Goldcorp Inc. and Andean Resources Limited announced an agreement whereby Goldcorp will acquire, through a scheme of arrangement under Australian law (“the Arrangement”), all of the outstanding shares of Andean. The total consideration for the purchase of 100% of the fully diluted shares of Andean is approximately C$3.6 billion.
Andean’s principal asset is the 100%-owned Cerro Negro gold project, an advanced-stage, high-grade vein system located in the Santa Cruz province of Argentina. Comprising 215 square kilometers, Cerro Negro currently has reported indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver. Inferred resources total 523,000 ounces of gold and 3.12 million ounces of silver1. Cerro Negro also contains several other vein structures, including the Mariana Central zone, where numerous recent drill intercepts have demonstrated high-grade gold and silver over significant widths.
“This transaction adds another key asset to Goldcorp’s peer-leading growth profile and low-cost gold production pipeline,” said Chuck Jeannes, Goldcorp President and Chief Executive Officer. “Cerro Negro is a high-grade, near-surface system that is expected to generate significant gold production at low cash operating costs following a relatively short construction period. A very exciting feature of the project is the opportunity for significant continued growth of gold resources through expansion of the existing deposits and the discovery of additional zones along the strike of the veins. As well, the potential exists for discoveries of new veins within this large, prospective land position.
“Goldcorp has consistently pursued a disciplined portfolio management strategy that seeks to upgrade the overall asset base through the addition of high-quality gold assets in stable jurisdictions and through divestitures of non-core assets,” Jeannes added. “This transaction fits that strategy perfectly, as Goldcorp’s strong financial position, technical expertise and track record of building mines responsibly and efficiently positions us to rapidly advance this project and maximize value for both Goldcorp and Andean shareholders and other stakeholders.
Wayne Hubert, Andean’s CEO, stated, “Over the past four years, the Andean Resources team has done a tremendous job in taking Cerro Negro from being a small gold project to a world class epithermal district that has the potential to double or triple its gold and silver resources over the next couple of years. This acquisition by Goldcorp, an industry leading senior gold producer, attests to Cerro Negro’s potential. The Goldcorp and Andean philosophies of responsible mining are very similar, so I see continuity of our plans into the future, enhanced by the additional resources Goldcorp will bring.
“I believe Cerro Negro will enhance Goldcorp’s growing quality gold production pipeline while complementing their already low cash costs profile. The Andean Board of Directors strongly believes that the shareholders of both parties will benefit from this business combination well into the future.”
Under the Arrangement, each common share of Andean will be exchanged for (i) 0.14 common shares of Goldcorp (the “Share Consideration”) or (ii) a cash payment in the amount of C$6.50, subject to an aggregate maximum cash consideration of C$1 billion. Andean shareholders will have the option to elect to receive cash or shares or any combination of cash and shares, subject to the aggregate cash limitation. Any Andean shareholder who does not elect either option shall be deemed to have elected to receive Goldcorp shares in respect of all of its Andean shares. If the Andean shareholders in the aggregate elect to receive more than C$1 billion in cash consideration, the aggregate cash consideration will be prorated among the Andean shareholders who elected to receive cash and the balance will be paid in Goldcorp shares.
Based on the September 2, 2010 closing price for Goldcorp’s common shares on the TSX, the transaction represents a 35% premium to Andean’s TSX closing price on the same date and a 56% premium to Andean’s 20 day volume weighted average trading price on the TSX.
The transaction has been unanimously approved by the boards of directors of Goldcorp and Andean and will be subject, among other things, to the favorable vote of 75% of the issued and outstanding Andean shares present and voting in person or represented by proxy at the scheme meeting to be called to consider and approve the Arrangement, and the affirmative vote of more than 50% of holders of Andean shares present and voting at such meeting as required under Australian Law. In the case of the board of directors of Andean the approval of the transaction is subject to there being no superior proposal and an independent expert opining that the transaction is in the best interest of Andean shareholders.
The officers and directors of Andean intend to vote in favor of the Arrangement. Sentient Executive GP II and its related entities (“Sentient”), Andean’s largest shareholder, hold approximately 21% of Andean’s issued and outstanding shares and have stated their intention to vote in favor of the Arrangement and in the absence of a superior proposal and subject to an independent expert concluding, and continuing to conclude, that the Arrangement is in the best interest Andean shareholders. In addition, Sentient, has agreed to a call option agreement with Goldcorp in relation to up to 107,909,316 Andean shares representing up to 19.9% of issued and outstanding Andean shares, in order to support the transaction. The scheme booklet in connection with the scheme meeting to be called to consider and approve the Arrangement is expected to be mailed to shareholders in November 2010. The transaction is expected to close in late 2010 or early 2011. The Summary of the Merger Implementation Agreement can be accessed through the Australian Securities Exchange at its website www.asx.com.au and by visiting the Goldcorp and Andean websites at www.goldcorp.com and www.andean.com.au respectively.
Andean has agreed to pay Goldcorp a termination fee equal to 1% of the aggregate of the total consideration offered by Goldcorp, under certain circumstances. Andean has also provided Goldcorp with certain other customary rights, including a right to match competing offers.
Goldcorp’s financial advisor is CIBC World Markets; its legal advisors are Cassels Brock & Blackwell LLP in Canada and Mallesons Stephen Jaques in Australia.
Andean’s financial advisor is BMO Capital Markets; its legal advisors are Fraser Milner Casgrain LLP in Canada and Corrs Chambers Westgarth in Australia.
Andean shareholders and other interested parties are advised to read the materials relating to the proposed transaction that will be filed by Andean with securities regulatory authorities in Canada and with the Australian Securities & Investments Commission when they become available. Anyone may obtain copies of these documents when available free of charge at the Canadian Securities Administrators’ website at www.sedar.com and from the Australian Securities Exchange at its website www.asx.com.au. This announcement is for informational purposes only and does not constitute an offer to purchase, a solicitation of an offer to sell the Shares or a solicitation of a proxy.
Goldcorp and Andean will hold a conference call to discuss the proposed transaction on Friday, September 3, 2010 at 7:30 am PDT. Participants may join the call by dialing toll free 1-866-223-7781 or 416-340-8018 for calls from outside Canada and the US or 800-6578-9898 for Australian calls. A recorded playback of the call can be accessed after the event until October 2, 2010 by dialing 1-800-408-3053 or 416-695-5800 for calls outside Canada and the US. Passcode: 6717500. A live and archived audio webcast will also be available at www.goldcorp.com.
Goldcorp is the lowest-cost and fastest growing multi-million ounce gold producer with operations throughout the Americas. Its gold production remains 100% unhedged.