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Updated: Agnico Eagle, Yamana Gold Team Up For Osisko Acquisition

By Alex Létourneau of Kitco News
Wednesday April 16, 2014 11:05 AM

Editor's Note: The article was updated to include comments from a conference call at 10 a.m.

(Kitco News) - Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) and Yamana Gold Inc. (TSX:YRI)(NYSE:AUY) have teamed up to acquire 100% of Osisko Mining Corp. (TSX:OSK) for a total offer of roughly C$3.9 billion, or C$8.15 per share.

 “I think that we’ve delivered a significant amount of value to shareholders by having increased from the original bid by Goldcorp, the hostile bid on Jan. 13, of C$2.6 billion to a transaction that now is worth more in excess of C$3.9 billion, bringing more recognition to Osisko, and their assets,” said Sean Roosen, president and chief executive officer of Osisko in a conference call Wednesday. “I feel that this is the best outcome that we could possibly come to.”

The deal breaks down to roughly C$1 billion in cash from both Agnico Eagle and Yamana, as well as  approximately C$2.33 billion in Agnico Eagle and Yamana shares, and shares of a new company, named Spinco, with an implied value of approximately C$575 million, or C$1.20 per share.

The jewel asset in play with Osisko is its Canadian Malartic mine, located near Val d’Or, Quebec.

“This is a prolific and long-life mine with planned production of approximately 600,000 ounces (of gold) per year and cash costs below C$690 per ounce,” said Peter Marrone, chief executive officer of Yamana. “Agnico and we will each fund C$501 million in cash and the remaining consideration will be in our shares, plus of course Spinco.”

Marrone said operations for Canadian Malartic, as well as the Hammond Reef and Kirkland Lake exploration properties, will be jointly operated by Yamana and Agnico Eagle. He also noted the companies’ reserves each jump 25% on the acquisition.

“This is a unique opportunity, clearly, in what we would classify as our backyard, an area of the world in which we’ve operated successfully for over 50 years,” said Sean Boyd, president and chief executive officer of Agnico Eagle. “These assets do not come along that often. We’re not buying a development project, we’re buying a fully built asset that’s in the optimization phase and Canada’s largest gold producer.”

Goldcorp Inc. (TSX:G)(NYSE:GG) triggered the bidding war in mid-January with a C$2.6 billion hostile bid, but the process has really picked up steam over the last few weeks.

Yamana entered into a partnership agreement with Osisko in early April, which valued Osisko at C$3.4 billion. Goldcorp came back with a bid the following week at C$3.6 billion.

This most recent bid from Agnico Eagle and Yamana represents approximately an 11% premium to the implied value of the current Goldcorp Inc. hostile bid, the companies said during the call.

“This is a superior offer for Osisko shareholders,” Marrone said.

Marrone said the companies will hold a meeting with shareholders in late May with closing of the deal expected to be in late May or early June.

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By Alex Létourneau of Kitco News aletourneau@kitco.com
Follow Alex Letourneau @alex_letourneau



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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