TORONTO Osisko Mining Corp OSK.TO rejected on Monday an unsolicited C$2.6 billion ($2.37 billion) takeover bid from rival Goldcorp Inc (G.TO), saying the offer was financially inadequate and not in the best interests of its shareholders.
The rejection, which sets the stage for a possibly bruising takeover battle between the two Canadian gold miners, came as no surprise. In its preliminary response to the bid last week, Osisko said the 15 percent premium being offered by Goldcorp was "very low".
"Goldcorp's offer significantly undervalues Osisko's world-class Canadian Malartic mine, and the rest of the company's portfolio of high-potential projects," the Montreal-based miner said in Monday's statement.
It also reported 2013 production results, which showed a 22 percent increase in gold output in the year, and an 11 percent decrease in cash costs.
Osisko said it expects its operating costs to continue to decline in 2014 as it is now able to access higher grade areas at the Malartic mine in northwestern Quebec. As most of its costs are denominated in Canadian dollars, the company said the weakening Canadian dollar is also likely to support its results.
The company said gold production in 2013 totaled 475,277 ounces at an estimated cash cost of C$760 an ounce, compared with 388,478 ounces at a cash cost of C$849 an ounce in 2012.
Osisko said that with the strong performance of the Malartic mine, the company was able to increase its cash balance last year and to reduce debt. As of December 31, Osisko's cash balance was roughly C$210.5 million, up from C$155.5 million in 2012.
Goldcorp said last week that it decided to proceed with its unsolicited offer after a long series of frustrated attempts to engage Osisko in talks about a deal.
In response, Osisko said on Monday that those discussions had never led to a credible proposal from Goldcorp. The company also noted that Goldcorp's offer is lower than the current trading price of Osisko shares.
The shares, which were down 3 Canadian cents at C$6.44 on Monday, continue to trade significantly higher than the value of Goldcorp's cash-and-share, which was worth about C$6.02 a share.
The stock has traded above the value of the Goldcorp offer since it was announced, indicating that investors expect a sweetened bid to emerge.
Osisko said is exploring strategic alternatives in light of the Goldcorp offer and it advised its shareholders to reject the hostile bid and not tender their shares to it.
(Reporting by Euan Rocha; Editing by Chizu Nomiyama; and Peter Galloway)