Just when you think its a nice opportunity to purchase a low cost metal producer, they do you in.
Stock in Goldcorp Inc. (TSX:G) drops 8% after announcing blockbuster merger with Glamis
11:35:25 EDT Aug 31, 2006
VANCOUVER (CP) – Shares in Goldcorp Inc. (TSX:G) tumbled more than eight per cent in early trading Thursday after it and fellow gold producer Glamis Gold (TSX:GLG) announced a blockbuster merger that will create a new big metals player worth more than $23 billion.
The companies said they expect the combination to reap synergies of about $25 million per year, creating “a world class low-cost gold producer in the Americas with industry-leading growth.”
Investors, however, appeared unimpressed, sending Goldcorp stock sharply downward. Shares in the Vancouver miner were off $2.85 at $30.92 in heavy trading on the Toronto Stock Exchange.
Glamis shares rose on news of the all-stock deal, which values that company at about $8.7 billion, adding $8.48 or about 20 per cent to $51.50.
Under the deal, Glamis shareholders will receive 1.69 shares of Goldcorp for each Glamis share they hold, valuing the shares at $52.05 at midday Thursday prices.
Goldcorp CEO Ian Telfer will become chairman of the new Goldcorp, while Kevin McArthur, president and chief executive of Glamis, will become president and chief executive officer of the new company which will be based in Vancouver.
Glamis shareholders will end up holding about 40 per cent of the new company that will have a board of directors including six from the board of Goldcorp and four from the board of Glamis.
The deal, supported by the boards of both companies, requires approval by two-thirds of Glamis shareholders.
Last year, Goldcorp bulked up with the takeover of Wheaton River Minerals Ltd. and the $1.5-billion-US addition of several former Placer Dome mines earlier this year.
$1.5-billion-US addition of several former Placer Dome mines earlier this year.
Goldcorp has operations in Canada, Argentina, Mexico, Brazil, Australia and the United States, and also owns a controlling interest in Silver Wheaton Corp. (TSX:SLW).
Meanwhile, Glamis operates mines and development projects in Nevada, Mexico and Central America.
The new company will have proven and probable reserves of about 41.1 million ounces of gold with focused operations in the Americas and 11,000 employees.
In its outlook, Goldcorp said gold production in 2006 was expected to be about 1.8 million ounces on an annualized basis, at a total cash cost of less than $100 per ounce.
Glamis expects to produce more than 700,000 ounces of gold next year.
Glamis has agreed to pay a break fee to Goldcorp of $215 million US if the deal is not completed under certain circumstances. Glamis has also provided Goldcorp with a right to match competing offers.