UPDATE 3-Osisko strikes deal with Yamana to stymie Goldcorp bid

Wed Apr 2, 2014 3:07pm EDT
 
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(Adds investor comments, context on Quebec)

By Euan Rocha, Allison Martell and Nicole Mordant

TORONTO/VANCOUVER, April 2 (Reuters) - Osisko Mining Corp said on Wednesday that Yamana Gold Inc would buy a 50 percent stake in its mining and exploration assets for C$930 million ($843 million), a deal that potentially thwarts a hostile bid from Goldcorp Inc.

The deal would give Latin America-focused Yamana its first major asset in Canada and make the Toronto-based miner an equal partner in the Osisko properties.

Goldcorp's bid to acquire Osisko marks the first major takeover tussle in the Canadian gold industry in more than a year. Deal-making has dried up after many miners wrote down the value of billions of dollars of assets that they purchased at sky-high prices as the bullion price ran up in the last decade.

Both Yamana and Goldcorp are vying for Osisko because of its huge Canadian Malartic gold mine in the province of Quebec - a mine widely viewed within the industry as a solid asset in a relatively stable mining jurisdiction.

Some analysts though were skeptical about Yamana effectively paying a premium without gaining a controlling interest in the asset itself.

"Our initial take is skeptical that this will provide net value per share to Yamana shareholders," said Cowen & Co analyst Adam Graf. "We see the valuation of Osisko as rich based on our models of the assets at the current forward curves for metal prices."

In a note to clients, Graf said he approved of the deal as it would help generate some tax savings for Yamana in Canada, but he doubts the savings will offset the negative impact of the purchase premium being paid by the miner.   Continued...