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Goldcorp, Inc.'s Hostile Bid Gets Nastier

Rich Duprey
January 30, 2014

You can't blame Goldcorp (NYSE: GG) for trying to obtain a premiere project like Canadian Malartic mine on the cheap. It's a world-class mine that could produce as much as 500,000 to 600,000 ounces of gold annually over its 16-year life, and would become one of the miner's leading projects in terms of free cash flow, production, and net asset value. 

But the $2.6 billion offer is seen as too opportunistic, and after rejecting the hostile offer, the project's owner Osisko Mining (NASDAQOTH: OSKFF) is turning equally nasty by going to court seeking a restraining order to halt Goldcorp in its tracks. It's alleging Goldcorp misused confidential information and acted in bad faith before launching the hostile bid.

With the price of gold having fallen 30% in 2013 and the valuation of the miners themselves depressed, it's an opportune time to swoop in and scoop up some values. In addition to Goldcorp, which previously indicated it wanted to make acquisitions during this time, Newmont Mining (NYSE: NEM) has also said it would use M&A to add on low-cost operations to its portfolio while Primero Mining (NYSE: PPP) and Asanko Gold both have already begun the process, announcing the acquisitions of Brigus Gold (NYSEMKT: BRD) and PMI Gold, respectively.

But Canadian Malartic would be a unique asset to own. The flagship, senior-scale, high-margin mine produced more gold in the first three quarters of 2013 than dozens of mines owned by the five largest North American gold producers. Between Agnico Eagle Mines, Barrick Gold, Goldcorp, Kinross Gold, and Newmont, which have ownership interests in more than 55 gold-producing assets, only 13 of them produced more gold than Canadian Malartic.

Osisko says preliminary full-year results show the mine produced 475,277 ounces at a cash cost of $760 Canadian per ounce, while producing 137,321 ounces at $713