Goldcorp Offers $3.4 Billion for Australian Rival
Published: September 3, 2010, New York Times
Goldcorp, the Canadian gold miner, said Friday that it would buy its Australian rival, Andean Resources, for $3.4 billion in cash and stock, topping an all-share offer from Eldorado Gold.
The board of Andean Resources has backed the Goldcorp proposal and offered 0.14 a share of Goldcorp common stock, as well as $6.17, for each Andean share.
The bid represents a 35 percent premium over Andean’s closing price in Toronto on Thursday and a 56 percent premium over its recent share price average.
Andean’s chief executive, Wayne M. Hubert, said the company’s board “believes that the shareholders of both parties will benefit from this business combination well into the future.”
Eldorado, based in Vancouver, British Columbia, could still come back with a higher offer. While Andean was in talks with Goldcorp before its friendly offer, the winning bid is 2 percent higher than Eldorado’s.
A person with direct knowledge of the matter, who asked not to be identified because he was not authorized to speak to the media, said that neither Goldcorp nor Eldorado had been aware that the other party was poised to bid.
Andean, which is based in Perth, Australia, and is listed on the Australian Stock Exchange, owns a large site called Cerro Negro in southern Argentina that is estimated to contain 3 million ounces of gold and 25 million ounces of silver. The gold is held in epithermal deposits, or long, narrow veins of quartz. These veins tend to have the mineral repeatedly along their length, meaning that a single find has great potential.
In a preliminary feasibility study released in July, Andean said that over the next five years, it would be able to produce gold for an average cost of $60 an ounce. It called Cerro Negro “one of the lowest-cost undeveloped gold projects in the world.”
Gold has spent most of the year at more than $1,100 an ounce, with its spot price at $1,251.10 on Friday. It briefly went above $1,265.30 in June, as economic uncertainties drove investors to what was perceived as a safe haven.
Other deal activity includes the $9.5 billion acquisition of Lihir Gold by Newcrest, which took effect last Monday; Barrick Gold’s initial public offering in March; and Glencore’s planned listing of its Kazakh gold unit.
If both Goldcorp and Eldorado are bidding for Andean — with Goldcorp effectively paying $900 an ounce — analysts said it was because gold prices were expected to rise even higher, benefiting from the same currency and sovereign debt problems that have pushed the metal to its current level.
Shares in Andean Resources rose 31 percent in Australia, to close Friday at $5.80.
Goldcorp is being advised by CIBC World Markets, with Cassels Brock & Blackwell and Mallesons Stephen Jaques as counsel.
Andean is being advised by BMO Capital Markets, with Fraser Milner Casgrain and Corrs Chambers Westgarth as counsel.