PDG Pendragon Plc

Placer Dome announces third quarter earnings of $148 million (United States ("U.S.") dollars, in accordance with U.S. generally accepted accounting principles ("GAAP")) VANCOUVER, Oct. 27 /PRNewswire-FirstCall/ -- Placer Dome Inc. (NYSE, TSX, ASX: PDG) generated third quarter earnings of $148 million, or $0.36 per share, on gold production of 888,000 ounces during the three months ended September 30. Quarterly mine operating earnings were $109 million and cash from operations totalled $91 million. Earnings for the quarter included an after-tax gain of $76 million relating to the reversal of a previously accrued tax and interest liability for Ontario mining taxes as a result of a decision by the Ontario Court of Appeal which ruled in favour of Placer Dome. Also during the third quarter of 2004, earnings were favourably impacted by the recognition of a $37 million non-cash tax gain for previously unrecorded tax benefits in Australia. This reflects a more positive operational outlook in Australia including an improved gold price environment. President and CEO Peter Tomsett said Placer Dome's mines are performing well and delivering strong margins and cash flow. "This quarter proves again that we own a quality portfolio of assets capable of generating significant value for shareholders," he said. "Our performance during the first nine months puts us on track to meet our 2004 targets for production and costs. We have also commenced a feasibility study on Cortez Hills and are progressing toward decision points on our important development projects in 2005." With sadness, Placer Dome reports the death of Board member Clifford Michel, who passed away recently after many years of service. Mr. Michel had been a Director of Placer Dome since its formation in 1987 and was a key contributor to the Board. Placer Dome Chairman Robert Franklin noted Mr. Michel's contributions over his many years of service, stating: "His opinion was very well regarded and he will be greatly missed." MANAGEMENT'S DISCUSSION AND ANALYSIS (United States ("U.S.") dollars, in accordance with U.S. generally accepted accounting principles ("GAAP")) Throughout this document, "Placer Dome" is defined to be collectively Placer Dome Inc., its consolidated subsidiaries and its proportionate share of unincorporated joint venture interests. Placer Dome's share is defined to exclude minority shareholders' interests. The "Corporation" refers to Placer Dome Inc. This Management's Discussion and Analysis ("MD&A") was made as of October 27, 2004. Highlights Consolidated net earnings in accordance with U.S. GAAP for the first nine months of 2004 and three months ended September 30, 2004 were $245 million ($0.59 per share) and $148 million ($0.36 per share), respectively, compared with $148 million ($0.36 per share) and $27 million ($0.06 per share) for the same periods in 2003. During the third quarter of 2004 Placer Dome recognized an after-tax gain of $76 million relating to the reversal of a previously accrued tax and interest liability for Ontario mining taxes as a result of a decision by the Ontario Court of Appeal which ruled in favour of Placer Dome. Also during the third quarter of 2004, earnings were favourably impacted by the recognition of a $37 million non-cash tax gain for previously unrecorded tax benefits in Australia. This reflects a more positive operational outlook in Australia including an improved gold price environment. Mine operating earnings were $404 million and $109 million for the first nine months and quarter ended September 30, 2004, respectively, representing an increase of 45% and a decrease of 4% over the respective prior year periods as stronger copper mine operating earnings were countered by weaker gold mine operating earnings in the third quarter. Cash from operations increased by $64 million and decreased by $34 million to $332 million and $91 million in the first nine months and third quarter of 2004, respectively, compared with $268 million and $125 million in the corresponding periods in 2003. The increase of 24% for the nine months ended September 30, 2004 primarily reflects an increase in mine operating earnings, partially offset by an increase in cash taxes. The decrease of 27% for the three months ended September 30, 2004 is primarily due to lower mine operating earnings and increased investment in working capital. Placer Dome's share of gold production in the first nine months of 2004 was 2,725,000 ounces, a decrease of 3% compared with the prior year period. The decrease was due to the temporary closure at Golden Sunlight as the mine develops stage 5B, the closure of the Misima mine late in the second quarter of 2004, the focus of mining operations at Bald Mountain on stripping of the Top Pit of Stage 7, and reduced production from the Kalgoorlie West and Granny Smith mines. This was partially offset by the acquisition of the North Mara mine in July of 2003, and higher production from the Porgera, Turquoise Ridge and Henty mines. Copper production was 319 million pounds, an increase of 2% from the same period in 2003 due to slightly increased production from both the Zaldivar and Osborne mines. Placer Dome's realized average prices were $389 and $382 per ounce of gold in the first nine months and third quarter of 2004, respectively, versus an average spot price of $401 per ounce in both periods. As a result of continuing to deliver into all positions and through early deliveries, the precious metal sales program was reduced by 1,025,000 ounces and 322,000 ounces of gold in the first nine months and third quarter of 2004, respectively, to maximum committed ounces of 9.43 million at September 30, 2004. Placer Dome's share of unit cash and total costs during the nine months ended September 30, 2004 were $232 and $287 per ounce, respectively, an increase of 8% and 5%, respectively, from the comparative prior year periods. The increase in cash costs per ounce was due primarily to the continued appreciation of foreign currencies against the U.S. dollar (cumulatively $15 per ounce) and rising global energy costs. Cash and total copper production costs for the nine months ended September 30, 2004 were $0.52 and $0.66 per pound, respectively as stronger production offset foreign exchange and input commodity cost pressures. Placer Dome has undertaken a restructuring of its senior management positions. The changes are intended to accomplish three objectives: 1. Consolidate the senior management of Placer Dome in Vancouver, Canada to allow timely and consistent implementation of strategies; 2. To further increase Placer Dome's focus on optimizing the performance of its mines; and 3. To improve the management and co-ordination of Placer Dome's important development projects and opportunities. The restructuring has resulted in the elimination of three and the creation of two senior management positions. The regional Executive Vice-President positions have been eliminated. Placer Dome's mines will now be operated on a country-by-country basis with the manager from each country reporting to an Executive Vice-President, Operations. The Executive Vice-President, Operations is responsible for providing strategic advice and guidance in overseeing all aspects of Placer Dome's operating mines. Placer Dome's evaluations, construction and technical teams have been centralized under an Executive Vice-President, Project Development and Corporate Relations. The group will have the technical and business expertise required to provide strategic direction and management to Placer Dome's capital projects at both existing operations and new developments. Evert van den Brand, currently Executive General Manager, Australian Operations has been named Executive Vice-President, Operations and William Hayes, currently Executive Vice-President, United States and Latin America has been appointed Executive Vice-President, Project Development and Corporate Relations. -------------------------------------------- September 30 -------------------------------------------- For the Third Quarter nine months ended -------------------------------------------- 2004(i) 2003(i)(ii) 2004(i) 2003(i)(ii) ------------------------------------------------------------------------- Financial ($ millions, except per share amounts) Sales 453 464 1,428 1,271 Mine operating earnings Gold 70 106 249 260 Copper 46 15 170 33 Other (7) (8) (15) (15) ------------------------------------------------------------------------- 109 113 404 278 ------------------------------------------------------------------------- Net earnings 148 27 245 148 Per share 0.36 0.06 0.59 0.36 Cash from operations 91 125 332 268 Per share(iii) 0.22 0.31 0.80 0.66 ------------------------------------------------------------------------- Operations - Gold (000s ozs) Production (Placer Dome's share) 888 1,014 2,725 2,822 Production (consolidated) 872 995 2,669 2,775 Sales (consolidated) 885 995 2,691 2,823 Cash production costs ($/oz)(iii) 235 217 232 215 Total production cost ($/oz)(iii) 291 271 287 273 Sales price realized ($/oz) 382 392 389 371 London spot price ($/oz) 401 363 401 354 ------------------------------------------------------------------------- Operations - Copper (millions lbs) Production 101 105 319 314 Sales 102 100 339 309 Cash production costs ($/lb)(iii) 0.56 0.52 0.52 0.52 Total production cost ($/lb)(iii) 0.70 0.66 0.66 0.67 Sales price realized ($/lb) 1.16 0.81 1.16 0.77 London spot price ($/lb) 1.29 0.80 1.27 0.77 ------------------------------------------------------------------------- (i) During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, with respect to deferred stripping to exclude the recording of liabilities on the balance sheet (see note 2(a) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change through December 31, 2003, was to increase earnings on an after tax basis by $4 million ($0.01 per share). As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. Also during the second quarter of 2004, Placer Dome changed its accounting policy, prospectively from April 1, 2004, with respect to mineral rights to reclassify them from intangible to tangible assets. Due to this change in accounting policy, Placer Dome has ceased amortization of the excess of the carrying value over the residual value of these assets and accounts 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 nine months of 2003 by $7 million ($0.02 per share) and $5 million ($0.01 per share), respectively; for the third quarter of 2003 by nil (nil per share) and nil (nil per share), respectively, and for the first quarter of 2004 by $3 million ($0.01 per share) and $2 million (nil per share), respectively. (ii) With the finalization of the AurionGold Limited ("AurionGold") purchase price allocation in the fourth quarter of 2003, there were several adjustments to the fair values assigned to the acquired assets and liabilities from the initial purchase price allocation. Accordingly, the results for the first nine months and third quarter of 2003 have been restated to reflect these changes. (iii) Cash from operations per share and cash and total production costs per ounce and pound are non-GAAP measures that do not have any standardized meaning as prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other entities. Please refer to the Non-GAAP Measures section for further detail. Outlook For the year ended 2004, Placer Dome expects its share of production to be approximately 3.6 million ounces of gold and 415 million pounds of copper. Gold cash and total costs are forecast at between $230 and $235 per ounce and $290 to $295 per ounce, respectively. Copper cash and total costs are forecast at about $0.53 and $0.69 per pound, respectively (previously $0.51 and $0.67 per pound). Capital expenditures remain forecast at $295 million, excluding pre-stripping and deferred stripping expenditures of $30 and $55 million, respectively. Exploration and Development Projects On September 28, 2004, Placer Dome delivered a certificate to its partners in Cerro Casale indicating it has commenced to use reasonable commercial efforts to arrange financing for the Cerro Casale project on commercially reasonable and customary terms in accordance with the financing requirements of the Shareholders' Agreement. Subject to the terms of the Shareholders' Agreement, Placer Dome has up to 15 months to arrange such financing. The partners have reached agreement on certain amendments to the Shareholders' Agreement to facilitate financing arrangements for the project and to cause the cash flows to be distributed in a manner consistent with the original intent of the Shareholders' Agreement. The amendments also provide for the option, at Placer Dome's election to fund senior loans on the project through Placer Dome's financing facilities. Placer Dome has agreed to provide support, through the period of the pre-completion guarantee, for metal price hedge contracts required to secure senior loans. In parallel, Placer Dome intends to continue to advance discussions on key commercial contracts and long-term marketing off-take arrangements. Should financing under the terms of the Shareholders' Agreement not be available on reasonable commercial terms, the project would revert to non-financeable status. In such case, Placer Dome's interest in the project would remain intact with obligations under the Shareholders' Agreement remaining in place. At any time Placer Dome can return the project to its partners if it does not meet Placer Dome's investment requirements. At Pueblo Viejo, the planned 1,900 metre drill program to test boundaries of newly identified mineralization and define controls of high-grade mineralization within the pit stages was completed in the third quarter. This and information from prior drilling is being compiled into the existing mineral resource database to enable a new mineral resource model and estimate to be completed by year-end. Work on the pre-feasibility study continued during the quarter including analysis of the results of metallurgical test work on whole ore autoclaving and preparation of flowsheets, layouts and input parameters. The pre-feasibility study remains scheduled for completion by the end of the year. The Donlin Creek project evaluation continues. Work has focused on the continued evaluation of power supply alternatives and condemnation drilling to confirm facility locations. Baseline environmental data collection and preliminary engineering activities are ongoing. Placer Dome continues to focus on optimizing the use of its mines' infrastructures by exploring to expand mineral reserves at existing operations. During the first nine months of 2004, exploration expenditures totaled $52 million, $37 million of which related to existing mines with major focuses on the Cortez, Kalgoorlie West, Musselwhite, North Mara and Porcupine operations. In addition to the mine site focus, during the quarter drill programs were completed or are under way at five projects and drill target definition is proceeding on a further 15 properties. Detailed Review of Financial Results Earnings Consolidated net earnings in accordance with U.S. GAAP for the first nine months of 2004 and quarter ended September 30, 2004 were $245 million ($0.59 per share) and $148 million ($0.36 per share), respectively, compared with $148 million ($0.36 per share) and $27 million ($0.06 per share) for the same periods in 2003. In the first nine months and the third quarter of 2004, Placer Dome's net earnings included an after-tax gain of $76 million for the reversal of a previously accrued tax and interest liability relating to Ontario mining taxes as a result of a decision by the Ontario Court of Appeal which ruled in favour of Placer Dome. During the third quarter of 2004, Placer Dome determined that, due to a more positive outlook for its Australian operations including an improved gold price environment, only $24 million of its deferred tax assets for tax benefits relating to these operations required a valuation allowance. Pursuant to this, the valuation allowance was reduced to that level by recording a non-cash credit of $37 million to Income and resource tax recovery in the income statement during the first nine months and third quarter of the year. In the first nine months and third quarter of 2004, Placer Dome's net earnings were also impacted by an unrealized non-hedge derivatives after-tax loss of $5 million (2003 - gain of $26 million) and gain of $1 million (2003 - loss of $25 million), respectively. Placer Dome's net earnings for the first nine months of 2004 also included a non-cash charge of $34 million, previously recognized in accumulated comprehensive income, relating to the cumulative foreign exchange translation loss on Placer Dome's investment in Misima as that mine ceased commercial production during the second quarter. The first nine months of 2004 net earnings also included the effect of the adoption of a new accounting policy relating to accounting for deferred stripping activities. The cumulative effect of this change to January 1, 2004 was a non-cash increase in year to date after-tax earnings of $4 million. During the first nine months of 2003, Placer Dome's net earnings were positively impacted by the recognition of a $39 million non-cash tax asset for previously unrecorded tax benefits related to its U.S. operations, an amount that was estimated more likely than not to be realized beyond 2003. The recognition reflected a more positive outlook for Placer Dome's U.S. operations including an improved gold price environment and the approval of Top Pit Stage 7 at the Bald Mountain mine. The first nine months of 2003 net earnings also included the effect of the adoption of a new accounting standard relating to accounting for post mining related asset retirement obligations. The cumulative effect of this change was a non-cash decrease in after-tax earnings of $17 million. Mine operating earnings for the first nine months and third quarter of 2004 were $404 million and $109 million, respectively, an increase of 45% or $126 million and a decrease of 4% or $4 million over the comparative 2003 periods due to higher contributions from copper and lower third quarter contributions from gold. Gold operating earnings decreased by 34% to $70 million in the third quarter of 2004 compared with $106 million in the third quarter of 2003. Gold sales revenue for the quarter was $336 million compared with $384 million in the prior year period, a decrease of 13% primarily reflecting a 12% decrease in consolidated production and a 3% decrease in the average price realized. The decrease in production was due to the temporary closure at Golden Sunlight, the closure of the Misima mine late in the second quarter of 2004 and reduced production from the Kalgoorlie West, Turquoise Ridge and Porcupine mines. The decrease in the average realized sales price was due to a decrease in the contribution from Placer Dome's precious metals sales program to negative $15 million in the third quarter of 2004 from positive $25 million in the third quarter of 2003. Placer Dome's share of cash and total production costs per ounce for the third quarter of 2004 were $235 and $291, respectively, compared with $217 and $271 in the prior year period. The increase in cash costs per ounce was due primarily to the appreciation of the South African rand, the Canadian and Australian dollars, the Papua New Guinean kina and the Chilean peso against the U.S. dollar (cumulatively $10 per ounce) and increased global energy prices, partially offset by a positive $2 million contribution from Placer Dome's currency hedging program. Copper operating earnings of $46 million in the third quarter of 2004 were $31 million or 207% higher than in the comparative 2003 period. Copper sales revenue for the quarter was $116 million compared with $79 million in the 2003 period, reflecting a 61% increase in the average spot price and a 2% increase in sales volume, partially offset by a negative contribution of $17 million (2003 - nil) from Placer Dome's copper hedging program. Consolidated copper production in the third quarter of 2004 was 101.4 million pounds (45,982 tonnes), down 4% from the prior year period primarily due to lower production from the Zaldivar mine. Placer Dome's share of cash and total production costs per pound of copper for the quarter were $0.56 and $0.70, respectively, compared with $0.52 and $0.66, respectively, in the third quarter of 2003. The increase in unit production costs was due to the lower production levels, the appreciation of the Australian dollar and the Chilean peso against the U.S. dollar and higher fuel prices and concentrate shipping costs. Cash from Operations Cash from operations increased by $64 million and decreased by $34 million to $332 million and $91 million in the first nine months and third quarter of 2004, respectively, compared with $268 million and $125 million in the corresponding periods in 2003. Excluding the impact of non-cash working capital, cash from operations was $331 million and $105 million in the first nine months and third quarter of 2004, respectively, compared with $273 million and $115 million in the prior year periods. The increase of 21% for the nine months ended September 30, 2004 primarily reflects an increase in mine operating earnings, partially offset by an increase in cash taxes. The decrease of 9% for the three months ended September 30, 2004 is primarily due to lower mine operating earnings. Expenditures on property, plant and equipment in the first nine months and third quarter of 2004 amounted to $237 million and $88 million, respectively, increases of $87 million and $31 million from the comparative prior year periods. The expenditures for the nine months included outlays of $42 million for the main shaft and underground development at the South Deep mine (2003 - $47 million), $26 million for leach pad and tailings expansion, Cortez Hills development and sustaining capital at Cortez (2003 - $4 million), $24 million for underground development at Turquoise Ridge (2003 - $9 million), $21 million for pre-stripping at Golden Sunlight, $18 million for the mill upgrade at North Mara and $13 million for processing enhancements and sustaining capital at Zaldivar (2003 - $21 million). Other cash from investing activities of $17 million and $14 million in the first nine months and third quarter of 2004, respectively, primarily related to the disposition of assets. Financing activities in the third quarter of 2004 included net long-term debt repayments of $31 million, primarily relating to the repayment of the non-recourse loan relating to East African Gold Mines Limited's project financing for the North Mara mine. During the third quarter of 2004, Placer Dome entered into a demand financing facility which permits borrowings up to $120 million. The facility also requires cash to be placed on deposit with the lender in an amount equal to drawdowns. At September 30, 2004, $90 million had been drawn on the facility and an equal amount had been placed on deposit. During the quarter, Placer Dome received proceeds of $6 million on the exercise of common share stock options. Financing activities in the third quarter of 2003 included the issuance of $164 million in commercial paper used to finance a portion of the East African Gold Mines Limited purchase price. Additional financing activities in the first nine months of 2003 included the redemption of $185 million of 8.625% preferred securities, the scheduled repayment of $200 million of 7.125% unsecured bonds, the repayment of $137 million of debt assumed in the AurionGold acquisition and the issuance of $200 million of 6.375% 30-year debentures, all in the first half of the year. Dividend payments totalled $41 million and $20 million in the first nine months and third quarter of 2004, respectively (2003 - $41 million and $20 million). Consolidated short-term and long-term debt balances at September 30, 2004, were $1,246 million, compared with $1,189 million at December 31, 2003. On September 30, 2004, consolidated cash and short-term investments, not including restricted cash of $90 million, amounted to $655 million, an increase of $64 million from the beginning of the year. Of the consolidated balance of cash and short-term investments, $635 million was held by Placer Dome and its wholly owned subsidiaries. At September 30, 2004, Placer Dome also had approximately $965 million of undrawn bank lines of credit available. Placer Dome entered into a new unsecured revolving credit agreement with a syndicate of lenders effective July 20, 2004. The facility is available for use for general corporate purposes. The agreement permits borrowings of up to $850 million, with a $300 million sub-limit for letters of credit, until its maturity on July 20, 2009. The agreement requires the Corporation to maintain a consolidated tangible net worth of $1.5 billion. Forward Sales and Options During the first nine months and third quarter of 2004, Placer Dome reduced the maximum committed ounces under its precious metals sales program by 1,025,000 and 322,000 ounces, respectively to a total of 9.43 million ounces at September 30, 2004. Committed ounces were reduced during the periods by delivering into hedge contracts and through early delivery of forward sales. This represents maximum committed ounces as a percentage of reserves at December 31, 2003 of 16% at an average expected realized price of approximately $390 per ounce for delivery over 13 years. Looking forward, Placer Dome expects to reduce its maximum committed ounces to nine million by December 31, 2004. This would represent a decrease of approximately 14% for the year. See note 9 of the unaudited interim consolidated financial statements for detailed allocation of the metals sales and currency programs. The mark-to-market value of Placer Dome's precious metals sales program at September 30, 2004, based on spot prices of $415.65 per ounce for gold, $6.905 per ounce for silver and an Australian to U.S. dollar ("AUD/USD") exchange rate of $1.3872, and the period-over-period change in the mark- to-market value is detailed in the following table. The mark-to-market value reflects the amount that would have been paid to counterparties if the contracts were closed out on September 30, 2004 under prevailing market conditions without allowance for market illiquidity. At October 25, 2004, based on spot prices of $429.15 per ounce for gold, $7.44 per ounce for silver and an AUD/USD exchange rate of $1.3399, the mark-to-market value was negative $703 million. ----------- $millions ------------------------------------------------------------------------- Mark-to-market value at December 31, 2003 (705) Cash value realized 49 Change in spot price (December 31, 2003 - $417 per ounce) 14 Change in the AUD/USD exchange rate (December 31, 2003 - $1.3319) (15) Accrued contango 99 Change in volatility, interest rates and gold lease rates (42) ------------------------------------------------------------------------- Mark-to-market value at September 30, 2004 (600) Provision included in Deferred Commodity and Currency Sales Contracts and Derivatives liability relating primarily to the fair value of the AurionGold and East African Gold precious metal hedge books remaining from the acquisitions by Placer Dome 188 ------------------------------------------------------------------------- Net unrealized mark-to-market value at September 30, 2004 (412) ------------------------------------------------------------------------- The net unrealized mark-to-market value of negative $412 million reflects the income statement effect that Placer Dome could expect to incur had it closed out its contracts at September 30, 2004 under prevailing metal prices, foreign exchange rates, interest rates and volatilities. The mark-to-market and unrealized mark-to-market amounts are not estimates of future gains or losses which depend on various factors including contango and interest rates, gold lease rates and the then prevailing spot price. For the copper sales and currency derivative programs, the mark-to-market value of forward and option contracts on September 30, 2004, was negative $42 million based on a spot copper price of $1.424 per pound (December 31, 2003 - negative $25 million based on a spot copper price of $1.053 per pound) and positive $33 million based on a foreign exchange rate of AUD/USD - $1.3872 (December 31, 2003 - positive $45 million based on a foreign exchange rate of AUD/USD - 1.3319), respectively. At October 25, 2004, the mark-to-market value of forward and option contracts was negative $23 million for copper based on a spot copper price of $1.315 per pound and positive $39 million for currencies based on a foreign exchange rate of AUD/USD - $1.3399, respectively. Other Income Statement Items Costs related to general and administrative, exploration, technology, resource development and other totalled $145 million and $50 million in the first nine months and third quarter of 2004, respectively, representing a nil change and a $4 million decrease from the respective prior year comparative periods. Resource development, technology and other expenses were $9 million and $8 million less than in the respective comparative prior year periods primarily due to the cessation of Turquoise Ridge holding costs and the reduced amortization of purchased undeveloped mineral interests. The increases in general and administration costs were primarily due to the weakening U.S. dollar and costs associated with increased corporate activities. Pre-tax non-hedge derivative losses in the first nine months and third quarter of 2004 were $15 million and $1 million, respectively (2003 - gain of $44 million and loss of $33 million). Included in these amounts are net unrealized non-cash losses of $3 million and $1 million for the first nine months and third quarter of 2004, respectively (2003 - gain of $41 million and loss of $26 million). The realized losses in 2004 were largely due to the appreciation in the price of copper. The 2003 gains and losses were primarily related to the mark-to-market value changes on foreign currency forward and option contracts and Australian dollar denominated metal derivative instruments acquired with AurionGold, which do not qualify for hedge accounting, covering future periods. Investment and other business income in the first nine months and third quarter of 2004 were expenses of $15 million and gains of $10 million, respectively, compared with an expense of $2 million and a gain of $6 million in the comparative prior year periods. The losses in the first nine months 2004 were due to an after-tax non-cash charge of $34 million, previously recognized in accumulated comprehensive income, relating to the cumulative foreign exchange translation loss on Placer Dome's investment in Misima, which ceased commercial production during the second quarter. Interest and financing expenses were $56 million and $19 million in the first nine months and third quarter of 2004, respectively, compared with $46 million and $13 million in the comparative prior year periods. The increase relates to higher average debt levels in the 2004 period, partially offset by lower interest rates. Income and resource tax recoveries in the nine months and quarter ended September 30, 2004 were largely due to an after-tax gain of $76 million relating to the reversal of a previously accrued tax and interest liability for Ontario mining taxes as a result of a decision by the Ontario Court of Appeal on August 31, 2004 which ruled in favour of Placer Dome. The Ontario Ministry of Finance has sought leave to appeal the Ontario Court of Appeal's decision to the Supreme Court of Canada. Management is of the view that, even should an application for appeal to the Supreme Court of Canada be accepted, Placer Dome will ultimately prevail. Placer Dome also expects to be reimbursed for previously made cash payments totaling $37 million plus interest. During the third quarter of 2004, Placer Dome determined that, due to a more positive outlook for its Australian operations including an improved gold price environment, only $24 million of its deferred tax assets for tax benefits relating to these operations required a valuation allowance. Pursuant to this, the valuation allowance was reduced to that level by recording a non-cash credit of $37 million to Income and resource tax recovery in the income statement during the quarter. Income and resource tax recoveries during the nine months ended September 2003 were largely due to the recognition of a $39 million non-cash asset for previously unrecorded tax benefits related to Placer Dome's U.S. operations. At December 31, 2003, the majority of the valuation allowance against the U.S. tax assets had been reversed. Net earnings in the first nine months of 2004 included the effect of a change in accounting policy related to deferred stripping. During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, to exclude the recording of deferred stripping liabilities relating to the Cortez joint venture on Placer Dome's balance sheet (see note 2(a) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change through December 31, 2003, was to increase earnings on an after-tax basis by $4 million ($0.01 per share). As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. Also during the second quarter of 2004, Placer Dome changed its accounting policy, prospectively from April 1, 2004, with respect to mineral rights to reclassify them from intangible to tangible assets. Due to this change in accounting policy, Placer Dome has ceased amortization of the excess of the carrying over the residual value of these assets and accounts for them according to its accounting policy for property, plant and equipment (see note 2(b) to the unaudited interim consolidated financial statements for more details). If this change had been adopted January 1, 2003, it would have increased Placer Dome's earnings on a pre and after tax basis in the following periods: for the first nine months of 2003 by $7 million ($0.02 per share) and $5 million ($0.01 per share), respectively; for the third quarter of 2003 by nil (nil per share) and nil (nil per share), respectively, and for the first quarter of 2004 by $3 million ($0.01 per share) and $2 million (nil per share), respectively. Net earnings in the first nine months of 2003 included the effect of the adoption of a new standard (SFAS 143 'Accounting for Asset Retirement Obligations') relating to accounting for post mining-related asset retirement obligations. The new standard requires that the fair value of liabilities for asset retirement obligations be recognized in the period in which they are incurred (see note 2(c) to the unaudited interim consolidated financial statements for more details). The cumulative effect of this change was a non-cash reduction in earnings on a pre- and after-tax basis of $23 million and $17 million, respectively. Share Capital As at October 25, 2004, Placer Dome had 414,806,485 common shares outstanding. As at the same date, it had $230 million in convertible debentures outstanding, none of which were in a position to be converted. If conversion were possible, the total number of common shares the Corporation would have to issue would be 10,991,631. As at October 25, 2004, Placer Dome had 14,258,863 share options outstanding under its stock-based incentive plans. If all of these options were exercised on that date, the Corporation would have to issue 14,258,863 common shares. Recent Accounting Developments The Emerging Issues Task Force of the Financial Accounting Standards Board ("FASB") is currently discussing the appropriateness and timing of capitalization and amortization of deferred stripping costs for mining operations. Should the Task Force reach a consensus, Placer Dome may be required to make further changes to its related accounting policies. On October 13, 2004, the FASB concluded that Statement 123R, "Share-Based Payment, an Amendment of FASB Statements No. 123 and 95" ("SFAS 123R"), which would require all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. This 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 FASB's current plan is to issue a final Statement on or around December 15, 2004. Placer Dome is currently evaluating the impact of SFAS 123R. Canadian GAAP Placer Dome also prepares a reconciliation highlighting the material differences between its interim financial statements as prepared in accordance with U.S. GAAP as compared to interim financial statements prepared under Canadian GAAP as well as a Management's Discussion and Analysis focusing on these differences (see note 13 to the interim unaudited consolidated financial statements). ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the nine months ended September 30 ------------------------------------- Placer Dome's Share ------------------------- Mine Placer Mine Dome's share operating Millfeed (% of mine earnings (000s Grade Recovery production) (1)(4)(7) tonnes) (g/t,%) (%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 $ 11 340 15.2 95.8 2003 $ 12 267 18.0 95.8 ------------------------------------------------------------------------- Musselwhite 68% 2004 6 749 5.2 95.7 2003 2 664 5.5 95.6 ------------------------------------------------------------------------- Porcupine 51% 2004 16 1,529 3.5 92.0 2003 14 1,587 3.6 92.5 ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 2 1,330 0.8 n/a 2003 5 4,008 0.7 n/a ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 99 17,207 1.2 n/a 2003 87 10,175 2.0 n/a ------------------------------------------------------------------------- Golden Sunlight(5) 100% 2004 1 - - - 2003 36 1,743 3.9 82.8 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 2 222 13.7 90.5 100% 2003 3 125 13.8 96.6 ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 (5) 3,282 1.9 89.1 2003 11 2,927 2.4 88.2 ------------------------------------------------------------------------- Henty(7) 100% 2004 14 216 16.7 96.6 2003 2 219 10.5 95.1 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 4 2,298 2.8 95.8 2003 (5) 2,619 3.6 95.2 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 14 1,430 4.2 89.7 2003 14 1,408 4.9 89.1 ------------------------------------------------------------------------- Osborne(9) 100% 2004 n/a 1,203 1.1 82.9 2003 n/a 1,125 0.9 80.0 ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 6 1,850 0.8 87.5 2003 1 3,288 0.8 87.6 ------------------------------------------------------------------------- Porgera(7) 75% 2004 92 3,500 5.9 87.7 2003 25 3,134 5.4 87.6 ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 11 2,451 1.0 81.8 2003 4 2,350 1.0 84.4 ------------------------------------------------------------------------- South Africa South Deep 50% 2004 (7) 808 6.1 97.2 2003 5 707 7.6 96.9 ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 16 1,523 3.2 92.6 2003 1 351 3.2 94.4 ------------------------------------------------------------------------- Metal hedging loss 2004 (31) 2003 47 ------------------------------------------------------------------------- Currency hedging gain 2004 9 2003 - ------------------------------------------------------------------------- TOTAL GOLD 2004 $ 249 2003 $ 260 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 29 1,203 2.8 94.8 2003 2 1,125 2.9 95.8 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 176 13,771 1.1 n/a 2003 31 13,067 1.0 n/a ------------------------------------------------------------------------- Metal hedging loss 2004 (35) 2003 - ------------------------------------------------------------------------- TOTAL COPPER 2004 $ 170 2003 $ 33 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other(1) 2004 (15) 2003 (15) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 $ 404 OPERATING EARNINGS(1) 2003 $ 278 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the nine months ended Estimated annual 2004/ September 30 Actual 2003 ----------------------------------------------------- Placer Dome's Share ----------------------------------------------------- Mine Placer Dome's Production Cost per Cost per share ----------------- unit(2) Production unit(13) (% of mine (ozs, % ($/oz, $/lb) (ozs, ($/oz, $/lb) production) 000s lbs) change Cash Total 000s lbs) Cash Total ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 158,337 +7% 251 319 208,000 240 310 2003 147,627 199 270 197,114 202 264 ------------------------------------------------------------------------- Mussel- white 68% 2004 119,749 +8% 265 343 157,000 260 340 2003 111,299 250 329 151,422 250 330 ------------------------------------------------------------------------- Porcupine 51% 2004 156,301 -9% 230 302 205,000 230 300 2003 172,070 212 270 233,101 206 262 ------------------------------------------------------------------------- United States Bald Mountain (3) 100% 2004 35,583 -52% 325 351 50,000 250 270 2003 73,876 237 283 90,601 228 279 ------------------------------------------------------------------------- Cortez(3), (4),(8) 60% 2004 500,705 +0% 157 193 630,000 160 200 2003 498,728 129 165 639,241 135 172 ------------------------------------------------------------------------- Golden Sunlight (5) 100% 2004 2,419 -99% - - 2,000 - - 2003 181,134 145 152 234,946 143 151 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 88,058 +61% 315 323 125,000 300 310 100% 2003 54,706 226 231 92,965 215 220 ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 174,237 -14% 330 417 255,000 330 420 2003 201,704 237 302 280,129 246 320 ------------------------------------------------------------------------- Henty(7) 100% 2004 110,434 +56% 161 267 135,000 175 300 2003 70,934 213 314 102,070 204 308 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 206,827 -29% 317 387 260,000 320 390 2003 290,962 269 365 396,254 271 364 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 171,421 -9% 253 319 230,000 260 340 2003 187,547 202 279 262,889 204 283 ------------------------------------------------------------------------- Osborne (9) 100% 2004 34,051 +35% n/a n/a 40,000 n/a n/a 2003 25,298 n/a n/a 37,357 n/a n/a ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 40,522 -43% 275 281 39,000 275 281 2003 71,611 272 307 94,837 276 310 ------------------------------------------------------------------------- Porgera(7) 75% 2004 560,699 +20% 189 221 740,000 190 230 2003 465,995 252 299 638,940 256 301 ------------------------------------------------------------------------- Chile La Coipa (11) 50% 2004 65,776 +1% 234 305 87,000 240 320 2003 65,190 216 300 99,637 208 291 ------------------------------------------------------------------------- South Africa South Deep 50% 2004 154,536 -7% 398 440 210,000 390 430 2003 166,091 280 321 220,371 301 342 ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 145,457 +291% 235 293 205,000 240 300 2003 37,154 219 319 89,525 225 301 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- Currency hedging gain 2004 (3) (3) 2003 - - ------------------------------------------------------------------------- TOTAL GOLD 2004 2,725,112 -3% 232 287 3,550,000- 230- 290- 3,650,000 235 295 2003 2,821,926 215 273 3,861,399 218 274 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne (9) 100% 2004 69,472 +2% 0.62 0.74 90,000 0.64 0.79 2003 68,000 0.57 0.70 93,638 0.56 0.69 ------------------------------------------------------------------------- Zaldivar (3) 100% 2004 249,960 +2% 0.50 0.64 325,000 0.50 0.66 2003 246,295 0.51 0.66 331,720 0.51 0.66 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- TOTAL COPPER 2004 319,432 +2% 0.52 0.66 410,000- 420,000 0.53 0.69 2003 314,295 0.52 0.67 425,358 0.52 0.67 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other(1) 2004 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 OPERATING EARNINGS(1) 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the Third Quarter ------------------------------------ Placer Dome's Share ------------------------- Mine Placer Mine Dome's share operating Millfeed (% of mine earnings (000s Grade Recovery production) (1) tonnes) (g/t,%) (%) ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 $ 5 125 16.4 96.0 2003 $ 5 80 19.4 95.6 ------------------------------------------------------------------------- Musselwhite 68% 2004 2 253 5.2 96.1 2003 2 232 5.7 96.0 ------------------------------------------------------------------------- Porcupine 51% 2004 4 519 3.1 92.4 2003 7 543 3.6 93.3 ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 - 750 0.9 n/a 2003 2 589 0.7 n/a ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 33 6,345 1.0 n/a 2003 26 4,653 1.5 n/a ------------------------------------------------------------------------- Golden Sunlight 100% 2003 13 590 3.9 83.2 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 (2) 49 13.0 80.3 100% 2003 2 93 13.4 96.7 ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 - 1,127 2.7 90.2 2003 2 971 2.6 88.4 ------------------------------------------------------------------------- Henty(7) 100% 2004 2 72 13.1 96.4 2003 3 74 11.9 97.1 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 (2) 756 2.6 95.6 2003 (1) 894 3.2 95.8 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 5 475 4.8 89.9 2003 4 465 5.3 88.5 ------------------------------------------------------------------------- Osborne(8) 100% 2004 n/a 423 1.3 82.0 2003 n/a 380 0.9 81.4 ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 - - - - 2003 (3) 1,079 0.8 88.2 ------------------------------------------------------------------------- Porgera(7) 75% 2004 33 1,081 6.3 89.0 2003 16 1,085 6.3 88.4 ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 3 856 0.6 80.7 2003 2 813 1.0 82.1 ------------------------------------------------------------------------- South Africa South Deep 50% 2004 (1) 284 6.5 97.0 2003 2 275 7.3 97.4 ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 4 497 3.2 92.0 2003 1 351 3.2 94.4 ------------------------------------------------------------------------- Metal hedging loss 2004 (15) 2003 25 ------------------------------------------------------------------------- Currency hedging gain 2004 2 2003 - ------------------------------------------------------------------------- TOTAL GOLD 2004 $ 70 2003 $ 106 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 9 423 2.7 93.4 2003 1 380 2.7 96.1 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 54 4,518 0.8 n/a 2003 14 4,742 1.2 n/a ------------------------------------------------------------------------- Metal hedging loss 2004 (17) 2003 - ------------------------------------------------------------------------- TOTAL COPPER 2004 $ 46 2003 $ 15 ------------------------------------------------------------------------- Other(1) 2004 (7) 2003 (8) ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 $ 109 OPERATING EARNINGS(1) 2003 $ 113 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- PRODUCTION AND OPERATING SUMMARY ------------------------------------------------------------------------- For the Third Quarter ------------------------------------ Placer Dome's Share ------------------------------------ Mine Placer Production Cost per Dome's share ------------------ unit(2),(12) (% of mine (ozs, % ($/oz, $/lb) production) 000s lbs) change Cash Total ------------------------------------------------------------------------- GOLD Canada Campbell 100% 2004 62,427 +32% 228 287 2003 47,263 199 274 ------------------------------------------------------------------------- Musselwhite 68% 2004 40,558 +2% 269 347 2003 39,639 232 313 ------------------------------------------------------------------------- Porcupine 51% 2004 46,920 -22% 242 321 2003 60,137 199 255 ------------------------------------------------------------------------- United States Bald Mountain(3) 100% 2004 10,182 -49% 445 458 2003 20,084 226 278 ------------------------------------------------------------------------- Cortez(3),(4),(8) 60% 2004 158,157 +2% 168 204 2003 155,619 140 176 ------------------------------------------------------------------------- Golden Sunlight 100% 2003 62,418 143 135 ------------------------------------------------------------------------- Turquoise Ridge(6) 75% 2004 15,959 -60% 446 459 100% 2003 39,614 230 236 ------------------------------------------------------------------------- Australia Granny Smith(7) 100% 2004 80,534 +10% 294 386 2003 73,392 288 344 ------------------------------------------------------------------------- Henty(7) 100% 2004 27,431 -0% 188 303 2003 27,562 197 273 ------------------------------------------------------------------------- Kalgoorlie West(7) 100% 2004 62,970 -32% 338 421 2003 92,323 288 371 ------------------------------------------------------------------------- Kanowna Belle(7) 100% 2004 64,465 +10% 233 296 2003 58,559 202 268 ------------------------------------------------------------------------- Osborne(8) 100% 2004 12,757 +40% n/a n/a 2003 9,087 n/a n/a ------------------------------------------------------------------------- Papua New Guinea Misima(10) 80% 2004 1,428 -94% 275 281 2003 24,347 284 361 ------------------------------------------------------------------------- Porgera(7) 75% 2004 180,564 +0% 181 210 2003 180,400 220 259 ------------------------------------------------------------------------- Chile La Coipa(11) 50% 2004 16,716 -33% 232 295 2003 24,867 188 272 ------------------------------------------------------------------------- South Africa South Deep 50% 2004 57,238 -7% 374 415 2003 61,707 294 333 ------------------------------------------------------------------------- Tanzania North Mara(12) 100% 2004 49,861 +34% 252 316 2003 37,154 219 319 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- Currency hedging gain 2004 (2) (2) 2003 - - ------------------------------------------------------------------------- TOTAL GOLD 2004 888,167 -12% 235 291 2003 1,014,172 217 271 ------------------------------------------------------------------------- ------------------------------------------------------------------------- COPPER Osborne(9) 100% 2004 23,512 +6% 0.62 0.74 2003 22,104 0.58 0.70 ------------------------------------------------------------------------- Zaldivar(3) 100% 2004 77,859 -6% 0.54 0.68 2003 82,980 0.50 0.65 ------------------------------------------------------------------------- Metal hedging loss 2004 2003 ------------------------------------------------------------------------- TOTAL COPPER 2004 101,371 -4% 0.56 0.70 2003 105,084 0.52 0.66 ------------------------------------------------------------------------- Other(1) 2004 2003 ------------------------------------------------------------------------- CONSOLIDATED MINE 2004 OPERATING EARNINGS(1) 2003 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Notes to the Production and Operating Summary Tables: (1) Mine operating earnings represent 100% of the results of mines owned by Placer Dome and its subsidiaries and a pro-rata share of joint ventures. Consolidated mine operating earnings, (and the related sub-totals), in accordance with accounting principles generally accepted in the U.S., exclude the pro-rata share of La Coipa, a non-controlled incorporated joint venture. Mine operating earnings comprises sales, at the spot price, less cost of sales including reclamation costs, depreciation and depletion for each mine, in millions of U.S. dollars. Pursuant to SFAS 109 - Accounting for Income Taxes, on business acquisitions, where differences between assigned values and tax bases of property, plant and equipment acquired exist, Placer Dome grosses up the property, plant and equipment values to reflect the recognition of the deferred tax liabilities for the tax effect of such differences. Other mine operating earnings included charges of $8 million and $3 million in the nine months and three months ended September 30, 2004, respectively (2003 - $6 million and $3 million), related to the amortization of the gross up of the property, plant and equipment allocation. (2) Components of Placer Dome's share of cash and total production costs in accordance with the Gold Institute Standard: --------------------------------- For the period ended September 30 --------------------------------- Third Quarter Nine Months --------------------------------- 2004 2003 2004 2003 $/oz $/oz $/oz $/oz ------------------------------------------------------------------------- Direct mining expenses 232 193 229 194 Stripping and mine development adjustment (16) 12 (15) 9 Third party smelting, refining and transportation 1 1 1 1 By-product credits - (1) (1) (1) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash operating costs per ounce 217 205 214 203 ------------------------------------------------------------------------- Royalties 15 11 15 11 Production taxes 3 1 3 1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total cash costs per ounce 235 217 232 215 ------------------------------------------------------------------------- Depreciation 26 30 29 31 Depletion and amortization 25 20 22 23 Reclamation and mine closure 5 4 4 4 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total production costs per ounce 291 271 287 273 ------------------------------------------------------------------------- (3) Recovery percentage is difficult to accurately measure at heap leach operations. (4) During the second quarter of 2004, Placer Dome changed its accounting policy, retroactive to January 1, 2004, with respect to deferred stripping to exclude the recording of liabilities on the balance sheet. The cumulative effect of this change through December 31, 2003, was to increase earnings on a pre and after tax basis by $4 million ($0.01 per share). As part of its review of deferred stripping accounting at the Cortez joint venture, Placer Dome determined that estimates relating to the cost of contained ounces of gold on the heap leach pad needed to be revised. This resulted in an adjustment, during the first quarter of 2004, which decreased earnings, on a pre and after tax basis by $3 million ($0.01 per share) and $2 million ($0.01 per share), respectively. (5) Production from Golden Sunlight was suspended in December 2003 and will recommence when ore is delivered from Stage 5B (pre-stripping started in September 2003 with ore production scheduled to commence in March 2005). (6) Production from Turquoise Ridge relates to third party ore sales. On December 23, 2003, Placer Dome and Newmont Mining Corporation formed the Turquoise Ridge Joint Venture. Results prior to this represent 100% of the mine's results, and 75% thereafter. The cash and total cost per ounce balances do not include the cost of processing the ore. (7) On October 22, 2002, Placer Dome gained control of AurionGold. This increased Placer Dome's ownership in the Granny Smith mine to 100% and the Porgera mine to 75% from 60% and 50%, respectively, and added the Henty, Kalgoorlie West and Kanowna Belle mines to Placer Dome's holdings. With the finalization of the AurionGold purchase price allocation in the fourth quarter of 2003, there have been several adjustments to the fair values assigned to the acquired assets and liabilities from the initial purchase price allocation. Accordingly, the results for the first nine months and third quarter of 2003 have been restated. (8) The Cortez mine processes material by way of carbon-in-leach ("CIL") and heap leaching. ------------------------------------------- Millfeed Grade Recovery Production (000s tonnes) (g/t) (%) (ozs) -------------------------------------------------------------------- Carbon in leach For the nine months ended September 30 2004 1,400 6.0 88.5 236,846 2003 1,545 6.8 90.1 305,713 For the third quarter of 2004 475 5.3 87.8 71,117 2003 520 5.5 89.3 82,610 -------------------------------------------------------------------- Heap leach For the nine months ended September 30 2004 15,619 0.7 Note 3 230,880 2003 8,352 0.9 Note 3 142,012 For the third quarter of 2004 5,806 0.7 Note 3 74,792 2003 4,030 0.8 Note 3 56,371 -------------------------------------------------------------------- Sale of carbonaceous ore For the nine months ended September 30 2004 188 6.4 85.8 32,979 2003 278 6.7 85.0 51,003 For the third quarter of 2004 64 6.9 85.9 12,248 2003 103 5.9 85.2 16,638 -------------------------------------------------------------------- Total For the nine months ended September 30 2004 17,207 1.2 Note 3 500,705 2003 10,175 2.0 Note 3 498,728 For the third quarter of 2004 6,345 1.1 Note 3 158,157 2003 4,653 1.5 Note 3 155,619 -------------------------------------------------------------------- (9) Osborne produces copper concentrate with gold as a by-product. Therefore, gold unit costs are not applicable. (10) Silver is a by-product at the Misima mine. For the nine and three months ended September 30, 2004, Misima produced 202,000 and 7,000 ounces of silver, respectively, compared with 435,000 and 110,000 ounces for the respective prior year periods. Mining was completed at Misima in May 2001, but processing of stockpiled ore continued until May 2004. (11) Gold and silver are accounted for as co products at La Coipa. Gold equivalent ounces are calculated using a ratio of the silver market price to gold market price for purposes of calculating costs per equivalent ounce of gold. The equivalent ounces of gold produced at La Coipa were 108,234 and 40,550 ounces, respectively for the nine and three month periods ended September 30, 2004 and 110,056 and 42,891 ounces, respectively, for the comparative prior year periods. At La Coipa, production for silver was 2.6 million and 1.2 million ounces for the nine and three months ended September 30, 2004, respectively, and 3.3 million and 1.3 million ounces for the comparative prior year periods. (12) On July 23, 2003, Placer Dome completed the acquisition of East African Gold Mines Limited which owned 100% of the open pit North Mara mine in northern Tanzania. (13) Estimated 2004 annual unit costs for the Canadian, Australian, Papua New Guinean, Chilean and South Deep mines are based on Canadian and Australian dollar, Papua New Guinean kina, Chilean peso and South African rand exchange rates to the U.S. dollar of 1.31, 1.38, 3.22, 626, and 6.54 to 1, respectively. Any change from these exchange rates would have an impact on the unit costs. At September 30, 2004 these exchange rates were 1.26, 1.40, 3.11, 609, and 6.47 to 1, respectively. Review of Mining Operations Canada On average, the Canadian dollar appreciated 6% against the U.S. dollar for the third quarter of 2004 compared to the third quarter of 2003. Production at the Campbell mine increased by 32% in the third quarter of 2004 compared to the prior year period due to increased throughput, partially offset by a decrease in grade. Cash costs per ounce increased by $29 or 15% from the prior period primarily related to the processing of increased tonnage of lower-grade ore and the appreciation of the Canadian dollar. At the Musselwhite mine, Placer Dome's share of production for the third quarter was 2% higher than the prior year period as increased throughput more than offset lower grade. Cash costs per ounce increased $37 or 16% from the prior year period due to increased short-term mine development activities and the appreciation of the Canadian dollar. Placer Dome's share of production in the third quarter for the Porcupine operations was 22% lower than the prior year period due primarily to lower throughput and grade. Cash costs per ounce were 22% higher than the prior year period primarily due to lower production and the appreciation of the Canadian dollar. Overburden removal at the Pamour mine is expected to commence in the fourth quarter of 2004, with gold production expected to start in the second quarter of 2005, one quarter earlier than previously planned. United States Placer Dome's share of production from the Cortez mine increased by 2% in the third quarter of 2004 compared with the 2003 period. This was due primarily to increased tonnes placed on the leach pads, partially offset by lower CIL tonnage and grades. Cash costs per ounce were 20% higher than in the prior year period, primarily due to an increased proportion of production from the relatively lower grade heap leach ore. The joint venture's updated forecast for 2004 calls for an increase in Placer Dome's share of production of 30,000 ounces from that previously disclosed to 630,000 ounces with no change in previously forecast cash and total costs per ounce. The feasibility study at Cortez Hills is ongoing and drilling on the deposit in the fourth quarter will primarily focus on condemnation drilling and defining geotechnical and groundwater parameters for the study. Additional drilling will be done to test the strike extension to the south of the orebody and the depth extension below the open pit in an attempt to identify additional mineral resources. Placer Dome's share of production from Turquoise Ridge in the third quarter of 2004 was 60% lower than the prior year period due to a reduction of Placer Dome's interest from 100% to 75% on the formation of the joint venture in December 2003 and lower throughput primarily caused by a combination of a shortage of experience miners and construction delays resulting in the deferral of timing for accessing higher grade ore zones. Production was also negatively impacted by shipping delays to Newmont Mining Corporation's Twin Creeks facility as well as lower recoveries. Cash costs per ounce were 94% higher than in the prior year period, primarily due to lower production and increased start-up costs. Development work continues at the mine and is expected to be complete in 2005 with operations now expected to reach annualized production of 300,000 ounces (Placer Dome's share 225,000 ounces) of gold in 2006. Australia and Papua New Guinea On average, the Australian dollar and the Papua New Guinean kina appreciated 8% and 10%, respectively, against the U.S. dollar for the third quarter of 2004 compared to the third quarter of 2003. At the Porgera mine, Placer Dome's share of production in the third quarter of 2004 was in line with 2003. Cash costs per ounce were $39 or 18% lower than the prior period, primarily due to higher mining rates and maintenance activities in the comparative period, partially offset by the appreciation of the Australian dollar and Papua New Guinean kina in the current period. The joint venture's updated forecast for 2004 calls for an increase in Placer Dome's share of production of 30,000 ounces from that previously disclosed to 740,000 ounces and its cash and total costs per ounce forecast has been decreased to $190 and $230 from $210 and $250 respectively. At the Granny Smith mine, Placer Dome's share of production for third quarter was 10% above that of the prior year period due to the processing of softer ore from Stage 3 of the Wallaby open pit. Cash costs per ounce were $294, representing a 2% increase over the prior period primarily due to the appreciation of the Australian dollar offsetting increased production. The mine's updated forecast for 2004 calls for a decrease in production of 31,000 ounces from that previously disclosed to 255,000 ounces and its cash and total costs per ounce forecast has been increased to $330 and $420 from $310 and $370 respectively. The decrease in production relates to lower grades than expected from transitional ore mined during the third quarter. The Wallaby underground feasibility study, previously forecast as being cost neutral is now expected to result in a net cost of approximately $5 million due to one of the trial mining lenses lacking continuity resulting in lower production from that area during the study. Production from Kalgoorlie West during the third quarter of 2004 was 32% below that of the prior year period. This reflects a reduced number of available ore sources and a higher proportion of low grade open pit ore in the mill feed schedule. Cash costs per ounce in the quarter increased by 17% compared to the prior year period due to the appreciation of the Australian dollar and lower production levels. At the Kanowna Belle mine, production for the three months ended September 30, 2004 was 10% above that of the prior year period due to improved recovery and roaster throughput. Cash costs per ounce were $31 or 15% higher than the prior year quarter due primarily to the appreciation of the Australian dollar and increased underground development and fleet maintenance costs, partially offset by the increase in production. At the Osborne mine, copper and gold production in the third quarter of 2004 increased 40% and 6%, respectively, from the prior year period due to higher throughput and gold grades, partially offset by lower copper recoveries. Cash and total costs per pound of copper (Osborne produces copper concentrate with gold as a by-product) were $0.62 and $0.74, respectively, 7% and 6% above prior period levels due to higher development activity, concentrate shipping costs and the appreciation of the Australian dollar. Africa At the South Deep mine, Placer Dome's share of production for the third quarter of 2004 was 7% lower than the prior year period primarily due to lower milled grades. Ongoing issues relating to the implementation of continuous operating working arrangements and the cessation of mining in uneconomic stopes resulted in the need to use low-grade surface ore to supplement mill feed. Unit cash costs increased by 27% due to a 16% appreciation in the rand relative to the U.S. dollar for the third quarter of 2004 compared to the third quarter of 2003, lower production levels and general inflationary operating cost increases. As part of its continuing efforts to improve the mine's cost structure, the South Deep mine has commenced a consultation process with the National Union of Mineworkers aimed at reducing the workforce by approximately 700 people. Early retirements, attrition and voluntary retrenchments are expected to comprise the majority of the reduction. This decision follows steps taken earlier this year that restructured and reduced mine management. Chile At the Zaldivar mine, copper production for the third quarter of 2004 was 6% lower than the prior year period due primarily to lower grades resulting from short-term modifications in the mine plan. Cash costs per pound during the period were $0.54, 8% higher than in the prior year period due to the average 10% appreciation of the Chilean peso to the U.S. dollar compared with the third quarter of 2003 and lower production levels. The mine's updated forecast for 2004 calls for an increase in production of 10 million pounds from that previously disclosed to 325 million pounds with no change in previously forecast cash and total costs per pound. Non-GAAP Measures Placer Dome has included certain non-GAAP performance measures throughout this document. These non-GAAP performance measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Placer Dome believes that as well as conventional measures prepared in accordance with U.S. GAAP, certain investors use this information to evaluate Placer Dome's performance and its ability to generate cash flow for use in investing and other activities. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Set out below are definitions for these performance measures and reconciliations of the non-GAAP measures to reported GAAP measures. Cash from Operations per Common Share Cash from operations per common share is determined by dividing the cash from operations by the weighted average number of common shares outstanding during the period, as follows: ------------------------------- September 30 ------------------------------- Third Quarter Nine Months ------------------------------- 2004 2003 2004 2003 ------------------------------------------------------------------------- Cash from operations ($ millions) 91 125 332 268 ------------------------------------------------------------------------- Weighted average number of common shares (millions) 413.5 409.3 412.9 409.0 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash from operations per common share $0.22 $0.31 $0.80 $0.66 ------------------------------------------------------------------------- Unit Costs A reconciliation of costs per ounce of gold produced, calculated in accordance with the Gold Institute Standard, and costs per pound of copper produced to the Cost of sales and Depreciation and depletion income statement lines is included below: (in millions of dollars except production and unit costs)(i) ------------------------------------------ For the nine months ended September 30 ------------------------------------------ 2004 ------------------------------------------ Gold Copper ------------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------ Reported 840 184 - - Copper (185) (45) 185 45 Corporate(ii) (5) (11) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metal produced 650 128 185 45 La Coipa 25 8 - - Minority interest (3) - - - By-product (3) - (14) - Roast ore costs (33) - - - Reclamation (12) 12 (1) 1 Inventories (6) (3) (9) (2) Other(iii) (12) (1) 5 1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 606 144 166 45 ------------------------------------------------------------------------- Production reported(i) 2,725 2,725 319 319 Osborne gold ozs. (34) (34) - - Roast ore (ozs.) (121) (121) - - Golden Sunlight ozs. (2) (2) - - La Coipa gold equivalent ozs. 42 42 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 2,610 2,610 319 319 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 232 55 0.52 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------ For the nine months ended September 30 ------------------------------------------ 2003 ------------------------------------------ Gold Copper ------------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------ Reported 797 196 - - Copper (162) (42) 162 42 Corporate(ii) (3) (10) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metal produced 632 144 162 42 La Coipa 22 8 - - Minority interest (6) - - - By-product (3) - (9) - Roast ore costs (13) - - - Reclamation (16) 16 (1) 1 Inventories (12) (8) 4 1 Other(iii) (5) 1 9 2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 599 161 165 46 ------------------------------------------------------------------------- Production reported(i) 2,822 2,822 314 314 Osborne gold ozs. (25) (25) - - Roast ore (ozs.) (55) (55) - - Golden Sunlight ozs. - - - - La Coipa gold equivalent ozs. 45 45 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 2,787 2,787 314 314 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 215 58 0.52 0.15 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------ For the three months ended September 30 ------------------------------------------ 2004 ------------------------------------------ Gold Copper ------------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------ Reported 283 61 - - Copper (60) (14) 60 14 Corporate(ii) (3) (3) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metals production 220 44 60 14 La Coipa 8 3 - - Minority interest - - - - By product - - (5) - Roast ore costs (9) - - - Reclamation (5) 5 - - Inventories (7) (1) - - Other(iii) (4) (2) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- 203 49 55 14 ------------------------------------------------------------------------- Production reported(i) 888 888 101 101 Osborne gold ozs. (13) (13) - - Roast ore (ozs.) (28) (28) - - La Coipa gold equivalent ozs. 18 18 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 865 865 101 101 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 235 56 0.56 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------ For the three months ended September 30 ------------------------------------------ 2003 ------------------------------------------ Gold Copper ------------------------------------------ Cost of Deprec- Cost of Deprec- Sales iation Sales iation ------------------------------------------ Reported 285 66 - - Copper (54) (13) 54 13 Corporate(ii) (3) (3) - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Related to metals production 228 50 54 13 La Coipa 7 3 - - Minority interest (2) - - - By product - - (3) - Roast ore costs (10) - - - Reclamation (6) 6 - - Inventories - (5) 4 - Other(iii) (4) (1) - 2 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 213 53 55 15 ------------------------------------------------------------------------- Production reported(i) 1,014 1,014 105 105 Osborne gold ozs. (9) (9) - - Roast ore (ozs.) (40) (40) - - La Coipa gold equivalent ozs. 18 18 - - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Production base for calculation 983 983 105 105 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Unit costs(i) 217 54 0.52 0.14 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (i) Gold production is in thousands of ounces and unit costs for gold are in dollars per ounce. Copper production is in millions of pounds, and unit costs for copper are in dollars per pound. (ii) Corporate depreciation includes the amortization of the tax gross ups (note 4(b) to the unaudited interim consolidated financial statements). (iii) Other consists of management fees and unusual costs such as significant severance or costs incurred during a temporary mine shut down, which are excluded from the determination of unit costs and smelting charges which are netted against sales revenue but included in the determination of unit costs. FIRST AND FINAL ADD TO FOLLOW DATASOURCE: Placer Dome Inc. CONTACT: Investor Relations: Greg Martin, (604) 661-3795, Media Relations: Joe Danni, (604) 661-1941

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