracts and
derivatives as at June 30, 2004 relating primarily to the remaining
provision booked on acquisition for the fair value of the
AurionGold and East African Gold metal hedge books. For the
currency program, the mark-to-market value of its currency forward
and option contracts on June 30, 2004, was approximately positive
$27 million (based on a foreign exchanges rate of AUD/USD $1.4430),
all of which has been recognized through earnings or other
comprehensive income. Gains and losses on Placer Dome's gold and
silver forward contracts and cap agreements are recognized in sales
revenue on the initial intended delivery date, except in instances
where Placer Dome chooses to deliver prior to that date, in which
case they are recognized on delivery. Placer Dome's copper forward
contracts are accounted for as cash flow hedges with the change in
fair values recorded each period in other comprehensive income and
subsequently reclassified to sales revenue on the contract forward
date. Changes in the fair values of all other metals financial
instruments are recorded each period in earnings in the non-hedge
derivative gain (loss) line. At June 30, 2004, Placer Dome's
consolidated metals sales program consisted of:
------------------------------------------------------------- 2004
2005 2006 2007 2008 2009 2010+ Total
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gold (000s ounces):
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Forward contracts sold(i) Fixed contracts Amount 313 1,047 1,239
1,245 923 269 807 5,843 Average price ($/oz.) 335 343 344 373 394
395 386 366 Fixed interest floating lease rate Amount - - - 15 287
850 810 1,962 Average price ($/oz.) - - - 415 370 434 460 435 A$
forward contracts Amount - 3 15 24 - 30 60 132 Average price
($/oz.) - 392 428 438 - 413 419 422
-------------------------------------------------------------------------
Total Forward contracts sold 313 1,050 1,254 1,284 1,210 1,149
1,677 7,937 A$ forward contracts purchased - (75) - - - - - (75)
-------------------------------------------------------------------------
Total Forward contracts 313 975 1,254 1,284 1,210 1,149 1,677 7,862
-------------------------------------------------------------------------
Call options sold and cap Agree- ments(ii) Amount 277 276 249 115
200 - - 1,117 Average price ($/oz.) 346 362 356 363 394 - - 363 A$
contracts Amount 47 65 - - - - - 112 Average price ($/oz.) 347 347
- - - - - 347
-------------------------------------------------------------------------
Total Call option sold and cap agreements 324 341 249 115 200 - -
1,229
-------------------------------------------------------------------------
Total Firm committed ounces (iii) 637 1,316 1,503 1,399 1,410 1,149
1,677 9,091
-------------------------------------------------------------------------
Contingent call options sold(iv) Knock-in (up and in) Amount 52 128
52 5 11 - 64 312 Average price ($/oz.) 361 358 347 401 408 - 381
364 Average barrier level ($/oz.) 395 390 381 430 433 - 381 390
Knock out (down and out) Amount - 38 42 66 54 117 30 347 Average
price ($/oz.) - 368 387 394 407 387 426 393 Average barrier level
($/oz.) - 323 351 344 332 341 347 340
-------------------------------------------------------------------------
Total Maximum committed ounces(v) 689 1,482 1,597 1,470 1,475 1,266
1,771 9,750
-------------------------------------------------------------------------
Put options pur- chased(vi) Amount 810 693 512 359 179 129 142
2,824 Average price ($/oz.) 348 405 416 440 405 393 421 395
-------------------------------------------------------------------------
Put options sold(vii) Amount 160 80 80 - - - - 320 Average price
($oz.) 265 250 250 - - - - 258
-------------------------------------------------------------------------
Contingent call options purchased not included in the above table
total 0.1 million ounces at an average price of $385 per ounce.
--------------------------- 2004 2005 2006
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Silver (000s ounces):
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fixed forward contracts(i) Amount - - 1,200 Average price ($/oz.) -
- 6.25 Call options sold(ii) Amount 1,050 1,560 1,200 Average price
($/oz.) 5.26 5.25 7.10
-------------------------------------------------------------------------
Total committed amount 1,050 1,560 2,400 Average price ($/oz.) 5.26
5.25 6.68
-------------------------------------------------------------------------
Put options purchased(viii) Amount 1,050 1,560 1,200 Average price
($/oz.) 4.90 4.90 6.00
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Copper (millions of pounds):
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Fixed forward contracts(i) Amount 49.6 14.9 - Average price ($/lb.)
0.900 1.031 - Call options sold(ii) Amount 46.3 84.3 - Average
price ($/lb.) 0.990 1.072 -
-------------------------------------------------------------------------
Total committed amount Amount 95.9 99.2 - Average price ($/lb.)
0.943 1.066 -
-------------------------------------------------------------------------
Put options purchased(vi) Amount 46.3 84.3 - Average price ($/lb.)
0.882 0.973 -
-------------------------------------------------------------------------
(i) Forward sales contracts - Forward sales establish a selling
price for future production at the time they are entered into,
thereby limiting the risk of declining prices but also limiting
potential gains on price increases. The types of forward sales
contracts used include: a) Fixed forward contracts - a deliverable
sales contract, denominated in U.S. dollars, where the interest
rate and gold lease rate of the contract are fixed to the maturity
of the contract. The average price is based on the price at the
maturity of the contract. b) Fixed interest floating lease rate
contracts - a deliverable sales contract, denominated in U.S.
dollars, which has the U.S. dollar interest rate fixed to the
maturity of the contract. Gold lease rates are reset at rollover
dates ranging from 3 months to 4 years. The average price reflects
the expected value to maturity of the contracts based on assumed
gold lease rates. c) A$ forward contracts - a deliverable sales
contract denominated in Australian dollars that has been converted
to U.S. dollars at an exchange rate of 1.4430. On a portion of
these contracts, the gold lease rates have been fixed to maturity.
The remaining contracts include a lease rate allowance or are
floating at market rates. Forward sales that are offset by call
options purchased are combined with the call option purchased and
included in put options purchased. Please refer to item (vi). (ii)
Call options sold and cap agreements - Call options sold by the
Corporation provide the buyer with the right, but not the
obligation, to purchase production from the Corporation at a
predetermined price on the exercise date of the option. Cap
agreements represent sales contracts requiring physical delivery of
gold at the prevailing spot price or the cap option price at the
expiry date of the contract. Call options and cap agreements are
disclosed based on the intended delivery date of the option. The
expiry date of the option may differ from the intended delivery
date. The average price is based on the exercise price of the
options. Call options denominated in Australian dollars have been
converted to U.S. dollars at an exchange rate of 1.4430. (iii) Firm
committed ounces - Firm committed ounces is the total of forward
sales and call options and cap agreements sold net of call options
purchased. It does not include any contingent option commitments,
whether bought or sold. (iv) Contingent call options sold -
Contingent call options sold are option contracts denominated in
Australian dollars that have been converted to U.S. dollars at an
exchange rate of 1.4430. These contracts are similar to standard
call options except that they are extinguished or activated when
the gold price reaches a predetermined barrier. Contingent options
are path-dependent since they are dependent on the price movement
of gold during the life of the option or within specified time
frames. Knock-out options consist of down and out options and up
and out options. A down and out option will expire early if the
gold price trades below the barrier price within specified time
frames whereas an up and out option will expire early if the gold
price trades above the barrier price within specified time frames.
Knock-in options consist of up and in and down and in options. An
up and in option will come into existence if the gold price trades
above the barrier price within specified time frames whereas a down
and in option will come into existence if the gold price trades
below the barrier price within specified time frames. As of June
30, 2004, the positions disclosed as contingent call options sold
have not been extinguished (knocked out) or activated (knocked in)
as the gold price has not traded above or below the barrier levels
during the specified time frames. In the event these positions are
activated they will be reclassified to call options sold. (v)
Maximum committed ounces - Maximum committed ounces is the total of
firm committed ounces and contingent call options sold. This total
represents the maximum committed ounces in each period, provided
the contingent call options sold are not extinguished or are
activated and the contingent call options purchased are not
activated. (vi) Put options purchased - Put options purchased by
the Corporation establish a minimum sales price for the production
covered by such put options and permit the Corporation to
participate in any price increases above the strike price of such
put options. Certain positions disclosed as put options are a
combination of a purchased call option and a forward sale of the
same amount and maturity. Therefore, the amount of call options
purchased offsets the committed ounces of the corresponding forward
sale. The combined instrument is referred to as a synthetic put.
(vii) Put options sold - Put options sold by the Corporation are
sold in conjunction with a forward sales contract or with the
purchase of a higher strike put option. A put option sold gives the
put buyer the right, but not the obligation, to sell gold to the
put seller at a predetermined price on a predetermined date. At
June 30, 2004, Placer Dome's consolidated foreign currency program
consists of:
-------------------------------------------------------------------------
Maturity Quantity Average period (millions price (to the year) of
USD) (AUD/USD) Australian dollars Fixed forward contracts 2007 $120
$1.8180 Put options sold 2007 $50 $1.6369
-------------------------------------------------------------------------
Total committed dollars $170 $1.7643
-------------------------------------------------------------------------
Call options purchased 2007 $74 $1.4920
-------------------------------------------------------------------------
Fixed forward contracts establish an exchange rate of U.S. dollar
to the operating currency of the region at the time they are
entered into, thereby limiting the risk of exchange rate
fluctuations. Put options sold by the Corporation provide the buyer
with the right, but not the obligation, to purchase U.S. dollars
from the Corporation at a predetermined exchange rate on the
exercise date of the options. Call options purchased by the
Corporation establish a minimum exchange rate for converting U.S.
dollars to the operating currency of the region for the amount
hedged, but permit the Corporation to participate in any further
weakness in the hedged currency. 10. Commitments and Contingencies
(a) At June 30, 2004, Placer Dome has outstanding commitments of
approximately $25 million under capital expenditure programs. (b)
In September 2002 Placer Dome Canada Limited ("PDC") lost a tax
appeal in the Ontario Superior Court related to a reassessment of
Ontario mining taxes for the 1995 and 1996 taxation years. On the
basis of the decision, Ontario mining tax and related interest
increased by approximately $1 million for the years in question.
Late in the fourth quarter of 2002 Placer Dome (CLA) Limited
("PDCLA"), the successor to PDC through amalgamation, was
reassessed with respect to the same issue for the 1997 and 1998
taxation years. Ontario mining tax and related interest increased
by approximately $16 million for these two taxation years. PDC and
PDCLA paid all taxes and related interest up to and including the
1997 taxation year by December 31, 2002 and paid the 1998
reassessment liability early in January 2003. In the third quarter
of 2003, PDCLA was reassessed with respect to the same issue for
1999. Ontario mining tax and related interest increased by
approximately $20 million for the 1999 taxation year. The 1999
reassessment liability was paid in the fourth quarter of 2003. The
Corporation filed an appeal of the decision to the Ontario Court of
Appeal in 2003 and is awaiting the result of the case which was
heard in March 2004. Should Placer Dome lose, the total tax and
interest payable would be approximately $76 million of which $37
million has been paid as noted above. (c) 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.
(d) In addition to the above, reference is made to note 18 to the
Consolidated Financial Statements included in the Annual Report and
Annual Information Form/Form 40-F. Placer Dome is subject to
various investigations, claims and legal and tax proceedings
covering a wide range of matters that arise in the ordinary course
of business activities. Each of these matters is subject to various
uncertainties and it is possible that some of these matters may be
resolved unfavourably to Placer Dome. The Corporation has
established accruals for matters that are probable and can be
reasonably estimated. Management believes that any liability that
may ultimately result from the resolution of these matters in
excess of amounts provided will not have a material adverse effect
on Placer Dome's financial position or results of operations. 11.
Stock-based Compensation Placer Dome follows the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", for stock options granted to employees and
directors. Had compensation cost for these grants been determined
based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, Placer Dome's net earnings and net
earnings per share would have been adjusted to the pro forma
amounts indicated below:
---------------------------------------------------------------------
---------------------------------------------------------------------
June 30 ------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------------
Net earnings - as reported 33 58 97 121 Net earnings - pro forma 30
55 92 115 Net earnings per share - as reported 0.08 0.15 0.23 0.30
Net earnings per share - pro forma 0.07 0.13 0.22 0.28
---------------------------------------------------------------------
---------------------------------------------------------------------
Placer Dome has three share option plans, two of which reserve
shares of common stock for issuance to employees and directors. At
June 30, 2004, there were 10.0 million vested and 6.0 million
unvested stock options outstanding. 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. 12.
Pension Plans Pension expenses are comprised of:
------------------------------- June 30
------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------------
Defined benefit plans: Service costs (benefits earned during the
period) 1 2 3 4 Interest costs on projected benefit obligations 3 3
5 5 Expected return on plan assets (2) (2) (4) (4) Amortization of
experience (gains) losses 0 0 1 1 ------------------------------
Total defined benefit plans 2 3 5 6 Defined contribution plans 1 1
2 3
---------------------------------------------------------------------
---------------------------------------------------------------------
Total pension expense 3 4 7 9
---------------------------------------------------------------------
13. Canadian GAAP (a) Reconciliation from U.S. GAAP to Canadian
GAAP The unaudited interim consolidated financial statements of
Placer Dome Inc. have been prepared in accordance with accounting
principles generally accepted in the U.S. and the accounting rules
and regulations of the Securities and Exchange Commission ("U.S.
GAAP") which differ in certain material respects from those
principles and practices that Placer Dome would have followed had
its consolidated financial statements been prepared in accordance
with accounting principles and practices generally accepted in
Canada ("Canadian GAAP"). The following is a reconciliation of the
net earnings (loss) between the U.S. and the Canadian basis:
------------------------------- June 30
------------------------------- Second quarter Six months
------------------------------- 2004 2003 2004 2003 $ $ $ $
---------------------------------------------------------------------
Net earnings - U.S. GAAP 33 58 97 121 Interest and financing
expense(i),(ii) 1 2 2 8 Unrealized non-hedge derivatives(iii) 1
(13) 8 (27) Early deliveries of hedge contracts(iv) - (6) 1 (6)
Difference due to write-down values for Osborne and Porgera(v) (2)
(3) (5) (6) Stock-based compensation(ix) (3) - (5) - Change in
accounting policy(vi),(vii) - - (4) 17 Cumulative translation
adjustment(x) 34 - 34 - Loss on redemption of preferred
securities(i) - 5 - 5 Other 1 2 2 3 Taxes 1 (2) (1) (7)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net earnings - Canadian GAAP 66 43 129 108
---------------------------------------------------------------------
Some of the significant differences between Canadian and U.S. GAAP
that impact the consolidated financial statements of Placer Dome
include the following: (i) Preferred Securities of $77 million
(December 31, 2003 - $77 million), under U.S. GAAP, are accounted
for as long-term debt. Under Canadian GAAP, these securities are
accounted for as equity with the related interest expense reported
as dividend. On redemption of the Preferred Securities, gains and
losses are reported in the statement of earnings as investment
income under U.S. GAAP, whereas under Canadian GAAP, it is credited
to contributed surplus. The interest expense/dividends in the
second quarter and first six months of 2004 were $1 million and $3
million, respectively (2003 - $2 million and $8 million). (ii) In
October 2003, Placer Dome issued $230 million of senior convertible
debentures. Under the U.S. basis, these are accounted for as debt.
Under the Canadian basis, there is a debt and an equity portion.
The proceeds of the offering are allocated between the debt and
equity portion using the residual method. The debt portion is
determined by discounting its cash flows using a market interest
rate for comparable debt instruments and the equity portion,
reflected in contributed surplus, represents the difference between
the proceeds and the amount allocated to the debt portion. The
carrying value of the debt is accreted to its face value through
periodic charges to interest expense. The amounts of accretion in
the second quarter and first six months of 2004 was nil and $1
million, respectively. (iii) Under U.S. GAAP, metal option (puts
and calls) contracts which are not settled through physical
delivery and foreign currency forward and option (puts and calls)
contracts that are used for managing non-specific foreign cost
exposures are marked-to- market with the change in value recorded
in earnings in the period as non-hedge derivative gains (losses).
Under Canadian GAAP, all such contracts are accounted for off
balance sheet with the exception of open call positions which
follow the same accounting as U.S. GAAP and those contracts
acquired, which was set up at market value on the date of
acquisition. Under Canadian GAAP, gains (losses) realized on metal
option contracts are included in sales, and gains (losses) realized
on foreign currency forward and option contracts are included in
cost of sales. (iv) Of Placer Dome's metals program, the majority
relate to gold metal forward contracts and cap agreements that are
exempt from SFAS 133 as normal course sales requiring settlements
through physical delivery. Gains and losses on these instruments
are recognized in sales revenue on the delivery date identified at
the contract inception, except in instances where Placer Dome, in
accordance with the contractual agreements, chooses to deliver into
the contracts prior to the initial delivery date and recognizes the
gains and losses on delivery. Under Canadian GAAP the gains and
losses on contracts that Placer Dome delivered into prior to the
initial delivery dates are deferred and recognized in income on the
forward date identified in the contract. (v) Prior to 2003, under
the U.S. basis, impairment provisions on long-lived assets were
calculated on a fair value basis, whereas under the Canadian basis
they were calculated on an undiscounted basis. In 2000, Placer Dome
wrote down certain assets, resulting in differences in the carrying
values of Porgera and Osborne. The difference remaining on the
balance sheet at June 30, 2004 is $72 million (December 31, 2003 -
$80 million). (vi) On January 1, 2003, under the U.S. basis, Placer
Dome adopted FAS 143, "Accounting for Asset Retirement Obligations"
(see note 2), and under the Canadian basis, adopted CICA 3110,
"Asset Retirement Obligations", which requires that the fair value
of liabilities for asset retirement obligations be recognized in
the period in which they are incurred. Under the U.S. basis, it was
applied prospectively with a cumulative effect of $17 million
booked through earnings in the first quarter of 2003. Under the
Canadian basis the new policy was applied retroactively with
restatement of 2002 and 2001 comparative figures and an increase to
the net earnings in 2002 and 2001. (vii) 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. Previously, Placer
Dome had, at December 31, 2003, a liability of deferred stripping
relating to its share of the Cortez joint venture on Placer Dome's
consolidated balance sheet. This change was made as a result of
deliberations by the Financial Statement Accounting Board's
("FASB") Emerging Issues Task Force ("EITF") at its July 1, 2004
meeting which concluded that a deferred stripping liability did not
meet the definition of a liability under FASB Concept Statement No.
6. Under the U.S. basis, it was applied prospectively with a
cumulative effect of $4 million booked through earnings in the
first quarter of 2004. Under the Canadian basis the new policy was
applied retroactively with restatement of 2003 and 2002 comparative
figures and an increase to the net earnings in 2003 and 2002.
(viii)The investment in La Coipa (50%) is in the form of an
incorporated joint venture. Under U.S. GAAP, La Coipa is accounted
for on an equity basis at $33 million (December 31, 2003 - $36
million), whereas under Canadian GAAP the investment is
proportionately consolidated with a net balance of $42 million
(December 31, 2003 - $46 million) recorded under Property, plant
and equipment. Although this impacts individual line items, the net
earnings impact is nil. (ix) Under the U.S. basis, in accordance
with SFAS No. 123 "Accounting for Stock-based Compensation" ("SFAS
123"), Placer Dome applies Accounting Principles Board ("APB")
Opinion No. 25 and related interpretations in the accounting for
employee stock option plans, and follows the disclosure only
provisions of SFAS 123. For stock options granted to employees and
directors, no compensation expense is recognized because the
exercise price is equal to the market price of Placer Dome's common
stock on the date of grant. For Canadian dollar denominated stock
options granted to non-Canadian employees, variable accounting is
applied. For stock options granted to personnel at joint ventures,
deferred compensation charges based on the fair value of the
options granted are expensed over the vesting period. Under the
Canadian basis, the Corporation has, effective January 1, 2003,
prospectively early adopted CICA 3870 "Stock Based Compensation",
which requires fair value accounting for all stock options issued.
(x) The $34 million cumulative translation adjustment was
recognized on the cessation of commercial production at the Misima
operations in the second quarter of 2004. Under Canadian GAAP, the
cumulative translation adjustment related to Misima was nil. The
use of the different exchange rates and the different adoption
dates for Canadian and U.S. GAAP purposes gave rise to a difference
in the cumulative translation adjustment account within
shareholders' equity. Effective January 1, 1991 Placer Dome adopted
the U.S. dollar as its reporting currency. Prior to this change the
Canadian dollar had been used as the reporting currency. Under the
Canadian basis Placer Dome's financial statements for all years
prior to January 1, 1991 have been translated from Canadian dollars
to U.S. dollars using the exchange rate in effect at December 31,
1990. Under the U.S. basis, pre-1991 financial statements must be
translated by the current rate method using year-end or annual
average exchange rates, as appropriate. This translation approach
has been applied from August 13, 1987, the date Placer Dome was
formed by the amalgamation of three predecessor companies. In
addition to the above, reference is made to the Canadian basis
consolidated financial statements in the Management Proxy Circular
and Statement filed with various Canadian regulatory authorities
and note 20(d) to the 2003 Consolidated Financial Statements
included in the Annual Report and Annual Information Form/Form
40-F. (b) Management's Discussion and Analysis Management's
Discussion and Analysis in this document is based on consolidated
financial statements of Placer Dome Inc. prepared in accordance
with U.S. GAAP. Set out below are the significant differences if
the Management's Discussion and Analysis had been based on Canadian
GAAP. - Consolidated net earnings in accordance with Canadian GAAP
for the first half of 2004 and three months ended June 30, 2004
were $129 million ($0.31 per share after dividends on preferred
securities) and $66 million ($0.16 per share), respectively,
compared with $108 million ($0.25 per share) and $43 million ($0.10
per share) for the same periods in 2003. - Pre-tax non-hedge
derivative gains in the first six months and second quarter of 2004
were $4 million and $3 million, respectively (2003 - $47 million
and $14 million). Included in these amounts are net unrealized
non-cash gains of $6 million and $4 million for the first six
months and second quarter, respectively (2003 - $48 million and $13
million). The 2003 gains were primarily related to the
mark-to-market value changes on Australian dollar denominated metal
derivative instruments acquired with AurionGold, which do not
qualify for hedge accounting, covering future periods. The positive
impact in the periods primarily reflects a strengthening of the
Australian dollar relative to the U.S. dollar during the period. -
Interest and financing expenses were $35 million and $18 million in
the first six months and second quarter of 2004, respectively (2003
- $25 million and $13 million). The increases relate to interest on
debt entered into during 2003. - Consolidated short-term and
long-term debt balances at June 30, 2004, were $1,074 million,
compared with $1,070 million at December 31, 2003. Financing
activities in the second quarter and first six months of 2004
included net debt additions of $3 million and $2 million,
respectively and the issuance of $20 million and $5 million of
common shares, respectively. 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 debentures, both in the first quarter of the year.
There were $23 million of dividend payments in the first half and
second quarter of 2004 (2003 - $28 million and $26 million).
Vancouver-based Placer Dome Inc. operates 17 mines on five
continents. The company's shares trade on the Toronto, New York,
Swiss and Australian stock exchanges and Euronext-Paris under the
symbol PDG. Placer Dome will host a conference call to discuss
second quarter results at 7:00am PDT/10:00am EDT on Thursday, July
29. North American participants may access the call at (800)
346-5998. International participants please dial (416) 641-6699.
The call will also be webcast on the Placer Dome website at
http://www.placerdome.com/. The conference call will be available
for replay until August 12, 2004 by dialing 416-626-4100,
reservation No. 21201822. For further information please contact:
Investor Relations: Greg Martin (604) 661-3795 Media Relations:
Theresa Coles (604) 661-1911 For enquiries related to shares,
transfers and dividends please contact: CIBC Mellon Trust Company
Toll-free within North America (800) 387-0825 Collect calls
accepted from outside North America (416) 643-5500 Head Office
Suite 1600, Bentall IV 1055 Dunsmuir Street (PO Box 49330, Bentall
Postal Station) Vancouver, British Columbia, Canada V7X 1P1 tel
(604) 682-7082 fax (604) 682-7092 On the internet:
http://www.placerdome.com/ CAUTIONARY NOTE Some of the statements
contained in this report are forward-looking statements, such as
estimates and statements that describe Placer Dome's future plans,
expectations, objectives or goals, including words to the effect
that Placer Dome or management expects a stated condition or result
to occur. Forward-looking statements may be identified by such
terms as "believes", "anticipates", "intends", "expects",
"estimates", "may", "could", "would", "will" or "plan". Such
forward-looking statements are made pursuant to the safe harbour
provisions of the United States Private Securities Litigation
Reform Act of 1995. Since forward-looking statements are based on
assumptions and address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results relating to, among other things, mineral reserves,
resources, results of exploration, reclamation and other
post-closure costs, capital costs, mine production costs, and
Placer Dome's financial condition and prospects, could differ
materially from those currently anticipated in such statements by
reason of factors such as the productivity of Placer Dome's mining
properties, changes in general economic conditions and conditions
in the financial markets, changes in demand and prices for the
minerals Placer Dome produces, litigation, environmental,
legislative and other judicial, regulatory, political and
competitive developments in domestic and foreign areas in which
Placer Dome operates, technological and operational difficulties
encountered in connection with Placer Dome's mining activities,
labour relations matters, costs and changing foreign exchange rates
and other matters discussed under "Management's Discussion and
Analysis" or detailed in Placer Dome's filings with securities
regulatory authorities. This list is not exhaustive of the factors
that may affect any of Placer Dome's forward-looking statements.
These and other factors should be considered carefully and readers
should not place undue reliance on Placer Dome's forward-looking
statements. Further information regarding these and other factors
which may cause results to differ materially from those projected
in forward-looking statements are included in the filings by Placer
Dome with the U.S. Securities and Exchange Commission and Canadian
provincial securities regulatory authorities. Placer Dome does not
undertake to update any forward-looking statement that may be made
from time to time by Placer Dome or on its behalf, except in
accordance with applicable securities laws. END FIRST AND FINAL ADD
DATASOURCE: Placer Dome Inc. CONTACT: PR Newswire -- July 28
Copyright