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Wednesday, 01/26/2005 8:48:29 AM

Wednesday, January 26, 2005 8:48:29 AM

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Fight over gold industry consolidation involving Cdn companies moves to Texas

David Koenig
Canadian Press


Wednesday, January 26, 2005

DALLAS (AP) - A three-way brawl has broken out among three gold-mining companies, each seeking to survive in an industry increasingly dominated by larger rivals.

Last month, Goldcorp Inc. made a $2.1 billion US stock offer for fellow Canadian operator Wheaton River Minerals Ltd, but American upstart Glamis Gold Ltd. jumped in two weeks later with a hostile bid for Goldcorp, which is twice its size. It's the latest move toward consolidation in the gold industry, following a similar three-way fight in South Africa. Industry officials say more deals are likely.

Wheaton River's management supports the sale to Goldcorp. On Tuesday, executives from the two companies were in Texas to ask big investors for help in approving their merger and fending off Reno, Nevada-based Glamis.

To win, Glamis must persuade Wheaton River shareholders to reject Goldcorp's offer, then get Goldcorp shareholders to sell their company for Glamis stock.

The showdown will come next month at shareholder meetings for Wheaton River and Goldcorp.

Robert R. McEwen, chief executive of Toronto-based Goldcorp, said a merger with Wheaton River would create a company that produces 1.3 million ounces of gold a year at relatively low cost and with little debt.

McEwen dismissed Glamis as a smaller and less cost-efficient producer of gold that promises future profits instead of current production.

"Most of our shareholders have liked our earnings growth, and I'm sure they will be very unhappy seeing the earnings fall out of the sky," he said.

All three companies are tiny in comparison to North America's leading gold producers, Denver-based Newmont Mining Corp., with annual sales of $3.2 billion US, and Barrick Gold Corp., with revenue of more than $2 billion US.

Through the first nine months of last year, Goldcorp earned about $36 million US or 19 cents per share on sales of $149 million US, and Wheaton River earned $86 million US or 13 cents per share on $307 million US in revenue.

Glamis, however, earned only $15 million US or 11 cents per share on sales of $61 million US in the same nine months.

Mike Steeves, the vice president of investor relations at Glamis, said his company's bid for Goldcorp was worth $3.7 billion US and represented a 23 per cent premium over Goldcorp's shares the day the offer was announced.

Glamis offered .89 of a share for each Goldcorp share, while Goldcorp offered .25 of a share for each Wheaton River share.

Glamis says its offer is better for Goldcorp shareholders, who wouldn't inherit Wheaton River's copper-mining holdings.

"With a Goldcorp and Glamis combination, you're getting a pure gold company with superior growth prospects," Steeves said. "And we're paying Goldcorp shareholders a premium instead of them paying one for Wheaton."

Glamis shareholders will meet Feb. 9 and are expected to approve creation of new shares to fund the purchase.

Goldcorp's McEwen and Wheaton River CEO Ian Telfer, who would replace McEwan as leader of a Goldcorp-Wheaton combination, met Tuesday with investors in Dallas and San Antonio.

At first glance, Texas might appear to lack a dog in the fight between Canadians and a company from Reno. But Texas, along with Southern California and South Florida, is a hotbed of gold investment.

Among Goldcorp's largest investors are NFJ Investment Group, Penn Davis McFarland Inc. and Carlson Capital LP, all of Dallas. Officials from each did not return calls for comment.

Wheaton River's investors include USAA Investment Management Corp. in San Antonio, which declined to comment, and the Austin-based Teacher Retirement System of Texas, which did not immediately call back.

© The Canadian Press 2005

http://www.canada.com/businesscentre/story.html?id=9d7b42d3-b91a-4409-866a-44045481e3cc&page=1



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