Goldcorp to Buy Glamis Gold for $8.6B
Thursday August 31, 1:24 pm ET
By Sandra Chereb, AP Business Writer
Canada's Goldcorp to Acquire Rival Gold-Miner Glamis Gold for $8.6 Billion in Stock
RENO, Nev. (AP) -- Canadian gold miner Goldcorp Inc. has agreed to buy Reno-based rival Glamis Gold Ltd. in an $8.6 billion stock deal that will create one of the world's largest gold producers, the companies announced Thursday.
The new company will have proven and probable reserves of about 41.1 million ounces of gold, worth about $25 billion at current prices. The company will have 11,000 employees and operations focused on the Americas, the companies said. It will continue to operate under the Goldcorp name and be headquartered in Vancouver, British Columbia.
"It's a good deal," said Tom O'Brien, editor of The Gold Report, a weekly subscription newsletter.
Both companies, he said, "are extremely low-cost producers."
"They take gold out of the ground for about $160 an ounce," O'Brien said. With gold prices at their highest levels in recent decades, trading around $620 an ounce, their product value will continue to rise, he said.
Under the terms of the agreement, shareholders will get 1.69 common shares of Goldcorp for each Glamis common share. Based on Goldcorp's closing share price on Wednesday, the offer values Glamis shares at $51.49 each, an almost 33 percent premium to the stock's closing share price on Wednesday.
Ian Telfer, president and CEO of Goldcorp, said the new company will have a strong balance sheet and robust cash flow that will make it a powerhouse in the industry.
"We believe this will be the world's premier gold company," Telfer, who will serve as chairman of the new company, said in a conference call with analysts. "This transaction doubles our reserves and resources."
Kevin McArthur, president and CEO of Glamis, will lead the new company in those same capacities.
Shares of Glamis surged 19 percent to $46.41 in midday trading on the New York Stock Exchange, where Goldcorp shares fell 8.8 percent to $27.77. Both companies are listed on the NYSE and Toronto Stock Exchange.
Goldcorp shareholders will own about 60 percent of the combined company, while Glamis shareholders will own the remainder.
The deal is supported by the boards of both companies. Glamis shareholders will vote on it in late October, and the deal is expected to close in November, company officials said. Goldcorp shareholders will not vote.
The deal creates one of the largest gold miners in the world by market capitalization, behind Barrick Gold Corp., which is worth more than $28 billion.
Goldcorp has operations in Canada, Argentina, Mexico, Brazil, Australia and the United States, and also owns a controlling interest in Vancouver-based Silver Wheaton Corp.
Glamis operates mines and development projects in Nevada, Mexico and Central America.
One of its most promising holdings is the Penasquito Project in central Mexico, considered one of the largest undeveloped precious metals deposits in the Americas.
The project "will be the largest mine in Mexico," McArthur said. It has a reserve of 10 million ounces of gold and 575 million ounces of silver, according to the company's Web site.
In its outlook earlier this year, Goldcorp said gold production in 2006 was expected to be about 1.8 million ounces on an annualized basis. Glamis expects to produce more than 700,000 ounces of gold next year.
Glamis has agreed to pay a breakup fee to Goldcorp of $215 million if the deal is not completed under certain circumstances. Glamis has also provided Goldcorp with a right to match competing offers.
