January 15, 2014 5:02 pm

Osisko criticises Goldcorp’s C$2.6bn bid as ‘opportunistic’

Osisko Mining said a C$2.6bn (US$2.38bn) acquisition offer from Goldcorp was “very low” and “opportunistic”, continuing a tug-of-war over Osisko’s main Canadian gold mine that has interested Goldcorp for more than five years.

Goldcorp this week went over the heads of Osisko directors to launch a bid for the company, saying it could do a better job of developing the Malartic mine in Quebec.

Goldcorp’s offer to buy Osisko comes at a time of significant uncertainty in the gold industry over the price of the precious metal, which slipped 27 per cent last year, reversing a bull run since the start of the decade.

However Goldcorp, which has relatively low debt compared with most of its largest peers, plans to increase production by about 40 per cent over the next four years and buying Malartic would bolster its cash flow as it comes to the end of capital spending on a trio of its mines.

Its C$5.95 per share offer for Osisko was made at a 15 per cent premium to Osisko’s share price but Osisko shares are now trading higher at C$6.22.

Montreal-based Osisko said on Wednesday: “Osisko’s board of directors noted that the 15 per cent premium to Osisko’s unaffected share price implied by Goldcorp’s offer is very low and the price opportunistic in light of Osisko’s proven high-quality asset base. Osisko’s board of directors remains committed to delivering superior value for shareholders and all stakeholders and will continue to pursue all initiatives to that end.”

In its takeover offer circular, Goldcorp revealed it had been discussing a possible deal for Osisko since 2008. “Osisko has continually refused to either negotiate or engage in meaningful dialogue,” Goldcorp said. Goldcorp sold a 10.1 per cent stake in Osisko in 2011.

Analysts have said Goldcorp may not face rivals in bidding for Osisko but some have questioned the wisdom of doing a deal, even given the cash flow from a mine in production such as Malartic.

Numis said the deal did not appear to make sense at the current spot gold price. “Goldcorp has commanded a premium over its peers recently but perhaps this will be tainted after making this offer, which has no doubt raised a few eyebrows,” Numis said.

Goldcorp has made a point of focusing a lot of its investment close to home in North America, where company executives think they face lower risks than in less-known jurisdictions.

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