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Goldcorp makes $2.6B takeover bid for Osisko

01/13/2014 12:18 EST | Updated 03/15/2014 05:59 EDT
Vancouver-based Goldcorp Inc. has made a $2.6-billion takeover bid for Montreal gold company Osisko Mining Corp. that it says is part of its focus on investment in low political risk jurisdictions.

The deal values Osisko at $5.95 a share, up 15 per cent on its Friday closing price of $5.17. Osisko stock jumped 20 per cent this morning to $6.20 on the news.

Goldcorp is offering a combination of cash and its own shares for the company, which operates primarily in Canada and Mexico.

Osisko is developing the Canadian Malartic gold mine, a significant gold find in the Abitibi region of Quebec, and also has projects in Hammond Reef and Kirkland Lake areas of Northern Ontario.

Goldcorp says it expects long mine life and low sustainability costs from these projects, which have about 10 million ounces of gold in reserve. It says the Osisko takeover dovetails with its other investments in Quebec and Ontario.

Osisko hasn't commented publicly on whether its board supports the takeover offer, which is being made directly to Osisko shareholders.

"Goldcorp shareholders will benefit from a long-lived, high-quality gold mine with low all-in sustaining costs capable of generating long-term free cash flows,” said Goldcorp president and CEO Chuck Jeannes.

“With our world-class Éléonore project in Northern Québec due to commence production later this year, Goldcorp will be the largest gold producer in the province with the resources to continue building collaborative, long-term relationships while leveraging corporate and regional synergies."

In a conference call with analysts, Jeannes said the proposal was not about making his company bigger.

"Our strategy has never been about size, it's been about getting better and delivering disciplined and sustainable growth," Jeannes said.

The long-term outlook for gold is diminishing, as the price of the metal declines. Gold was trading at $1,250 US an ounce on Monday, up from its lows in December after  declining by nearly 30 per cent last year.

The falling price of gold has put pressure on the mining sector, where some companies have sold more difficult properties and others have looked at consolidation. But it also lowered stock prices, with Osisko dropping from the $8 a share range last year.

After a big writedown in the second quarter of 2013, Goldcorp returned to positive earnings territory in the third quarter, with net profit of $190 million, or $0.23 per share.

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