Fool's Gold Report: Yamana Gold, Agnico-Eagle Team Up to Fight Goldcorp As Metals Barely Budge

Bullion markets were quiet Wednesday, but new developments in the fight for Osisko drew attention.

Apr 16, 2014 at 7:25PM

Precious metals markets were mostly quiet Wednesday, with only minor changes in price for gold, silver, and platinum. But even as geopolitical tensions failed to produce any bounce from yesterday's sell-off, a new development in the fight for Osisko Mining brought Agnico Eagle Mines (NYSE:AEM) into the mix, joining with Yamana Gold (NYSE:AUY) to make what the companies called a "friendly acquisition agreement" to counter Goldcorp's (NYSE:GG) hostile bid.

How metals moved today
June gold futures posted minor gains Wednesday, gaining $3.20 per ounce to settle at $1,303.50. May silver futures rose almost $0.15 per ounce to settle around $19.63, regaining some of its lost ground from yesterday. Spot price changes were much less dramatic, as palladium was the stand out with a 1% move to the upside.


Today's Spot Price and Change From Previous Day


$1,303, unchanged


$19.64, up $0.08


$1,432, down $2


$799, up $9

Source: Kitco. As of market close.

A new play for Osisko
With relative quiet in the bullion markets, the battle for Osisko Mining and its promising Canadian Malartic mine attracted a lot of attention from gold investors today. This morning, a joint announcement from Yamana Gold, Agnico Eagle, and Osisko Mining announced that Yamana had enlisted Agnico Eagle to make a full acquisition bid for Osisko, with the bid amounting to C$8.15 per share in cash and shares of Yamana, Agnico Eagle, and a new company to be spun off from Osisko. According to the three companies, the offer represented a premium of 11% compared to Goldcorp's most recent hostile bid.

The mechanics of the deal are complex, but in essence, Yamana and Agnico Eagle will create a 50/50 joint venture to own and operate Canadian Malartic and to explore and develop other Osisko assets. As part of the transaction, Agnico Eagle and Yamana will create a new company that will receive 155 million Canadian dollars in cash, a 5% net-smelter royalty interest on Canadian Malartic, a 2% net-smelter royalty interest on Osisko's other primary assets, and certain other assets, liabilities, and investments from Osisko.

Canadian Malartic Mine. Source: Osisko.

The transaction will have two main results. First, current Osisko shareholders will get to participate directly in the success of Canadian Malartic and Osisko's other assets through the net smelter royalty interests. More importantly, though, Osisko shareholders will own more than 14% of the outstanding shares of Yamana Gold and almost 17% of Agnico Eagle.

Market response
It's clear from the way shares of the various parties involved in the Osisko fight moved today that investors think the price for Osisko has gone too high. Agnico Eagle plunged almost 9% Wednesday, while Yamana Gold fell more than 4%. On the other hand, Goldcorp gained almost half a percent as its shareholders might be breathing a sigh of relief that it got bailed out of its recently increased bid in a rapidly escalating bidding war.

Of course, there's no guarantee that Goldcorp won't extend itself even further in its bid to capture Canadian Malartic from Osisko. For now, though, Agnico Eagle and Yamana Gold will have to count on getting a positive surprise from Osisko's assets if it wants to justify this deal in the long run.

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