The world’s second largest gold producer by market value, Goldcorp Inc (GG) is acquiring gold miner Canplats Resources Corp for about C$238 million ($229 million) to establish a network of satellite mines around its Penasquito gold project in Mexico. Each Canplats share would be exchanged for 0.074 of a common share of Goldcorp and an interest in a new exploration company.
The offer values Canplats at about C$3.60 ($3.46) per share based upon the closing price of Goldcorp shares on Nov. 13. The offer represents a premium of about 41% over the C$2.55 million ($2.45 million) closing price of Canplats shares. The transaction is expected to close in January 2010.
The Boards of Directors of both Goldcorp and Canplats have approved the deal. However, a two-thirds majority of Canplats outstanding shareholders are required to vote in favor of the offer for it to conclude. Canplats has agreed to pay a termination fee of C$7.2 million ($6.92 million) if the transaction is not completed.
To increase mining and exploration activities and expand gold reserves, Goldcorp, like the largest gold company in the world and its major rival Barrick Gold (ABX), is acquiring junior gold companies. Goldcorp plans to acquire and spin off all of Canplats’ assets — except its Camino Rojo project — into a new gold-exploration company. Goldcorp will retain a 9.9% interest in the new spin-off, while existing Canplats shareholders will own the remaining 90.1%. The new company will hold interests in certain early-stage exploration properties located in the Durango and Chihuahua states of Mexico and C$10 million ($9.6 million) in cash.
Camino Rojo is located near Goldcorp’s Penasquito mine, which is expected to reach commercial production next year. The acquisition has expanded Goldcorp’s Mexican asset base. In its last quarter results, Goldcorp had raised its 2009 production outlook and chopped its cost guidance for the full-year 2009. Gold production for 2009 has been raised to 2.4 million ounces from the 2.3 million ounces projected in July.
Goldcorp has also lowered its forecast for 2009, bringing the total cash costs to about C$312 ($300) an ounce, which includes revenue from silver and copper byproducts, from C$380 ($365) an ounce forecast in May. Goldcorp is developing new mines to benefit from higher prices for gold.
However, the company is exposed to foreign exchange risk as it pays most costs in local currencies and sells metal in US dollars, hurting profits when currencies such as the Mexican peso and Canadian dollar rise, in spite of the company selling more gold at higher prices.
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