Goldcorp agrees to buy Andean Resources for $3.42B; will get access to Argentine gold project

Goldcorp agrees to buy Andean Resources for $3.42B

TORONTO — Canada’s Goldcorp Inc. said Friday it has agreed to buy Andean Resources Ltd. for about 3.6 billion Canadian dollars (US$3.42 billion), trumping a rival bid from Eldorado Gold Corp.

The acquisition would give Goldcorp, the world’s second-largest gold producer by market capitalization, access to Andean’s Cerro Negro gold project in Argentina, which is said to have a significant amount of gold and silver.

The Goldcorp-Andean deal has been approved by both companies’ boards but requires approval by a majority of Andean shareholders. The companies expect the deal to close later this year or in early 2011.

The announcement came shortly after Canada’s Eldorado made an offer of 3.4 billion Canadian dollars (US$3.2 billion) for the company.

Andean is based in Utah and is listed on the Toronto and Australian stock markets. It acquired the Cerro Negro gold deposit in southern Argentina in 2004.

Chuck Jeannes, Goldcorp’s president and CEO, said the deal represents a premium of more than 24 percent over Thursday’s Andean closing price.

Wayne Hubert, Andean’s CEO, said the Goldcorp deal benefits both companies and allows for the development of Cerro Negro into a key gold project.

“The Andean board of directors strongly believes that the shareholders of both parties will benefit from this business combination well into the future,” Hubert said in a statement.

Under terms of the Goldcorp deal, each Andean common share will be exchanged for 0.14 Goldcorp shares or a cash payment in the amount of 6.50 Canadian dollars ($6.17) per share.

The maximum cash consideration will be 1 billion Canadian dollars ($948.6 million).

Shareholders can choose stock, cash or a combination of the two.

Paul Wright, president and CEO of Eldorado, said Eldorado had been looking at buying Andean for the past two years and had taken its offer to shareholders after the companies failed to reach an agreement.

Wright later said on a conference call on Friday that they remain serious bidders and they’ll keep their options open.

“I think you can assume that we will use whatever tools that we have available to us as we see fit,” Wright said.

Earlier this year, Goldcorp also prevailed over Barrick Gold Corp., the world’s largest gold producer, when it bought a controlling interest in the El Morro gold-copper project in Chile from the miner New Gold Inc.

Andean’s Cerro Negro gold project has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver.

“It all boils down to the fact that Cerro Negro is a truly exceptional asset by any reckoning. And these types of high-quality gold projects have become exceedingly rare,” Jeannes said.

Jeannes said that the project allows Goldcorp to increase its gold resources by expanding existing deposits and exploring more areas that may have additional deposits.

If the transaction doesn’t close, Andean will pay Goldcorp a termination fee equal to 1 percent of the aggregrate total offer made by Goldcorp.