Osisko finds white knight
To fend off Goldcorp’s hostile offer with sale of 50 per cent stake in mining company
Osisko Mining Corp. agreed to sell a 50 per cent stake in its mining and exploration assets to Yamana Gold Inc. in an attempt to block Goldcorp Inc.’s $2.77 billion hostile offer for the company.
Yamana’s $929.6 million cashand-stock deal values Osisko at $7.60 a share, Montreal-based Osisko said Wednesday. Goldcorp’s bid, announced in January, is currently worth about $6.34 a share.
Yamana and Goldcorp are among producers looking to take advantage of a recent slump in gold prices to replenish their mine reserves and acquire more profitable operations. Osisko’s main asset is the Canadian Malartic project in Quebec, which Goldcorp chief executive officer Chuck Jeannes has said would rank among his company’s top mines.
Osisko said Wednesday that Toronto-based Yamana will become an equal partner in all of its mining and exploration assets. Osisko will continue to operate Canadian Malartic and all other projects under the guidance of a joint operating committee and it will maintain a head office in Montreal.
“For Yamana, this is a low-risk entry into a new, mining-friendly jurisdiction,” Yamana chairman and chief executive officer Peter Marrone said Wednesday on a conference call.
Osisko also plans to sell a portion of its future gold from Canadian Malartic to Caisse de Depot et Placement du Quebec and agreed with the Canada Pension Plan Investment Board to increase a credit facility. The agreements with the two pension funds will provide Osisko with an additional $550 million in funding.
Adam Graf, a New York-based analyst at Cowen & Co., said he’s skeptical the deal will provide net value to Yamana’s shareholders.
“We see the valuation of Osisko as rich based on our models of the assets at the current forward curves for metal prices,” Graf said Wednesday in a note.
Under Wednesday’s accord with Yamana, Osisko shareholders will receive a combination of cash, Yamana shares and a new common share of Osisko. The deal’s aggregate value is about 10 per cent more than Osisko’s closing price yesterday and 22 per cent more than the value of the Goldcorp offer as of yesterday, Osisko said. Osisko rejected the Goldcorp offer on Jan. 20, arguing that it was too low.