Goldcorp (NYSE:GG) [TSX:G], the world`s second largest gold producer by market capitalization, has announced that it will acquire Australian mining business Andean Resources (ANDPF.PK) [TSX and ASX: AND], a company whose main asset is its Cerro Negro gold project in Santa Cruz, Argentina, in a C$3.6 billion share and cash deal, beating an earlier $3.2 billion offer by Eldorado Gold Corp.
Both companies are vying for Andean`s Cerro Negro gold project, which is an advanced-stage, high-grade vein system, comprising 215 square kilometers. It currently has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver, while inferred resources total 523,000 ounces of gold and 3.12 million ounces of silver.
Cerro Negro also contains several other vein structures, including the Mariana Central zone, where numerous recent drill intercepts have showed high-grade gold and silver over significant widths.
Under the terms of the transaction, each common share of Andean will be exchanged for 0.14 common shares of Goldcorp, or a cash payment in the amount of C$6.50.
Andean shareholders will be able to choose whether they receive cash or shares or any combination of the two.
The $6.50 per share offer, represents a 35% premium to Andean`s closing price on the TSX on September 2 (the last day prior to the announcement), and is higher than Eldorado`s $6.36 per share offer.
Cerro Negro is expected to generate significant gold production at low cash operating costs, following a relatively short construction period, said Goldcorp president and CEO Chuck Jeannes.
"A very exciting feature of the project is the opportunity for significant continued growth of gold resources through expansion of the existing deposits and the discovery of additional zones along the strike of the veins. As well, the potential exists for discoveries of new veins within this large, prospective land position," he continued.
Indeed, Andean`s CEO Wayne Hubert believes that the property has the potential to double or triple its gold and silver resources over the next couple of years.
The transaction has been unanimously approved by the boards of directors of Goldcorp and Andean, but is still subject to the approval of 75% of Andean shareholders, as the deal is structured as a scheme of arrangement under Australian law.
Sentient, Andean's largest shareholder, has already stated its intention to vote in favour of the deal.
The acquisition is expected to close in late 2010 or early 2011. Andean has agreed to pay Goldcorp a termination fee equal to 1% of the total value of the deal, should it be tempted by a competing offer.
The Andean deal is not the first time Goldcorp has beat other gold companies to the punch. In January, Goldcorp trumped Barrick Gold Corp for a 70% controlling stake in the El Morro gold-copper project in Chile from global mining company Xstrata.
Andean was up more than 30% on the Australian Stock Exchange, trading at Au 6.40, as of market close in Australia on Friday.
Disclosure: no position
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