Goldcorp and Glamis breed goliath

Goldcorp and Glamis Gold have agreed to combine in a $21.3 billion transaction to create one of the world’s largest gold mining companies. The new company will continue under the name Goldcorp Inc.

The new Goldcorp will have the following attributes, the companies state:

  • Best production growth profile among major gold companies
  • Proven and probable reserves of some 41.1 Moz gold
  • Resource base of approximately 14.0 Moz gold of measured and indicated resources plus inferred resources of about 30.9 Moz gold
  • Lowest cost senior producer
  • Focused operations and growth projects in the Americas with approximately 11,000 employees
  • Strong balance sheet and robust cash flow to finance growth
  • All gold reserves and production unhedged.

Goldcorp describes itself as “one of the world’s lowest-cost and fastest growing multi-million ounce gold producers with operations throughout the Americas and Australia.” Gold production in 2006 is expected to be some 1.8 Moz on an annualized basis, at total cash cost of less than $100/oz. In the second half of 2006, production is expected to be 950,000 oz. The company does not hedge its gold production.

Glamis sys it “is the premier intermediate gold producer with low cost mines and development projects in Nevada, Mexico and Central America.” Plans call for growth to over 700,000 oz of gold by 2007. The company remains 100% unhedged.

Ian Telfer, President and Chief Executive Officer of Goldcorp, said "The combination of Goldcorp and Glamis will create a world class low-cost gold producer in the Americas with industry-leading growth from an exciting portfolio of development projects. We believe that this transaction represents an excellent value proposition to our shareholders."

Kevin McArthur, President and Chief Executive Officer of Glamis, added "This transaction merges the talents of the two top performing gold mining companies over the past five years. We will leverage this talent to deliver on a very exciting mine-building and growth program for the company’s long-term future. This transaction provides tremendous value to Glamis shareholders."

The acquisition of Glamis by Goldcorp is expected to be completed by way of a court approved Plan of Arrangement whereby each Glamis common share will be exchanged for 1.69 Goldcorp common shares on a tax-deferred basis for both Canadian and US shareholders, representing a value of $51.49/share based upon the closing price of Goldcorp on August 30, 2006. This represents a premium of 32.7% to the closing price of Glamis’ shares on the TSX on August 30, 2006 and 34.8% to the 20 day volume weighted average trading price of Glamis’ shares on the TSX. After completion of the transaction, current Goldcorp shareholders will own approximately 60% of Goldcorp and current Glamis shareholders will own about 40%. It is expected that the transaction will close in November.

The combination has been approved by the boards of directors of Goldcorp and Glamis and will be subject, among other things, to the favourable vote of 66 2/3% of the Glamis common shares voted at a special meeting of shareholders called to approve the transaction. The board of directors of Glamis has determined that the transaction is in the best interest of Glamis and that the exchange ratio is fair to the Glamis shareholders and unanimously recommends that holders of Glamis shares vote in favour of the transaction. Each of Orion Securities and J.P. Morgan Securities have provided opinions to the board of directors of Glamis that the share exchange ratio is fair, from a financial point of view, to the holders of common shares of Glamis. Senior officers and directors of Glamis have agreed to vote in favour of the transaction.

Glamis has agreed to pay a break fee to Goldcorp under certain circumstances of $215 million. Glamis has also provided Goldcorp with certain other customary rights, including a right to match competing offers.

Telfer will become Chairman of the new Goldcorp, while McArthur will become President and Chief Executive Officer. The new Goldcorp will continue to be based in Vancouver, British Columbia, Canada. The board of directors of the new Goldcorp will be comprised of 10 members, six from the board of Goldcorp and four from the board of Glamis.

Goldcorp’s financial advisors are Merrill Lynch Canada and CIBC World Markets and its strategic advisors are GMP Securities, BMO Capital Markets, Canaccord Capital and Genuity Capital Markets. Goldcorp’s counsel are Cassels Brock & Blackwell and Dorsey & Whitney. Glamis’ financial advisors are Orion Securities and J.P. Morgan Securities. Glamis’ counsel are Osler, Hoskin & Harcourt, Lang Michener and Neal, Gerber & Eisenberg.