Goldcorp and Kaminak to tie C$520m knot

TORONTO (miningweekly.com) – Canadian gold major Goldcorp has agreed to buy Kaminak Gold for about C$520-million, a deal that would see the major acquiring Kaminak’s promising 100%-owned Coffee gold project, a structurally hosted hydrothermal gold deposit located about 130 km south of the City of Dawson, in Canada’s Yukon Territory.

Since reporting the robust results of a feasibility study on the project, TSX-V-listed Kaminak had been ripe for the picking, with Goldcorp, under leadership of CEO David Garofalo, executing its strategy of acquiring growth projects in favour of taking on grassroots exploration risks.

"This acquisition is consistent with our strategy of partnering with junior exploration companies to identify and develop mining districts with significant exploration potential, which is expected to grow our net asset value per share.

“Coffee is located within a politically stable jurisdiction and provides us with an opportunity to add high quality ounces to our development pipeline, at low all-in sustaining costs. With our strong financial position and mine construction expertise, we see significant potential to deliver value for all partners and stakeholders,” Garofalo stated.

Under terms of the plan of arrangement, Goldcorp offered to exchange each Kaminak common share for 0.10896 common shares of Goldcorp. Based on the closing price of Goldcorp's common shares on the TSX on Wednesday, the transaction valued each Kaminak share at C$2.62.

Kaminak’s stock on Thursday jumped more than 30% to C$2.58 a piece following the announcement.

The offer for Kaminak represented a 40% premium over the 20-day volume-weighted average share price of Kaminak from all trading on Canadian exchanges for the period ending Wednesday, and a premium of 33% over Kaminak's closing share price on the TSX-V on the same day.

Goldcorp advised that it expected to issue about 21.6-million shares based on the issued and outstanding shares of Kaminak, but would be subject to adjustment depending on the number of Kaminak options that might be exercised before the arrangement had been completed.

"This transaction realises many immediate benefits for our shareholders and at the same time ensures that the Coffee gold project will be developed in a timely and responsible manner. Coffee is a natural fit within [Goldcorp’s] portfolio and they have the experience, expertise and financial flexibility to build Coffee for the benefit of our First Nations partners and all Yukon stakeholders,” stated Kaminak president and CEO Eira Thomas.

POSITIVE PROSPECTS
Prepared and led by JDS Energy and Mining, an established Yukon mine builder, in collaboration with a broad range of consultants, Kaminak’s January feasibility study assumed an exchange rate of C$1 to $0.78, which gave the Coffee project a base case after-tax net present value of C$455-million at a 5% discount rate and an internal rate of return of 37%.

The proposed mine, located 130 km south of Dawson City in the Yukon Territory, would operate over an initial ten-year life-of-mine (LoM) with an average yearly output of more than 200 000 oz for the first five years, excluding an initial three-month ramp-up period and an average LoM output of 184 000 oz/y.

Construction and commissioning would cost C$317-million, with an LoM capital cost of C$478-million, including C$60-million in closure costs. The after-tax capital payback period was estimated to be two years.

The all-in sustaining cash costs, as defined by the World Gold Council, excluding corporate general and administrative costs, was estimated to be $550/oz of gold produced.

Coffee was a high-grade, openpit, heap-leach mining project located in a top-tier mining jurisdiction. The Coffee land package, comprising more than 60 000 ha, had demonstrated significant potential for near-mine discoveries, with mineralisation remaining open along strike and at depth. The feasibility study was based on a probable mineral reserve of 46.4-million tonnes grading 1.45 g/t, containing 2.16-million ounces of gold. Over the life of the project, 1.86-million ounces would be extracted at expected average metallurgical gold recoveries of 86.3%.

The arrangement had been unanimously approved by both companies’ boards, and would be put to a Kaminak shareholder vote at a special meeting of shareholders and option holders to be held no later than July 14.

Kaminak had agreed not to solicit any alternative transactions and, in certain circumstances, to pay Goldcorp a termination fee equal to C$20.3-million should the arrangement not be completed.