Osisko Mining takeover battle: Goldcorp could target one of these companies next
By – Published in on May 1, 2014
Osisko Mining Corporation’s (TSX: OSK) takeover fight appears to be over. On April 21, 2014, Goldcorp (NYSE: GG) bowed out of the bidding despite increasing its takeover offer to $7.65 a share. The bid, though, fell short of the $3.9 billion, or $8.15 per share, 50-50 joint offer from both Yamana Gold (NYSE: AUY) and Agnico Eagle Mines (NYSE: AEM) that was announced on April 16, 2014. Osisko shareholders will receive $2.09 in cash, 0.26471 of a Yamana common share, 0.07264 of an Agnico Eagle common share, and one share of the new Osisko, which the companies estimated would be worth $1.20, for each share held.
Yamana Gold had taken the markets by surprise when on April 2, 2014, it announced a friendly deal to acquire 50% of Osisko’s mining and exploration assets for $930 million, or $7.60 per share, in cash and Yamana stock, besting Goldcorp’s initial $5.95 per share unsolicited bid.
Osisko’s flagship asset had become an appealing prize. Malartic has 9.37 million ounces of gold in reserves and is located in a mining-friendly jurisdiction. Its mine is expected to produce more than 500,000 ounces of gold in 2014 at an estimated cash cost of between US$527 and $577 per ounce.
The following six companies, although not as attractive as Osisko, could also be potential acquisition targets for Goldcorp:
1. Alamos Gold Inc. (TSX: AGI): This gold producer owns and operates the Mulatos Mine in Mexico, and has exploration and development activities in Mexico, Turkey, and the United States. Alamos has approximately $410 million in cash and cash equivalents and is debt-free. The company said it expects to produce between 150,000 and 170,000 ounces of gold in 2014 at cash operating costs of $630 to $670 per ounce of gold sold, excluding royalties.
2. Argonaut Gold Inc. (TSX: AR): Argonaut’s primary assets are the production stage El Castillo Mine in Durango, Mexico, and the La Colorada Mine in Sonora, Mexico, in addition to the advanced exploration stage San Antonio project in Baja California Sur, Mexico, and the Magino project in Ontario. The company currently has $81 million in cash and no debt. It has a Measure and Indicated gold resource of 12.5 million ounces. Argonaut expects 2014 gold production of 135,000 to 150,000 gold equivalent ounces at a cash cost per ounce sold of $750-$775.
3. Detour Gold Corp. (TSX: DGC). Detour is similar to Osisko in that it has a single, producing mine in Canada, that being Detour Lake in northern Ontario, but it is a higher cost operation with estimates of between $800 and $900 an ounce this year. The company has 15.5 million ounces of proven and probable gold reserves and it expects to produce about 600,000 ounces per year for the next 10 years. Given that its stock has surged 88% to its current price of $10.91 since the initial Osisko offer, Detour seems to be the market’s first choice for Goldcorp or another suitor.
4. AuRico Gold Inc. (TSX: AUQ). AuRico has a producing mine in Ontario (Young-Davidson) as well as in Mexico (El Chanate) in addition to development assets in both of those countries. The miner estimates consolidated production of between 210,000 and 240,000 ounces of gold in 2014, which would be an increase of up to 25% from 2013, at expected cash costs of between US$675 and $775 per ounce. AuRico has proven and probable gold reserves of 6.5 million ounces.
5. New Gold Inc. (TSX: NGD). The miner currently has four producing assets: the New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia, and the Cerro San Pedro Mine in Mexico. The company’s total gold production in 2014 is estimated to be between 380,000 and 420,000 ounces at total cash costs of US$320 to $340 or all-in sustaining cash costs of $815 to $835, using a $1,300 per ounce gold price assumption. New Gold has 18.5 million ounces of proven and probable gold reserves.
6. Pretium Resources Inc. (TSX: PVG). Although its Brucejack gold project in northern British Columbia isn’t expected to go into production until 2016, the 6.6 million ounces of probable reserves in its Valley of the Kings area grading 13.6 g/t is difficult to ignore. A feasibility study done last year estimates average annual gold production of 425,700 ounces during the mine’s first 10 years at all-in sustaining cash costs of $508 per ounce using a US$1350 per ounce gold price assumption.
While other companies could have been included in this list, these six were chosen based on one or more of the following factors that include: North American assets, reserve/resource size, production costs or estimated production costs that are below US$1200 an ounce, as well as having mines and/or development projects located near existing Goldcorp interests, which could result in potential cost-saving synergies.
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Yamana Gold had taken the markets by surprise when on April 2, 2014, it announced a friendly deal to acquire 50% of Osisko’s mining and exploration assets for $930 million, or $7.60 per share, in cash and Yamana stock, besting Goldcorp’s initial $5.95 per share unsolicited bid.
Osisko’s flagship asset had become an appealing prize. Malartic has 9.37 million ounces of gold in reserves and is located in a mining-friendly jurisdiction. Its mine is expected to produce more than 500,000 ounces of gold in 2014 at an estimated cash cost of between US$527 and $577 per ounce.
The following six companies, although not as attractive as Osisko, could also be potential acquisition targets for Goldcorp:
1. Alamos Gold Inc. (TSX: AGI): This gold producer owns and operates the Mulatos Mine in Mexico, and has exploration and development activities in Mexico, Turkey, and the United States. Alamos has approximately $410 million in cash and cash equivalents and is debt-free. The company said it expects to produce between 150,000 and 170,000 ounces of gold in 2014 at cash operating costs of $630 to $670 per ounce of gold sold, excluding royalties.
2. Argonaut Gold Inc. (TSX: AR): Argonaut’s primary assets are the production stage El Castillo Mine in Durango, Mexico, and the La Colorada Mine in Sonora, Mexico, in addition to the advanced exploration stage San Antonio project in Baja California Sur, Mexico, and the Magino project in Ontario. The company currently has $81 million in cash and no debt. It has a Measure and Indicated gold resource of 12.5 million ounces. Argonaut expects 2014 gold production of 135,000 to 150,000 gold equivalent ounces at a cash cost per ounce sold of $750-$775.
3. Detour Gold Corp. (TSX: DGC). Detour is similar to Osisko in that it has a single, producing mine in Canada, that being Detour Lake in northern Ontario, but it is a higher cost operation with estimates of between $800 and $900 an ounce this year. The company has 15.5 million ounces of proven and probable gold reserves and it expects to produce about 600,000 ounces per year for the next 10 years. Given that its stock has surged 88% to its current price of $10.91 since the initial Osisko offer, Detour seems to be the market’s first choice for Goldcorp or another suitor.
4. AuRico Gold Inc. (TSX: AUQ). AuRico has a producing mine in Ontario (Young-Davidson) as well as in Mexico (El Chanate) in addition to development assets in both of those countries. The miner estimates consolidated production of between 210,000 and 240,000 ounces of gold in 2014, which would be an increase of up to 25% from 2013, at expected cash costs of between US$675 and $775 per ounce. AuRico has proven and probable gold reserves of 6.5 million ounces.
5. New Gold Inc. (TSX: NGD). The miner currently has four producing assets: the New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia, and the Cerro San Pedro Mine in Mexico. The company’s total gold production in 2014 is estimated to be between 380,000 and 420,000 ounces at total cash costs of US$320 to $340 or all-in sustaining cash costs of $815 to $835, using a $1,300 per ounce gold price assumption. New Gold has 18.5 million ounces of proven and probable gold reserves.
6. Pretium Resources Inc. (TSX: PVG). Although its Brucejack gold project in northern British Columbia isn’t expected to go into production until 2016, the 6.6 million ounces of probable reserves in its Valley of the Kings area grading 13.6 g/t is difficult to ignore. A feasibility study done last year estimates average annual gold production of 425,700 ounces during the mine’s first 10 years at all-in sustaining cash costs of $508 per ounce using a US$1350 per ounce gold price assumption.
While other companies could have been included in this list, these six were chosen based on one or more of the following factors that include: North American assets, reserve/resource size, production costs or estimated production costs that are below US$1200 an ounce, as well as having mines and/or development projects located near existing Goldcorp interests, which could result in potential cost-saving synergies.
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