February 4, 2014 / 3:37 PM / 4 years ago

UPDATE 1-Silver Standard to buy Nevada mine from Goldcorp, Barrick

(Adds analyst comments, background, share price moves)

By Euan Rocha

TORONTO, Feb 4 (Reuters) - Silver Standard Resources Inc said on Tuesday it will buy the Marigold mine in Nevada for $275 million in cash from joint owners Goldcorp Inc and Barrick Gold in a move aimed at its boosting its gold exposure.

Vancouver-based Silver Standard, which owns the Pirquitas silver mine in Argentina, said the transaction adds an operating mine in a well-established, low-risk mining jurisdiction to its asset base.

Marigold, an open-pit gold mine that has been in production since 1988, is being sold by Barrick and Goldcorp as the two miners trim their portfolios and shed some higher cost assets.

Analysts said the deal will benefit Barrick and Goldcorp, Canada’s No. 1 and No. 2 gold producers.

“We view the transaction to be positive given the attractive price received for the asset relative to our estimate,” Barclays analyst Farooq Hamed wrote in a note to clients, adding that he had valued Marigold at about $120 million.

Hamed said Goldcorp may use some of the proceeds to help fund its C$2.6 billion ($2.3 billion) hostile bid for Osisko Mining Corp, or to pay down some of its convertible senior notes that come due later this year.

Analysts were more skeptical about the merits of the deal for Silver Standard and shares of the company fell 4.9 percent to C$8.13 in early trading on the Toronto Stock Exchange.

“With the long life of the asset and the long operating history, we view the near-term cash flow from operations as a positive, but highlight that the capital requirements of the asset are significant, reducing the free cash flow profile of the asset,” Dundee analyst Chris Lichtenheldt said in a note.


“This transaction is consistent with Goldcorp’s ongoing strategy of disciplined portfolio management,” Goldcorp Chief Executive Chuck Jeannes said in a statement.

Barrick also said the sale of its minority interest in Marigold mine was part of its ongoing portfolio pruning process.

RBC analyst Stephen Walker estimates that Barrick’s sale of its interest in Marigold will lower its overall operating cost profile by roughly $10 per ounce in 2014.

The move comes just two weeks after Barrick announced that it has agreed to sell its Kanowna gold mine in Western Australia to Northern Star Resources Ltd for A$75 million ($66.1 million).

Barrick’s recent slew of asset sales are aimed at trimming its debt load, strengthening its balance sheet and regaining favor with investors. Last year, Barrick agreed to sell three of its high-cost gold mines in Australia to Gold Fields for $300 million.

Shares in Barrick and Goldcorp were down less than 1 percent in early trading on the Toronto Stock Exchange on Tuesday.

CIBC acted as Silver Standard’s financial adviser on the deal, which is expected to close in April. Goldcorp and Barrick were advised by BMO Capital Markets and RBC Capital Markets, respectively.

($1=$1.11 Canadian)

$1=$1.1350 Australian Additional reporting by Sakthi Prasad in Bangalore; Editing by Supriya Kurane and Peter Galloway

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