Goldcorp Steps Up Deal Making as Metal Rally Bolsters Shares

  • Agrees to buy Canadian explorer Kaminak for $406 million
  • Company eyeing Yukon project as possible new source of output

Goldcorp Inc., the third-most valuable bullion producer, agreed to buy Canadian explorer Kaminak Gold Corp. in a C$520 million ($406 million) share swap that would be its biggest acquisition in five years.

The deal comes after gold prices surged 20 percent this year and Vancouver-based Goldcorp had its first profit in three quarters. Chief Executive Officer David Garofalo is eyeing Kaminak’s Coffee project in the Canadian Arctic as a possible new source of output to help close the gap with more valuable rivals Barrick Gold Corp. and Newmont Mining Corp.

Major gold producers that have cut costs and lowered debt are heading for their best year in the stock market since 2009, giving them more leverage to do stock-based deals.

Goldcorp shares, which fell 2.1 percent at 10:23 a.m. in Toronto Thursday, are still up 47 percent this year. Kaminak would be its biggest buy since Andean Resources Ltd., which was completed in 2011 when gold soared above $1,900 an ounce.

“This acquisition is consistent with our strategy of partnering with junior exploration companies to identify and develop mining districts with significant exploration potential that is expected to grow our net asset value per share,” Garofalo said in a statement Thursday.

‘Good Offer’

Each Kaminak share will be exchanged for 0.10896 Goldcorp shares in an arrangement that values Kaminak stock at C$2.62, or 40 percent more than the 20-day average. About 21.6 million Goldcorp shares will be issued for the deal.

Goldcorp’s financial advisers are RBC Capital Markets and Fort Capital Partners and its legal advisers are Cassels Brock & Blackwell LLP in Canada. The deal was unanimously approved by both boards and is expected to close by Aug. 15.

Coffee is one of the better development assets in Canada, according to Mackie Research analysts Barry Allan and Ryan Hanley.

“We think this is a good offer by Goldcorp and recommend shareholders tender,” they wrote in a research note. “Given the fairness of the offer, we doubt a higher bid will be received.”

The acquisition is the second-largest involving gold miners this year, behind Tahoe Resources Inc.’s $552 million purchase of Lake Shore Gold Corp. in February, according to data compiled by Bloomberg.

Gold miners have announced mergers and acquisitions totaling $1.22 billion this quarter, exceeding the $1.12 billion in deals last quarter, although still less than half the levels of a year ago, the data show.

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