Thursday, 16 January 2014

Gold Miner M&A - Goldcorp Hostile Bid for Osisko

The biggest bid in some time stirring opinions

The bid is hostile - Osisko's response here
Osisko's Board of Directors noted that the 15% premium to Osisko's unaffected share price implied by Goldcorp's Offer is very low and the price opportunistic in light of Osisko's proven high quality asset base. Osisko's Board of Directors remains committed to delivering superior value for shareholders and all stakeholders and will continue to pursue all initiatives to that end.
Indeed any buyers of stock between 2009 and 2013 will be out of pocket but Osisko is a risky business unless the gold price can turn around, in which case 500k oz pa production can provide good leverage on a $2.7bn cap. Book value is approx $1.7bn with accumulated losses of almost $0.5bn in the last 2 quarters but after over $1bn of non cash entries.
Could this mark a bottom in the miners and especially the juniors as the majors recognise the need to replace reserves? Picking up a newly built mine at least avoids capex and execution risk.
As gold industry grades decline Osisko's Malarctic open pit is no longer so low grade and can make a significant impact on Goldcorp numbers. The ex Queenston Kirkland Lake projects should also be interesting while Hammond Reef is large but will need a much higher gold price.
There is also interesting exploration in Mexico near another potential Goldcorp fit at Torex.

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