Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Canada’s Goldcorp (TSX:G, NYSE: GG), the world’s third largest bullion producer, has inked a deal to acquire Kaminak Gold (TSX-V: KAM) in a share swap arrangement that values the explorer at $520 million.
The acquisition gives Goldcorp access to the Coffee gold project, Kaminak’s key asset, located about 130 kilometres south of Dawson City, in Yukon, and which has total indicated gold mineral resources of 3 million ounces.
Goldcorp is eying Kaminak’s Coffee project in the Canadian Arctic as a possible new source of output to help close the gap with rivals, such as Barrick and Newmont.
“This acquisition is consistent with our strategy of partnering with junior exploration companies to identify and develop mining districts with significant exploration potential that is expected to grow our net asset value per share,” Chief Executive Officer David Garofalo said in the statement.
The deal also represents a big win for Kaminak Gold. “In ten short years we have grown Kaminak from a small grass roots explorer to one of Canada’s top gold development companies,” chairman John Robins said in a separate statement.
“The discovery of the Coffee Gold Project has created value for our shareholders and its development will ultimately benefit our First Nations partners and all Yukoners,” he noted.
Each Kaminak share will be exchanged for 0.10896 Goldcorp shares in an arrangement that values Kaminak stock at C$2.62, or 40% more than the 20-day average. About 21.6 million Goldcorp shares will be issued for the deal.
Coffee is expected to yield more than 200,000 ounces of gold a year in the first five years of production at all-in sustaining costs of about US$550 an ounce.
The deal is expected to close no later than August 15.
