Sean Roosen, who turned a small explorer into the operator of one of Canada’s largest gold mines, says he’s ready to do it again after agreeing to sell Osisko Mining Corp. (OSK) for C$3.9 billion ($3.5 billion).
Yamana Gold Inc. (YRI) and Agnico Eagle Mines Ltd. yesterday agreed to pay C$8.15 per Osisko share, trumping a hostile C$7.65-a-share bid announced last week by larger Canadian competitor Goldcorp Inc. (G) The Yamana-Agnico deal includes splitting off exploration properties, royalties and cash into a new company that would be led by Roosen and his team.
“We will be looking to turn New Osisko, or Osisko 2, into a multibillion-dollar company the same way we did at Canadian Malartic,” Osisko’s chief executive officer said yesterday in a phone interview, referring to his company’s flagship mine in Quebec. In the near term, “our goal will be to be working on both ends of the spectrum, the royalty business and the greenfields exploration side.”
Mineral exploration and development companies take on the risk of hunting for and studying new deposits, with the potential for a huge payoff if they’re successful in building a mine or finding a buyer willing to pay a big premium.
‘All the Ingredients’
The battle for Osisko is focused on Canadian Malartic, where the company started production in 2011 after raising more than $1 billion in funding and persuading local residents to make room for the huge pit. The Montreal-based company had a market value of about C$6 million when it bought the property in 2004, two years before Roosen was hired.
Nine years following the acquisition, Osisko had fourth-quarter revenue of C$185.8 million after producing a record 137,321 ounces of gold.
“The fact that they were able to move a town, deal with the Quebec government and put the mine into production and have now attracted not one but three miners for it is a testament to his abilities,” John Ing, the Toronto-based CEO at brokerage Maison Placements Inc., said of Roosen. “Now that they have a royalty together with cash it has all the ingredients” for a repeat of that success, he said in a phone interview yesterday.
Goldcorp announced Jan. 13 it was taking a C$2.6 billion cash-and-share offer for Osisko straight to the company’s shareholders. Before that, Osisko and Goldcorp held talks on and off for five years and the two parties signed confidentiality pacts in 2008 and 2012.
Osisko rejected Goldcorp’s initial bid as too low and announced April 2 that Yamana had agreed to buy 50 percent of Osisko’s assets. That transaction also included financing deals with two Canadian pension funds.
Goldcorp responded last week by raising its own bid and lowering the minimum tender requirement to 50.1 percent.
The Yamana-Agnico cash-and-stock deal announced yesterday is most likely the final bid, Adam Graf, a New York-based analyst at Cowen & Co., said in a note. Any counteroffer would probably need to top C$4 billion and would also need to take into account the C$195 million break fee included in the Yamana-Agnico deal, he said.
While the latest proposed transaction has the signs of being a “knock-out punch,” there’s a chance that Goldcorp will come back with a higher offer, said Brian Huen, managing partner at Red Sky Capital Management in Toronto, which manages about C$225 million.
“Those guys spent a ton of time on it, they were the original bidders, they know what’s there, what the value is and they’ve done all the homework,” Huen said by phone yesterday. “The question becomes whether or not they have the wherewithal, whether they can justify it to shareholders that it’s the right thing to come back.”
Christine Marks, a Goldcorp spokeswoman, didn’t respond to a phone call or e-mail seeking comment on the rival deal or whether Goldcorp will raise its offer.
In the Yamana-Agnico transaction, the new Osisko would be spun out with C$155 million in cash, the company’s exploration assets in Mexico, a 5 percent net smelter royalty on Canadian Malartic and a 2 percent royalty on other current Osisko projects.
Stephen Walker, an analyst at RBC Capital Markets, estimated in a note yesterday that the value of the spinoff company would be C$645 million, or C$1.34 a share.
The royalty on Canadian Malartic means the company will benefit from cash flow from the mine, as well as have exposure to any expansions or improvements that Yamana and Agnico pursue, Roosen said yesterday.
Osisko rose 7 percent to C$7.94 at the close yesterday in Toronto. Yamana fell 4 percent to C$8.83, Agnico Eagle dropped 8.2 percent to C$30.71 and Goldcorp gained 0.8 percent to C$26.22.
That left the value of the Yamana-Agnico offer at C$7.86 per Osisko share and lifted the Goldcorp bid to C$7.38. The Osisko shares had closed at C$5.17 on the trading day before Goldcorp went public with its initial bid.
Roosen has “done a great job maximizing shareholder value, no doubt about it,” Huen said.
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