Goldcorp bid as good as it gets for Osisko: analysts – by Liezel Hill and Andy Hoffman (Bloomberg News/Montreal Gazette – January 14, 2014)

TORONTO — Osisko Mining Corp. investors wagering on a higher bid than Goldcorp Inc.’s $2.6-billion offer have few places to look other than Goldcorp itself.

Osisko closed yesterday 5.5 per cent above the C$5.92 a share value of Goldcorp’s unsolicited cash-and-stock offer. Based on closing prices before the deal was announced, the premium was 15 per cent, which could be viewed as low compared with historical gold-sector standards and might need to be raised to win over Montreal-based Osisko’s shareholders, said Michael Parkin, an analyst at Desjardins Group.

“There is room for Goldcorp to raise the bid, if needed,” Parkin said yesterday in a note. “With our view of a low potential for an emergence of a white knight, we view Goldcorp’s initial bid as a smart starting point.”

Gold-mining companies are reassessing their businesses following the biggest annual drop in the gold price in more than three decades.  The companies are close to their cheapest relative to book value in at least two decades, according to data compiled by Bloomberg, providing opportunities for producers looking to replenish their reserves and acquire more profitable mines.

‘Modest Interest’

“You have modest interest in this asset that may bid it up slightly, but it’s not going to be a frenzy,” Sachin Shah, a special situations and merger-arbitrage strategist at New York- based Albert Fried & Co., said yesterday in a telephone interview. “Not many companies out there are going to be able to do this.”

Goldcorp, the world’s second-biggest producer by market value, was the top performer last year among the 10 largest gold miners ranked by sales. The Vancouver-based company has the lowest total debt-to-equity ratio, according to data compiled by Bloomberg.

Goldcorp has operations in Canada, Mexico, the U.S., Guatemala, Argentina and the Dominican Republic. Canada would account for about 44 per cent of the company’s 2014 gold production if the Osisko bid is successful, Goldcorp Chief Executive Officer Chuck Jeannes said yesterday on a conference call. The company also is scheduled to start up its Eleonore project in Quebec later this year.

In November, Osisko forecast 2013 output at its Canadian Malartic mine of 485,000 ounces of gold, at cash costs of about $770 an ounce.


“Canadian Malartic will become an important asset for Goldcorp,” Jeannes said on the call. “It would rank among our top mines in terms of free cash flow generation, production and net asset value.”

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