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California and the West

Goldcorp to Buy Rival Glamis

September 01, 2006|From the Associated Press

RENO — Canadian gold miner Goldcorp Inc. has agreed to buy Reno-based rival Glamis Gold Ltd. in an $8.6-billion stock deal that would create one of the world's largest gold producers, the companies said Thursday.

The new company would have proven and probable reserves of about 41.1 million ounces of gold, worth about $25 billion at current prices. The company would have 11,000 employees and operations focused on the Americas, the companies said.

The combined company would continue to operate under the Goldcorp name and be headquartered in Vancouver, Canada.

"It's a good deal," said Tom O'Brien, editor of the Gold Report, a weekly newsletter.

Both companies, he said, "are extremely low-cost producers."

"They take gold out of the ground for about $160 an ounce," O'Brien said. With gold prices at their highest levels in recent decades, trading around $620 an ounce, their product value will continue to rise, he said.

Under the terms of the agreement, shareholders will get 1.69 common shares of Goldcorp for each Glamis common share. Based on Goldcorp's closing share price Wednesday, the offer values Glamis shares at $51.49 each, an almost 33% premium to the stock's closing share price Wednesday.

Ian Telfer, president and chief executive of Goldcorp, said the new company would have a strong balance sheet and robust cash flow that would make it a powerhouse in the industry.

"We believe this will be the world's premier gold company," Telfer, who will serve as chairman of the new company, said in a conference call with analysts. "This transaction doubles our reserves and resources."

Kevin McArthur, president and CEO of Glamis, will lead the new company in those same capacities.

Shares of Glamis jumped $7.26, or 18.7%, to $46.12. Shares of Goldcorp fell $2.81, or 9.2%, to $27.66.

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