There may be a light at the end of the tunnel for Yukon miners.
Mining giant Goldcorp has announced plans to buy Kaminak Gold Corporation and its Coffee mine site near Dawson City, marking the corporation’s first foray into the territories.
The Vancouver-based company, which is the world’s fourth-largest gold producer, announced the $520-million acquisition of Kaminak on Thursday.
“This is really part of our strategy of working with junior companies and trying to look at what kind of potential there really is with some of the junior exploration companies,” said Brent Bergeron, Goldcorp’s executive vice-president of corporate affairs and sustainability.
According to the agreement, each Kaminak share will be exchanged for 0.10896 Goldcorp shares. Based on the $24.08 closing price of Goldcorp on the TSX on May 11, each Kaminak share would then be worth $2.62.
That represents a premium of 32 per cent for Kaminak shares over their closing price of $1.98 on the TSX-V on May 11, and a 40 per cent premium over the company’s 20-day average. Goldcorp will issue roughly 21.6 million shares under the arrangement.
After the announcement, Kaminak shares jumped to $2.50 on Thursday morning.
“It’s a very good opportunity for our shareholders,” said Kaminak CEO Eira Thomas. “We think it’s a very good opportunity for the project, and we think it’s a very good opportunity for the Yukon.”
The deal has been unanimously approved by the boards of directors of Kaminak and Goldcorp. Thomas said shareholders will vote on the arrangement sometime in July, and she hopes the deal will close in August.
Thomas said she wasn’t looking to sell Kaminak, but Goldcorp made a “compelling offer” that will produce value for the shareholders right away.
“We would have continued to move forward with this project in the absence of that offer. This wasn’t about Kaminak going out and looking for a buyer to purchase our company,” she said. “They put a good deal in front of us.”
Last week, Kaminak’s board of directors announced it had approved a $29-million budget for 2016, for environmental baseline, permitting and exploration activities at its Coffee project south of Dawson City. Thomas said those programs will still be carried out while the acquisition is finalized.
“For us, it’s very much business as usual,” she said.
Bergeron said Kaminak appealed to Goldcorp because the junior company has built strong relationships with First Nations and the Yukon government. He said Goldcorp values the participation of First Nations in its Canadian projects.
“It’s part of our culture. It’s how we do it,” he said. “It’s not going to change in terms of how we move forward.”
He said Goldcorp also makes local hiring a priority.
Kaminak had been planning to begin construction on the Coffee mine in 2018, with first gold production expected by the end of 2019. Bergeron said Goldcorp doesn’t yet have a firm timeline for the project.
Thomas said there’s a good chance that some of the Kaminak team will stay involved with the project going forward, though she will likely “move on to other things” once the transition is complete.
But she said the acquisition will draw attention to the Yukon as a good jurisdiction for mining investment.
“I just think it’s always great when you’ve got a world-class company that makes a decision to invest in the Yukon,” she said. “We’ve got the right rocks, we’ve got the right support at the government and regulatory level, and we’ve got First Nations that are generally very supportive of the industry.”
Bergeron confirmed that Goldcorp will likely invest in further exploration around the existing Coffee mine site, to try and increase the value of the asset.
Mike Burke, president of the Yukon Chamber of Mines, said the sale is “excellent news.” He said Goldcorp will have the resources to develop the Coffee mine without having to raise extra cash.
“I think it’s pretty huge to have a major mining company active in the Yukon,” he said. “It’s a good day in the Yukon.”
While the price of gold took a dramatic plunge a few years ago, its price has increased 20 per cent so far this year, its strongest performance in nearly 30 years. As of Friday morning, the price of gold was about US$1,270 an ounce.
Contact Maura Forrest at
maura.forrest@yukon-news.com