Goldcorp consolidates Red Lake District with $1.5 billion acquisition of Gold Eagle
Thursday July 31, 8:25 am ET
<<Toronto Stock Exchange: G Toronto Stock Exchange: GEANew York Stock Exchange: GG>>
VANCOUVER, July 31 /CNW/ - Goldcorp Inc. ("Goldcorp") (NYSE:GG, TSX:G)and Gold Eagle Mines Ltd. ("Gold Eagle") (TSX:GEA - News) today announced anagreement whereby Goldcorp will acquire, through a friendly plan ofarrangement, all outstanding shares of Gold Eagle.
Gold Eagle's principal asset is the world class Bruce Channel golddiscovery which is situated along the prolific Red Lake Trend, adjacent toGoldcorp's Red Lake gold mine and immediately southwest of Goldcorp'spast-producing Cochenour-Willans Mine. This transaction will enable Goldcorpto capitalize on its extensive exploration and operations expertise in the RedLake district and its considerable human resources and related infrastructure.
"This transaction secures for Goldcorp full control of 8 kilometres ofstrike length in the heart of the world's richest high grade gold district,"said Kevin McArthur, Goldcorp's President and Chief Executive Officer. "Nearly200 drill holes have defined an impressive gold deposit at Bruce Channel, withpotential for additional expansion over time. Development of thisstrategically important zone can now move forward with our adjoining assets asa single, comprehensive project, sharing mine infrastructure, ore processingfacilities and human talent with Red Lake, thus minimizing capital andoperating costs and maximizing long-term shareholder value. Red Lake mine hasoperated for over 50 years, and Goldcorp's continued district consolidationefforts are designed to sustain this world-class operation for decades intothe future. We are the natural partner to develop the Bruce Channel projectwith the geographic footprint preferred by our community."
Under the plan of arrangement, each common share of Gold Eagle not ownedby Goldcorp will be exchanged for (i) a cash payment in the amount of C$6.80and (ii) 0.146 common shares of Goldcorp, assuming full pro-ration. Gold Eagleshareholders will have the option to elect to receive cash (on the basis of$13.60 per Gold Eagle share), shares (on the basis of 0.292 Goldcorp sharesand $0.0001 per Gold Eagle share) or any combination of cash and shares,subject to pro-ration, with an aggregate maximum cash consideration of $691million and an aggregate maximum of 14.8 million common shares of Goldcorpsubject to increase on a prorated basis if Gold Eagle warrants and options areexercised prior to the effective date of the arrangement. The totalconsideration for 100% of the fully diluted shares of Gold Eagle would beapproximately $1.5 billion.
Based on the July 30, 2008 closing price and 20-day volume weightedaverage price for Goldcorp's common shares on the TSX, and assuming fullpro-ration, the transaction values each Gold Eagle share at C$12.62 andC$13.39, respectively. On this basis, the consideration received by Gold Eagleshareholders represents a 19% premium to closing prices and a 36% premium tothe 20-day volume-weighted average prices for each company. The transaction isexpected to close in September, 2008.
I just had to double down on my investment there. That sell off was IMO a blatant bear raid. There was absolutely no reason whatever for the last leg down except I reckon some MM taking advantage of their naked shorting ability to hit at a vulnerable moment and scare out some weak hands before ramping it back up again.
I could be wrong. Perhaps it has something to do with the political risk mentioned before. Who really knows?
Personally, I think it is an absolute steal below $1.00 and probably a good value up to about $2.00.
I'm also eyeing uxg for the same reason I bought it back in '05 and unfortunately only made a 3 bagger out of a 20 bagger; i.e., they have 1.2 million ounces of bulk mineable gold plus a mill at Tonkin Springs. I'm thinking that could be brought into production while they are exploring to see if there really is another Cortez Hills buried deep under there. So far, MacEwan seems intent on exploring and not producing, but perhaps that will change with the share price plumbing the depths again.
I know some people put a lot of blind faith in McEwen, but seriously, what has US Gold got going for it? I saw some very preliminary gold mineralization results in Mexico but nothing high-grade.
Looks to me like this is not a bad explorer, but the price has been incredibly inflated because of RM's involvement. I don't think it's worth a dollar a share. That's just based on a quick survey of their projects. Maybe I am missing something.
This was a non-material deal , we have a 200square mile zone , in red lake it is very large, we optioned this peice which i believe management believes immaterial ,its 50miles from the zone, if they drill they can satay if they dont they go, we will probably get it back, they can say they have a preseence in red lake to there shareholders everyone wins
its a yawner really
I would have liked to have had a better cash flow out of this or at least kept a 50% stake.
Still, Rubicon is not paying for the exploration and Rubicon is keeping a 25% stake in this property. If HALO hits something big then Rubicon still gets 25% and Rubicon is not paying for the exploration.