Goldcorp offers C$2.6 billion to acquire Osisko Mining

Mon Jan 13, 2014 1:07pm EST
 
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By Euan Rocha and Allison Martell

TORONTO (Reuters) - Goldcorp Inc (G.TO: Quote) launched an unsolicited cash-and-stock bid to acquire smaller rival Osisko Mining Corp (OSK.TO: Quote) for C$2.6 billion ($2.4 billion) on Monday, in a move to gain control of Osisko's Malartic gold mine in Quebec.

The bid is the Canadian gold sector's first major attempt at a merger and acquisition deal in nearly a year. Miners stung by a 25 percent drop in the price of gold over the last 12 months have focused on cutting costs and slowing down work on growth projects.

The acquisition of the large, low-grade Malartic deposit would boost Goldcorp's proven and probable reserves by some 10 million ounces, but it also carries its own set of perils.

"Given the low grade of the reserves, the Osisko assets will be relatively susceptible to any further weakness in the gold price, though the Canadian dollar will help protect the domestic mining industry," JPMorgan analyst John Bridges said in a note to clients.

The Canadian dollar hit a four-year low against the U.S. dollar last week, after data showed Canada unexpectedly shed jobs last month. A weak Canadian dollar typically helps miners with assets within Canada, as most of their costs are denominated in Canadian dollars, while gold sales are in U.S. dollars.

"We have been working on this (transaction) for some time, so the Canadian dollar movement did not drive the discussion or the decision, but the move looks good and it is something that helps our existing portfolio and it would help this asset going forward as well," Goldcorp's chief executive officer, Chuck Jeannes, said on a conference call.

UNSOLICITED BID

The bid by Vancouver-based Goldcorp, which works out to roughly C$5.95 per share, represents a 15 percent premium to Osisko's closing share price on Friday.   Continued...

 
Chuck Jeannes, CEO of Goldcorp speaks at the Denver Gold Forum industry conference in Denver September 24, 2013. REUTERS/Rick Wilking