Osisko Mining Corp.’s board has come out swinging against Goldcorp Inc.’s hostile takeover bid, urging shareholders to reject the “financially inadequate” $2.6 billion offer from the Vancouver giant while the company seeks out a better deal.
Chief executive Sean Roosen urged investors Monday not to tender shares to the Goldcorp bid, launched last week, while the board “aggressively pursues” alternatives for the junior that owns and runs the coveted Canadian Malartic mine in northwestern Quebec.
Roosen, who built Malartic into one of the world’s largest gold mines, said on a conference call that companies with a high quality, single asset have substantially outperformed giant diversified firms such as Goldcorp, whose shares have fallen 23 per cent in the last five years as Osisko’s doubled.
“Goldcorp’s best days are behind it, and we are at a brand new mine with our best days in front of us,” said Roosen.
The all-Canadian takeover bid is the largest in the struggling global gold sector in over a year, during which the bullion price tumbled 30 per cent and companies closed mines and slashed costs to combat falling share prices.
The Goldcorp offer “fails to recognize the strategic value” of Canadian Malartic, which “was developed, built, commissioned and ramped up by Osisko over the past 10 years and would be extremely difficult, time-consuming and costly to replicate,” the firm said in a lengthy statement
Montreal-based Osisko also released preliminary operational and financial results for 2013, which show the mine produced 475,277 ounces at a cash cost of $760 an ounce, and in the most recent quarter 137,321 ounces at $713 per ounce.
The mine, which opened in 2011, has 10 million ounces of reserves and is expected to be in full production for at least 16 years.
“The Goldcorp offer has been opportunistically timed to occur before Canadian Malartic enters what Osisko expects will be its most productive years,” the company said.
Roosen advised investors to hold out for a better offer since there are very few quality gold assets in the world like Malartic in the more mining-friendly Abitibi gold belt. He boasted Osisko is one of the few miners “that can ever claim to have built a mine ahead of schedule and on budget.”
Tendering Osisko shares to the current Goldcorp offer, which expires Feb. 19, “may preclude the possibility of a superior alternative transaction emerging,” the company warns investors on its website.
Osisko shares have traded well above the $5.95 implied value of the Goldcorp offer since the stock-and-cash proposal was first announced Jan. 13, indicating investors think Goldcorp or another suitor will sweeten the deal.
Analysts have said Goldcorp will have to raise its offer if it wants to close the deal.
Goldcorp chief executive Chuck Jeannes was not immediately available for comment Monday.
He has said Canadian Malartic would transform Goldcorp into “a true Canadian mining champion” and rank among the company’s most important operations if the takeover is successful.
Joseph Fazzini of Dundee Capital Markets called the mine “a cherished and coveted asset for Canadians” -- many of whom are invested in Osisko through the Canada Pension Plan and the Caisse de depot et placement du Quebec, Canada’s second largest pension fund.
Osisko’s CEO pointed out that Goldcorp’s primary asset, the Penasquito mine in Mexico, has “under-delivered” and is more a base metal than bullion producer, while Osisko is a pure gold play.
Goldcorp was once one of the largest shareholders in Osisko, but sold its 10.1 per cent stake in the company in 2011 for $13.75 a share for a total of about $530 million.
Since then, the world’s second-largest gold producer said it had been in regular discussions to try to strike a friendly deal with Osisko until late last year.
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