(Adds investor comments, context on Quebec)
By Euan Rocha, Allison Martell and Nicole Mordant
TORONTO/VANCOUVER, April 2 Osisko Mining Corp
said on Wednesday that Yamana Gold Inc would
buy a 50 percent stake in its mining and exploration assets for
C$930 million ($843 million), a deal that potentially thwarts a
hostile bid from Goldcorp Inc.
The deal would give Latin America-focused Yamana its first
major asset in Canada and make the Toronto-based miner an equal
partner in the Osisko properties.
Goldcorp's bid to acquire Osisko marks the first major
takeover tussle in the Canadian gold industry in more than a
year. Deal-making has dried up after many miners wrote down the
value of billions of dollars of assets that they purchased at
sky-high prices as the bullion price ran up in the last decade.
Both Yamana and Goldcorp are vying for Osisko because of its
huge Canadian Malartic gold mine in the province of Quebec - a
mine widely viewed within the industry as a solid asset in a
relatively stable mining jurisdiction.
Some analysts though were skeptical about Yamana effectively
paying a premium without gaining a controlling interest in the
"Our initial take is skeptical that this will provide net
value per share to Yamana shareholders," said Cowen & Co analyst
Adam Graf. "We see the valuation of Osisko as rich based on our
models of the assets at the current forward curves for metal
In a note to clients, Graf said he approved of the deal as
it would help generate some tax savings for Yamana in Canada,
but he doubts the savings will offset the negative impact of the
purchase premium being paid by the miner.
Yamana shares, which initially rose in early trading after
the transaction was announced, were down 1.1 percent at C$9.60
in midday trading on the Toronto Stock Exchange.
Adrian Day, who runs his own asset management firm, which
owns shares of Yamana and Goldcorp but not Osisko, said he was
happy to see Yamana looking to buy assets when the gold price is
down, rather than at the height of the market.
Day said the implied price that Yamana would pay looks high
at first glance, though not "grossly high." But he said the deal
structure, where Yamana will not get control, is unusual.
"If Goldcorp comes back with a better offer, I suspect a lot
of shareholders will find that easier to wrap their heads around
than this, which is a sort of strange deal," he said.
The complex deal structure calls for the exchange of each
Osisko share for C$2.194 in cash, 0.2119 of a Yamana common
share and a new common share of Osisko. Based on Tuesday's
closing prices and other assumptions, that would value Osisko at
C$7.60 per share, Yamana and Osisko said.
"This is a better deal than the Goldcorp deal, but I'm not
all that happy with it," said John Kinsey, a portfolio manager
with Caldwell Securities, which owns a small position in Osisko.
"I think this deal is more out of desperation than anything
else. I think Mr. Roosen just wants Goldcorp to go away and he
doesn't want to give up total control," he said, referring to
the company's Chief Executive Sean Roosen.
Osisko shares were up 9 percent at C$7.49 in midday trading
on the TSX, while those in Goldcorp rose 2.3 percent to C$27.70.
Vancouver-based Goldcorp launched a C$2.6 billion cash and
stock bid for Osisko in January. Osisko rejected Goldcorp's
unsolicited bid as too low.
Montreal-based Osisko said that under the deal announced
Wednesday it would continue to operate its flagship Canadian
Malartic mine and all other projects under the guidance of a
joint committee. It will also maintain its head office in
The takeover fight has political undertones. Quebec, a
province that will hold elections later this month, has a
history of shielding companies based there. Osisko has warned
the Goldcorp bid would damage Quebec's interests. Goldcorp, for
its part, said that it employed more people in Quebec than
Osisko and has invested more in the province than its takeover
Osisko's board has unanimously approved the deal with
Yamana, and the company said it would hold a special meeting
next month for shareholders to vote on the transaction.
Osisko has also reached separate deals with the two large
Canadian pension funds - Canada Pension Plan Investment Board
(CPPIB) and Caisse de depot et placement du Quebec, conditional
on the Yamana deal's closing.
CPPIB has agreed to increase its C$150 million credit
facility to C$275 million, as part of the deal, while the Caisse
has agreed to buy a gold stream from Canadian Malartic, under
which it would pay a C$275 million deposit. The stream will see
the Caisse buy 37,500 ounces of gold per year from Osisko for 42
percent of the spot gold price.
The two side deals would generate C$550 million of the C$1
billion in cash set to be distributed to Osisko's shareholders.
Yamana itself is paying about C$442 million in cash along with
95.7 million common shares of its shares to fund the deal.
($1 = $1.10 Canadian)
(Additional reporting by Nicole Mordant; Editing by Bernadette
Baum, Lisa Von Ahn and Bernard Orr)