Q2 2004 Placer Dome Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Ladies and gentlemen, thank you for standing by. Welcome to the Placer Dome Inc. 2004 second quarter results conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded, Thursday, July 29, 2004. I would now like to turn the conference over to Mr. Joe Danni, Vice President of Corporate Relations. Please go ahead, sir.

JOE DANNI, VP CORPORATE RELATIONS, PLACER DOME, INC.: Good morning everyone. Welcome to Placer Dome's second quarter 2004 conference call. Before I turn the call over to Jay, I need to remind you as always that in our remarks we will make several forward-looking statements within the meaning of the U.S. Federal Securities law. These include statements about our expectations, beliefs, intentions, strategies for the future. We will indicate by words such as anticipate, intend, believe, estimate, forecast, expect and similar words.

All forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions we have made. The Company's actual results may differ materially from those projected in these statements for a number of factors all of which are contained in Placer Dome's annual information form and annual report on Form 40-F for the fiscal year ended December 31, 2003, 6-K Forms filed subsequent to that time and other filings with securities regulatory authorities.

We base our forward-looking statements on information currently available to us. And we do not assume any obligation to update them except in accordance with applicable security laws. And of course all of the figures discussed are in U.S. dollars. And with that behind us I will turn it over to Jay.

JAY TAYLOR, CHAIRMAN, CEO, PLACER DOME, INC.: And welcome everyone to Placer Dome's second quarter 2004 conference call. Joining me on the call is our Vancouver senior management team and each of our regional Executive Vice Presidents. In keeping with the format that we established last year each of our regional Executive Vice Presidents will be providing you with a (indiscernible) update of their operations.

The second quarter continued Placer Dome's record of strong quarterly operational and financial performance. We produced over 900,000 ounces of gold at cash costs of less than $230 per ounce, and over 100 million pounds of copper at less than 50 cents per pound. This was within our gold cost guidance and below our copper cost guidance.

With metal prices staying strong, we continued to turn these operational results into improved financial metrics. Our mine operating earnings and cash flow are up about 100 percent and 85 percent respectively from the same period last year. We're delivering the growth in earnings and cash flow expected from this industry.

Let me address a few topics before handing it over to Rex McLennan to give you a more detailed review of the financials. Mark (ph) has been very interested in our Cortez Hills discovery of last year, and we felt it appropriate to provide a new mineral reserve and resource estimate for the property. At this time last year Cortez Hills was a new discovery hosting a 4.5 million ounce measured and date indicated resource grading about 3.63 grams per ton.

Today we announced a deposit on a 100 percent basis now holds 7.5 million ounces of proven and probable reserves at 5.4 grams per ton, a 66 percent increase in size, with a 50 percent increase in grade in 12 months. The highlight of the first half year's drilling was the discovery of a new high grade zone down dipped to the West Salee area (ph) drilled off in 2003. The delineation of this high grade zone combined with closing off the deposit to the north and east was the principal focus of the drilling year-to-date and the dark (ph) big driver of the reserve increase.

This new zone effectively increases the overall size of the open-pit to encompass any of the known resource areas. We have now released 4 reserve and resource updates for Cortez Hills. Each time the deposit has grown and each time the average grade has improved. It is without doubt an exceptional discovery.

Aggressive drilling will continue throughout the remainder of the year as the deposit remains open in two directions, down plunge and a long strike to the south ford's pediment. We will be stepping up more aggressively as we attempt to delineate the extent of the ore body.

The Cortez Hills discovery remains exciting for two reasons. The first is its continued potential to grow. Secondly, is the discovery has provided geological insight that we're applying to the entire property. Understanding the controls of this high grade system has caused us to relook at our entire property. And based on that knowledge we have gained from Cortez Hills, we have identified additional interesting exploration targets. We have commenced a feasibility study on the deposit to optimize the development of Cortez Hills and its impact on the overall Cortez operation to maximize value.

Over the coming months the study will examine issues around pit development, processing and scheduling and be used to commenced the permitting process.

I know many of you are awaiting the announcement of my successor. The Board is well along in its selection process and we will make a decision in advance of my announced retirement date of September 30. We do appreciate your patience. As expect, the Board is being diligent and deliberate in their decision.

And with those opening remarks let me turn the call over to our Chief Financial Officer, Rex McLennan, to review the financial performance of the Company. Rex, would you take the phone?

REX MCLENNAN, EVP, CFO, PLACER DOME, INC.: As Jay mentioned our mines continued to deliver solid results during the second quarter producing 908,143 ounces of gold at cash and total cost of $229 and $283 per ounce. Copper production was 109 million pounds at cash and total cost of 49 cents and 63 cents per pound. Production and cost were all consistent with our annual guidance.

These results combined with the stable metal prices drove Placer Dome's earnings of 33 million. Included in this result was our previously announced non-cash after-tax cumulative translation adjustment expense of $34 million relating to the closure of the Misima mine. This CTA expense simply clears a foreign exchange translation loss that was potentially frozen on our books 7 years back when we switched to the U.S. dollar as our functional currency of account. So adjusting our earnings for this non-cash impact results in net earnings of 67 million or approximately 16 cents per share. Cash from operations was 107 million or 26 cents per share. We have now generated 241 million or 58 cents per share in cash from operations year-to-date.

Mine operating earnings for the quarter were 137 million, double the same period in 2003. And this reflects continuing strong production and higher metal prices. Half-year mine operating earnings were 295 million, a record for the Company.

Metal prices traded within a fairly tight range during the quarter. The spot price of gold averaged $393 per ounce in the second quarter, a 4 percent decline from the first quarter. Copper prices averaged $1.26 per pound, a 2 percent increase from the first quarter. Currencies were also relatively stable with the U.S. dollar strengthening 3 percent and 6 percent against the Canadian dollar and Australian dollar respectively relative to the first quarter.

The South African rand continued its strength, gaining 3 percent against the dollar. And since the end of the quarter the rand has strengthened to below 6 rands to the dollar, a level not seen since our initial investment in the joint venture in 1999. With cumulative inflation since that time of about 44 percent, we're effectively dealing with a real 44 percent increase in rand-based cost.

With those statistics it is not surprising that the South African gold industry is under severe duress. The rand is sitting today at about 6.25 to the dollar. And at these levels, if they continue, they will obviously impact the mine's cost structure and the strategies to deal with it.

Finally, oil prices averaged over $35 per barrel in the second quarter, a 10 percent increase from the first quarter of this year, and a 23 percent increase relative to the average for full year 2003. Energy costs clearly continue to increase and impact our costs. We maintained our course of reducing the gold hedge positions by delivering into all of our maturing contracts. We remain on track to hit our 9 million ounce target by year end.

For the quarter, we realized $386 per ounce and $1.13 per pound for gold and copper respectively as we delivered into all maturing positions. The mark-to-market of the gold hedge book at quarter end was -486 million versus -686 million at the end of the first quarter. Our cash position was strengthened due to the free cash flow generated, and including short-term investments, now stands at 688 million. With our strong balance sheet and liquidity, Placer remains very well-positioned to take advantage of development opportunities as they progress through the evaluation process.

Our spending in exploration and resource development technology are all on track with our full year guidance estimates. Within the G&A line most of the increase relates to currencies, but we're also increasing our investment in IT related to the implementation of our global enterprise resource planning systems.

So in summary, for the first six months Placer Dome has achieved its operating and financial targets. And the stage is set for the Company to continue its strong performance through the second half of the year. And I will end there and turn it back to you, Jay.

JAY TAYLOR: I want to confirm we remain confident in our production targets of 3.6 million ounces of gold and 400 million pounds of copper this year. We have increased our gold cash cost guidance range by $5 per ounce to principally reflect the more conservative rand assumption and the South Beet (ph) production forecast. Gold total costs and copper production cost guidance remain unchanged.

Let me now asked each original EVPs to give a brief overview of the first six month performance of their assets. And I will now ask George Pirie, Placer Dome Canada's lead executive to lead off.

GEORGE PIRIE, EVP, PLACER DOME, INC.: The Canadian operations had a solid second quarter. After tough operating conditions with the cold winter, each of our operations produced more gold at a lower cost in Q2. The second quarter puts us back on track to achieving our target severe. And in fact the Porcupine joint venture is running ahead of expectations. In the first six months of year mine operating earnings for the Canadian …