Goldcorp to acquire Gold Eagle

Reuters and Globe and Mail Update

July 31, 2008 at 9:41 AM EDT

TORONTO — Goldcorp Inc. said Thursday it plans to acquire fellow Canadian gold miner Gold Eagle Mines Ltd. for about $1.5-billion to pick up the Bruce Channel gold discovery, which lies close to Goldcorp's flagship Red Lake operation.

Goldcorp, Canada's No. 2 gold producer, also reported an unexpected second-quarter loss, hurt by a non-cash foreign exchange loss on future income tax liabilities, and cut its production outlook for the year.

Under the friendly deal, Gold Eagle shareholders will receive $6.80 in cash and 0.146 shares of Goldcorp for each share. Goldcorp already owns 4.7 per cent of Gold Eagle.

“This transaction secures for Goldcorp full control of eight kilometres of strike length in the heart of the world's richest high-grade gold district,” said Kevin McArthur, Goldcorp's president and chief executive officer.

Goldcorp Inc.

Gold Eagle Mines

“Nearly 200 drill holes have defined an impressive gold deposit at Bruce Channel, with potential for additional expansion over time. Development of this strategically important zone can now move forward with our adjoining assets as a single, comprehensive project, sharing mine infrastructure, ore processing facilities and human talent with Red Lake, thus minimizing capital and operating costs and maximizing long-term shareholder value,” he said in a statement.

The offer values each Gold Eagle share at $12.62, a 19 per cent premium, based on Wednesday's closing prices. Gold Eagle's board has approved the transaction, the companies said.

Goldcorp, which has operations in Canada and throughout Latin America, lost $9.2-million (U.S.), or 1 cent a share, in the quarter ended June 30. That compares with a profit of $2.9-million, or nil a share, in the year-before period.

Adjusted earnings were 12 cents a share, while analysts had expected a profit of 22 cents a share, before exceptional items.

Cash margins increased 18 per cent to $589 per ounce, as gold prices soared year over year.

However, the company cut its 2008 production outlook and raised its cash cost estimate.

It now expects to produce between 2.3 million and 2.4 million ounces, down from its previous expectation of 2.6 million ounces. Costs are expected at less than $300 an ounce, up from its previous estimate of $250 an ounce