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In an effort to block Goldcorp Inc.’s hostile bid, Osisko Mining Corp. cut a complicated deal with Yamana Gold Inc. and two Canadian pension funds that will allow Osisko to operate its large gold mine in Quebec.
Toronto-based Yamana will use cash and its stock to buy a 50-per-cent interest in Osisko’s mining and exploration assets for $1.37-billion. Osisko will keep the rest of its company. That will give Osisko shareholders cash, a stake in Yamana, and a new common share of Osisko that’s worth $3.35 apiece, according to the companies.
Combining the new Osisko and the Yamana offer, the total per-share value is $7.60 for every Osisko share, the companies said. That is 10 per cent higher than Osisko’s closing price on Tuesday and 20 per cent more than Goldcorp’s current cash-and-stock offer of $6.33 a share.
As part of the friendly arrangement, Osisko will keep its head office in Montreal and continue to operate its flagship Canadian Malartic gold mine. The Quebec connection has become a key talking point for Osisko, whose chief executive officer Sean Roosen has been playing up the company’s ties to the province ahead of a provincial election next Monday.
Mr. Roosen has repeatedly said that any Quebec government would be upset if the province loses another Montreal-headquartered company as it did when Alcan Inc. was acquired by Anglo-Australian mining titan Rio Tinto PLC in 2007.
“Osisko will continue to be the miner of Quebec,” he told investors and analysts in French on a call to discuss the Yamana proposal.
The companies will not cut any jobs at Osisko. Mr. Roosen and the rest of the Osisko executive team will remain in their current positions.
Although Goldcorp will soon be producing gold from its Éléonore mine in Quebec, the company has no plans to move its head office from Vancouver to Montreal.
Canadian Malartic holds more than nine-million ounces of gold reserves and is on track to produce an average of 597,000 ounces of bullion annually over 14 years.
As part of the deal, two Canadian pension funds, the Canada Pension Plan Investment Board and Caisse de dépôt et placement du Québec, will provide Osisko with a total of $550-million in funding. In return, the Caisse will get a stream of 37,500 ounces of gold a year from Canadian Malartic. The CPPIB will increase its credit facility to Osisko.
The funding from the pension funds and money from Yamana will generate about $1-billion in cash that will be distributed to Osisko shareholders, the companies said.
Osisko will use the cash to buy back its stock, reducing the company’s float by nearly 60 per cent in a move designed to appease the short-term arbitrageurs that jumped into the stock when Goldcorp put the company in play.
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