Let the bidding war begin...cause there is no way in h...ll that a portion of a potential tier one world class gold mining project in a safe jurisdiction will ever sell at a discount....here we go again
https://www.mining.com/web/the-battle-for-osisko-mining-a-good-sign-for-the-gold-mining-sector/
Sprott Group | April 24, 2014 | Two months ago, we saw signs that majors were on the search for mergers and acquisitions once again. The world’s third-largest gold producer, Goldcorp, announced a hostile takeover of Osisko Mining Corp., which owns the large Malartic gold mine in eastern Canada, for $2.4 billion1.
The mine aims to produce 500,000 ounces of gold per year for a long time2, in a safe country – increasing Goldcorp’s annual production and decreasing its exposure to political risk. Goldcorp believed the mine would also have synergies with another mine that Goldcorp is building in the same province of Canada — the Eleanore Mine.
Displeased with the low-ball offer, Osisko’s management denounced Goldcorp for being opportunistic at a time when the mining company’s share price was undervalued. They urged Osisko shareholders to turn Goldcorp down and allow management to fight for a higher offer.
As with most management teams who are the target of a hostile takeover, Osisko set out to find a white knight to make a higher and more friendly takeover offer — preferably instigating a bidding war to push the takeover price even higher.
In early April, Osisko announced it had found such a suitor in Yamana Gold Inc. Yamana would buy 50% of Osisko for $1.24 billion3, meaning Osisko and its shareholders would retain direct exposure to this growing gold mine through the other 50% of the company.
A week later, Goldcorp stepped in again, offering $3.28 billion to fully take over Osisko.
Once again, Osisko responded by attracting an even higher offer. Osisko announced that Yamana and Agnico Eagle Gold Mines were making a joint offer totaling $3.55 billion for the company2. This latest offer represents a 60% increase from where Osisko was trading just two months earlier.
A: Goldorp makes initial bid for Osisko; B: Osisko announces Yamana counter-bid; C: Goldcorp responds with higher bid; D: Osisko announces joint bid from Yamana – Agnico Eagle
What this recent takeover fight means is that at least three big gold mining companies are seeking to make new acquisitions today. They have cash to spend. That is very healthy for the junior mining companies that own high-quality deposits – especially in mining-friendly, lower-risk countries.
The recent Osisko episode also shows share prices can rise quickly if a bigger company comes along and offers to acquire some or all of their assets.
As an investor, I suggest building positions in juniors that are most likely to be taken over by bigger companies. Don’t fret about your company’s languishing share price. If you have done your homework and chosen the best juniors with high quality deposits, I believe a bigger company will come knocking on the door someday offering a significantly higher and fairer price. From my experience, the price that a bigger company will pay tends to reflect the full value of the deposit, regardless of where the market has priced it.
The dust appears to have settled on the battle between Goldcorp and Yamana – Agnico Eagle. Goldcorp has recused itself from the bidding war, meaning they will walk away the loser. This leaves the gold miner disappointed; its cash is still there, burning a hole in its pocket.