Osisko-Goldcorp battle turns bitter (Northern Miner – February 6, 2014)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

VANCOUVER – How quickly relationships between potential partners can sour.

For more than five years Osisko Mining (TSX: OSK) and Goldcorp (TSX: G; NYSE: GG) considered joining forces in a series of meeting that gained momentum as Osisko finished building and commissioning one of the world’s largest gold mines.

The Canadian Malartic mine in Quebec produced 475,277 oz. gold in 2013 at an average cash of $760 per oz. According to Osisko’s calculations, only 13 of the 55 gold mines owned by North America’s five largest gold miners produced more, and Osisko expects production to increase and costs to decline at Malartic in 2014.

Goldcorp is one of those five gold majors and it wants Malartic. The mine sits on more than 10 million oz. of gold reserves in a low-cost, politically stable environment, making it precisely the kind of asset gold majors are seeking today.

Goldcorp’s interest in Osisko is no secret. Osisko and Goldcorp talked informally but regularly between 2008 and 2012, a relationship that led to three separate takeover bids that Osisko rejected as inadequate.

In the fall of 2012 the potential partners entered official merger discussions aimed at a friendly deal. The framework for those discussions included a two-year confidentiality agreement and a standstill clause preventing Goldcorp from making a hostile takeover bid for one year.

That standstill clause expired last October. Days later, representatives from the two companies had another meeting, but what transpired at that meeting is now at the heart of a bitter lawsuit.

Osisko says its chief financial officer, Bryan Coates, agreed to share new information with Goldcorp only if the standstill agreement were extended for another eight months. In an affidavit Coates said Goldcorp’s people agreed verbally and so, based on that verbal deal, Osisko shared sensitive new information.

However, Coates claims Goldcorp then stymied Osisko’s efforts to formalize the extension of the hostile bid clause after the meeting.

Several months later, on Jan.13, Goldcorp unveiled a US$2.6-billion hostile takeover bid for Osisko. Within two weeks, after advising shareholders to reject the “financially inadequate” and “very hostile” bid, Osisko sued Goldcorp for breach of confidentiality in a suit alleging Goldcorp misused confidential information and acted in bad faith. The suit seeks to block Goldcorp’s bid entirely.

Lawyers for Goldcorp call Osisko’s version of events a fabrication.

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