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January 13, 2014 12:43 pm
Goldcorp has made a C$2.6bn ($2.4bn) unsolicited offer for a rival Canadian gold miner, in a move that shows how some miners hope to take advantage of low valuations in the sector to bolster their growth.
Gold miners have undergone a year of turmoil after a slide in the price of the precious metal forced many to write down asset values and scrap projects. But Goldcorp, which vies with Barrick Gold as the world’s most valuable gold miner by market capitalisation, expects to grow 40 per cent over the next three years as it completes a trio of new mines.
Goldcorp said its cash and shares offer for Osisko Mining Corporation would support its cash flow and underscored its strategy of investing in the Americas, which it sees as a lower-risk region. Osisko’s only mine in production is Malartic in the Canadian province of Quebec, which opened in 2011.
A deal for Osisko would increase Goldcorp’s annual gold production by about 500,000 ounces, or some 18 per cent. It would also mean 44 per cent of its output would come from Canada, compared with about 34 per cent without an Osisko deal.
Chuck Jeannes, Goldcorp’s chief executive, said: “This is not about Goldcorp getting bigger . . . our strategy has never been about size . . . it is about getting better.”
Goldcorp is offering 0.146 of its own shares plus C$2.26 in cash for each Osisko share. Based on Goldcorp’s share price last week, the offer represented a 15 per cent premium to Osisko’s closing share price last week, according to Goldcorp.
On a conference call Mr Jeannes said Goldcorp’s discussions with Osisko had ended last year. “Our clear preference remains to engage with Osisko, as we strongly believe in the compelling strategic and financial merits of this transaction to the mutual benefit of both companies’ shareholders,” said Goldcorp. Osisko did not respond to Goldcorp’s proposed offer.
Goldcorp previously owned a stake of about 10 per cent in Osisko, but sold the holding in 2011 at a price of $13.75 per share.
Osisko’s shares rose 19 per cent on news of the proposed deal to C$6.19, above the $5.95 implied by Goldcorp’s offer. Shares in Goldcorp fell 3 per cent to $24.52.
Malartic was an asset “worth more in the hands of Goldcorp than it is on a standalone basis”, Mr Jeannes said. Goldcorp’s Eléonore mine, also in Quebec, is due to open this year and Goldcorp said it would gain some synergies – which it did not quantify – from the combination with Osisko.
Goldcorp produced about 2.67m ounces of gold last year while Osisko has said its 2013 output would be about 484,000 oz. Goldcorp has 67m oz of gold reserves across its 20 mines while Malartic has 10m oz of reserves.
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