Goldcorp offers 43% premium for Virginia
Pouncing on the soaring gold price, Goldcorp Inc. announced yesterday it’s set to gobble up a new James Bay gold project from a tiny Quebec City- based exploration company in an allequity deal valued at $420 million ( U. S.).
“ It’s the only significant gold discovery literally anywhere in the world in this gold cycle,” Goldcorp chief executive Ian Telfer said in an interview.
Canada’s fourth-largest gold miner will acquire the Éléonore gold project from Virginia Gold Mines Inc. at an estimated 43 per cent premium to the Quebec junior miner’s market value, which Telfer said reflects just how hot the property is as well as where the industry thinks the bullion price is headed.
“ It was certainly a premium. But we think there are at least 10 years left in this gold cycle, and I think you’ll see gold over $700 ( U. S.) in the next couple years,” said Telfer.
Gold, which has been on a roll and recently hit 22- year highs, closed up another $ 5.60 yesterday at $ 508.90 ( U. S.).
“ We agree with a number of analysts’ views of this property, that it should be easily in excess of 4 million ounces,” he said, adding: “ Some analysts think it could be 10 million ounces.” The exploration project has more than 200 holes drilled and is also in a great location near paved roads and the James Bay power plant, said Telfer, noting Quebec is known for having a mining- friendly regulatory environment. Production could start as soon as 2008.
Gold analyst John Ing of Maison Placements Canada Inc. agreed it’s a “ great find” that every player in the industry has kept an eye on since its discovery a year ago.
“This is Canada’s next new gold mine and potentially the next big gold producer,” Ing said. Under the deal, Virginia Gold investors will get 0.4 of a Goldcorp share and 0.5 of a share in a new exploration company
called New Virginia
for each Virginia
Gold share. Goldcorp will issue 19.6
million shares as part of the transaction, which is expected to be completed in the first quarter of 2006.
“ All of us at Virginia had hoped to see Éléonore being developed by a qualified and experienced mine development team, and Goldcorp with their Canadian expertise is without any doubt one of the best in the industry,” said Virginia Gold president André Gaumond.
In the past five weeks, Goldcorp has been on a buying spree, starting with a deal with Barrick Gold Corp. on Oct. 31 to scoop up the Canadian gold properties of hostile takeover target Placer Dome Inc. for $ 1.35 billion ( U. S.) in cash, which would boost Goldcorp’s annual production by 50 per cent to 2 million ounces. And last week, Goldcorp announced the acquisition of 10 per cent of Wolfden Resources Inc. for $ 21.6 million ( Canadian). “These are very interesting times in the gold industry,” said Telfer. The news sent Virginia Gold stock up 24 per cent, or $ 2, to close at a record $ 10.30 on the Toronto Stock Exchange. Goldcorp shares fell 20 cents on the TSX to close at $ 23.58.