PDG Pendragon Plc

/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

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