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Goldcorp's $2.6 Billion Bid For Osisko Is Positive For Quebec Mining Sector
By Alex Létourneau of Kitco NewsTuesday January 14, 2014 12:00 PM
(Kitco News) - Senior gold producer Goldcorp Inc.’s (TSX:G)(NYSE:GG) C$2.6 billion bid for Quebec-based Osisko Mining Corp. (TSX:OSK) served a strong reminder that Quebec is still seen as a good mining jurisdiction, said a Goldcorp executive.
After a run of being named the Fraser’s Institute’s best mining jurisdiction from 2007 through 2010, Quebec has seen a fall from grace, tumbling out of the top 10 best jurisdictions in the world in 2013. They were ranked fourth in 2011 and fifth in 2012.
Political uncertainty was rampant in the province as the newly elected Parti Quebecois government could not provide clarity on changes to the sector, in turn frightening investors and miners.
The PQ government put a stop to that uncertainty as Bill 70, Quebec’s Mining Act, was adopted at the end of 2013.
Brent Bergeron, senior vice president, corporate affairs for Goldcorp, told Kitco News in a telephone interview that passing Bill 70 was critical for the province’s mining sector.
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“When governments clarify their positions, that’s what’s important to the industry and to investors,” Bergeron said. “That point to me was a key part in our internal discussion to go ahead with this offer.
“What they did once they got this thing approved was offering clarity to the private sector in terms of if you’re going to come here to Quebec to do business, this is what’s expected of you and this is how you need to conduct yourself,” he said. “That in itself is indicative of a good mining jurisdiction.”
Goldcorp is no stranger to the province as they’ve been building their Eleonore gold project in northern Quebec. Bergeron said the project remains on track for production in October.
With Eleonore in the home stretch toward production and Goldcorp seeing optimism in Quebec, Bergeron said it was a good time to make a bid on a company with a project they have had their eye on for a while, Osisko’s flagship project, Canadian Malartic mine.
“It’s the type of asset that Goldcorp looks for and one of the most important things these days is cash flow and this deal offers us the ability to not have to build a new project and put the production directly into our financials,” Bergeron said. “It doesn’t have a strong impact on our cash flow, on the contrary, Lindsay (Hall, chief financial officer) was mentioning yesterday that this brings us back to cash flow positive by the fourth quarter of this year.
“Canadian Malartic started production in May 2011 and we expect this mine to be one that’s going to produce over 500,000 ounces (of gold) a year,” Bergeron said. “For us, when we take a look at the asset, it’s a good asset, we think there are some efficiencies that can actually be gained with the project itself.”
As it stands, nothing is set in stone. Osisko said in a press release that “the board of directors of Osisko will consider this announcement as well as any formal offer actually made. Until the corporation completes its review, it will not comment further or speculate as to any future course of action it might take.”
Bergeron said while the Quebec government isn’t taking a stance on the bid, they gave Goldcorp “some very positive comments from them, saying their happy that Goldcorp is showing them that we do have confidence in the province right now.”
Regarding the bid and communication with Osisko, Bergeron said, “we expect at one point we’ll eventually sit down and continue our discussion, we hope so anyway. We’ve been trying to do that and maybe this is the catalyst to sit down and look at this deal in a rational way.”
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By Alex Létourneau of Kitco News aletourneau@kitco.com
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