Goldcorp Inc. (TSE:G, Mkt cap 22.79B, P/E – , Div/yield 0.06/2.57, EPS -1.15, Shares 813.53M) has unveiled a deal to buy Toronto-based Probe Mines Ltd. for $526 million in stock, or $5 a share, the Financial Post reports.
The deal was priced some 49% higher than Probe's closing price late last week, and analysts said that Goldcorp is paying a "healthy price" for the junior mining company.
Chief executive of Probe Mines, David Palmer, said there had been little thought about selling the firm following a successful 12 months, but he explained that changed once the project caught the attention of the bigger companies.
It's not every year that a junior mining company makes a significant gold discovery, but that was the case for Probe at its Borden Gold project, located 160 kilometres southwest of Timmins, Ont.
Last summer, Probe said it had identified two million ounces of high-grade gold resources at Borden. Whilst this might not be considered a colossal find on its own, it became much more impressive when the company made it known that the high-grade core is surrounded by large quantities of lower-grade gold, as well as untapped exploration ground.
The sale to Goldcorp seems to make sense for a number of reasons, including the fact that it knows the Timmins area well, as its Porcupine mine continues to be the region's dominant producer.
The Vancouver-based producer plans to unlock savings in this transaction by transporting ore from Borden to its Porcupine processing facilities, thus reducing capital costs and permitting requirements at Borden.
The purchase comes shortly after the news that Goldcorp will report a write-down in excess of $2 billion on its new Cerro Negro mine in Argentina. However, with the company worth in the region of $23 billion, it's unlikely to have been shaken drastically by this hit.
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