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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

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Tuesday, December 29, 2009

Goldcorp: Is Third Time a Charm in Bid for Canplats?

Canplats Resources Corp. ($CPQRF) (CVE:CPQ) has for the third time since November accepted a buyout bid from Goldcorp Inc. ($GG) (TSE:G). This is the second time Goldcorp has matched a rival offer from Minera Penmont, a jointly owned partnership between Fresnillo PLC (LSE:FRES) and Newmont Mining Corp. ($NEM) (NYSE:NEM).

Goldcorp stated in a release on Tuesday, December 29 that its third offer in two months is C$4.60 per Canplats shares and C$0.20 in shares of a new company holding Canplats' exploration properties.

The new proposal values Canplats at about C$277 million.

Canplats said in a statement that its board has determined that Goldcorp has matched the Penmont offer, making it a superior proposal.

"Accordingly, Canplats will enter into an amended agreement with Goldcorp reflecting such terms," Canplats stated.

Goldcorp's original agreement to buy out Canplats in November was an all-stock transaction for C$3.60 a share.

Goldcorp is interested in combining the synergies of its nearby Penasquito mine and Canplats Camino Rojo project with 3.4 million ounces of gold. Camino Rojo also has potential for further growth in reserves.

Monday, December 28, 2009

Minera Penmont Outbids Goldcorp...Again!!!

Get out your scorecard! The Canplats buyout isn't over yet!


A bidding war for Canplats Resources ($CPQRF) (CVE:CPQ) escalated today after the company reported it had received a bid on Sunday from Minera Penmont that was once again "financially superior" to the matched offer from Goldcorp ($GG).

This bidding war highlights how important large gold deposits are to tier 1 gold miners that are on the hunt to replace their dwindling reserves. There are very few multi-million ounce deposits that are "shovel ready." This deal could be the beginning of a 2010 buyout frenzy among major gold miners for emerging gold juniors with large and promising deposits.

Minera Penmont is now offering C$4.60 in cash and C$0.20 in stock of a newly formed company from the C$4.20 a share plus C$0.20 in new company stock offered earlier and matched by Goldcorp. Minera Penmont is a joint venture between Mexico-based silver miner Fresnillo and Denver's Newmont Mining ($NEM).

Canplats said the new Minera Penmont offer is 9 percent higher than Goldcorp's matched bid, valued at about C$254 million. The latest salvo in this bidding war by Minera Penmont is worth C$276.6 million.

Goldcorp has until January 5 to make a counteroffer.

The winner of this bidding war is eying Canplats' Camino Rojo project, with about 3.4 million ounces of gold and 60.7 million ounces of silver with additional mineral potential.

Both Penmont and Goldcorp have indicated they would keep Camino Rojo and spin off other properties.

Canplats and whoever wins the bidding war for Camino Rojo will be required to pay breakup fees of C$10.2 million to Penmont or C$9.3 million to Goldcorp.

This saga started on November 16 with Goldcorp announcing it intended to acquire all of the outstanding common shares of Canplats for about C$238 million.

On December 23, Goldcorp announced it had been notified by Canplats that it received a $254 million buy-out offer on December 21 from Minera Penmont 6.7 percent higher than Goldcorp's earlier bid of C$238 million.

On December 24, Goldcorp amended its proposal to acquire Canplats, matching the proposal by Minera Penmont. Canplats was contractually obligated to accept the Goldcorp match.

And today, Canplats announced the revised bid by Minera Penmont.
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This bidding war is especially interesting for holders of Terrane Metals ($TRXOF) (CVE:TRX). Terrane is on the verge of a Goldcorp decision to offer a joint venture for the company and its low-cost ($51 cash cost per ounce) 6 million proven and probable ounces of gold and 2.1 billion lbs. of copper at the Mt. Milligan project in British Columbia, Canada.

In July 2006, Goldcorp retained 240 million convertible preferred shares, or about 59% of Terrane Metals as a result of a deal involving Barrick and Placer Dome that spun Terrane off as an independent company.

In July 2008, Goldcorp and Terrane agreed to provide Goldcorp with an option to convert its 59 percent equity interest in Terrane into a joint venture at Mt. Milligan. Goldcorp's option expires on January 8, 2010.

Speculation is, as an alternative, Goldcorp may want to buy out the entire company and its major deposit at Mt. Milligan. Goldcorp is familiar with the Mt. Milligan project due to the previous deal and having a company officer on Terrane's board of directors.

Regardless of the outcome of the Canplats deal, Goldcorp is unlikely to walk away from Mt. Milligan. If the Canplats deal falls through for Goldcorp, Terrane is an especially important deal for the company. Terrane Metals shares were trading at C$1.53 mid-afternoon.

The price of gold is holding at $1,106.50 an ounce late Monday afternoon with the SPDR Gold Trust ETF ($GLD) at $108.22, down 0.13 percent.

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Disclosure: Long Terrane Metals.

Thursday, December 24, 2009

Goldcorp Matches Penmont Bid for Canplats

Yesterday, Canada-based Goldcorp Inc. ($GG) announced it had been notified by Canplats Resources Corp. ($CPQ.CA) ($CPQRF) that it received a $254 million buy-out offer from Minera Penmont that is higher than Goldcorp's earlier bid of $238 million.

Today, Goldcorp announced it has matched the competing proposal. Under the terms of Goldcorp's matching proposal, Canplats is required to enter into an agreement with Goldcorp to reflect the amendments and recommend Canplats shareholders approve the buyout by Goldcorp. Under the terms of the Penmont proposal, because Goldcorp has exercised its right to match Penmont, the proposal is no longer in effect. No fees are payable by Canplats to Penmont.

If Goldcorp had not matched or outbid Penmont, Canplats would owe Goldcorp a contractual termination payment of $7.2 million.

Penmont is jointly owned by Fresnillo PLC and Newmont Mining Corp. ($NEM). The company offered $4.20 cash and shares in a new exploration company worth 20 cents per share for every Canplats share.

Canplats' main focus is the development of the Camino Rojo discovery in Mexico. The Represa deposit at Camino Rojo has 3.4 million ounces of gold and 61 million ounces of silver on a measured and indicated resources basis.

Penmont is owned 56 percent by Mexico-based Fresnillo Plc, and 44 percent by Newmont. Fresnillo is Mexico's second largest gold producer and the world's largest primary silver producer. Newmont is the world's second largest gold producers.

Wednesday, December 23, 2009

Goldman Rates Gold Fields & Harmony Gold as "Buys"

South African-based gold miner Harmony Gold ($HMY) has been upgraded by Goldman Sachs ($GS) from a "Neutral" to a "Buy" rating. Goldman Sachs also initiated coverage on Gold Fields Ltd. ($GFI) with a "Buy" rating and Anglo-Gold Ashanti ($AU) with a "Neutral" rating. Gold Fields and Anglo-Gold Ashanti are South African-based gold miners as well. Goldman Sachs downgraded Jersey, Channel Islands-based Randgold Resources ($GOLD) to "Neutral" from "Buy" after a strong run-up in valuation.

The firm highlighted their perspective that Harmony Gold and Gold Fields have a high exposure to South African gold production and above average cash costs per ounce. Goldman Sachs stated, "This suggests that they will see the largest benefits from a combination of rising U.S. dollar gold prices and a weakening South African rand over the next two years."

For its valuation models, Goldman is forecasting average gold prices of $1,261 an ounce for 2010, and even higher average prices of $1,425 an ounce in 2011. The firm's gold price model is driven largely by gold ETF inflows like the SPDR Gold Trust ($GLD) and expected net bullion buying activity by central banks. Earlier this year, the Reserve Bank of India bought 200 metric tons of gold from the International Monetary Fund.

Spot gold is trading at $1,093 an ounce, up 0.7 percent this morning.

Company Profiles

AngloGold Ashanti is the third-largest gold producer in the world and the biggest in Africa, with projected production of 4.9 million ounces in 2009. AngloGold’s production in South Africa is characteristically from deep-level hard rock operations with the balance of ounces outside South Africa coming from shallow and surface operations. AngloGold has 21 production operations in 10 countries on four continents, with a large and global project pipeline. Countries with production operations include South Africa, Argentina, Australia, Brazil, Ghana, the Republic of Guinea, Mali, Namibia, Tanzania and the United States. AngloGold also produces uranium, silver, and sulphuric acid as byproducts of the gold recovery process.

Gold Fields, with almost 4 million ounces of annual production, is the world’s fourth largest producer of gold from eight operating mines in South Africa, Ghana and Australia. A ninth mine, Cerro Corona Gold/Copper mine in Peru, commenced production in August 2008. Management expects Cerro Corona to be producing at a rate of about 375,000 gold equivalent ounces per year in December 2009. Gold Fields’ production is unhedged though they may hedge for development projects. The company has proven and probable ore reserves of 81 million ounces and mineral resources of 234 million gold ounces .

Harmony Gold, the fifth largest gold producer in the world, produced 1.5 million ounces of gold in 2009. The company's mining operations in South Africa include 10 underground operations, an open-pit mine and 9 processing plants. Like other legacy South African gold miners, the company’s South African mines are very deep and high grade. Harmony's exploration and development is currently focused in Papua New Guinea (PNG), including the Morobe joint venture project with Newcrest Mining. Redevelopment has also begun in several of Harmony Gold’s South African mines. Harmony's gold-only reserves are 50.5 million ounces with 256 million ounces of gold resource.

Randgold Resources is the largest gold miner in West Africa. The company has mining interests in Mali, Ivory Coast, Senegal, Burkina Faso, Ghana, and Tanzania. Proven and probable reserves are 8.9 million gold-only ounces with total resources of 16.1 million ounces. The company is on track to produce more than 440,000 ounces of gold for 2009. Discoveries to date include the 7.5 million-ounce Morila deposit in southern Mali, the 6 million-ounce-plus Yalea deposit at Loulo in western Mali, and the 3 million-ounce Tongon deposit in the Ivory Coast.

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