Canada's Goldcorp seals deal for acquiring Andean at $3.42b

Sydney: Canada's Goldcorp agreed to buy Argentina-focused gold miner Andean Resources for C$3.6 billion ($3.42 billion), trumping a competing offer from rival Eldorado Gold.

The takeover is the latest in a series of gold mining deals this year, including Australia's Newcrest Mining's $8.4 billion purchase of rival Lihir Gold, as near-record prices for the metal boost the hunt for reserves and pump cash into the sector.

Gold consumption rose by more than a third in the second quarter of 2010 and is set to stay strong with India, China providing the main thrust.

Investment demand is also seen firm amid uncertainty about the global economic outlook, which boosts the appeal of gold as a safe haven.

"Andean's plan to sell does not come as a surprise. It was set up to be taken over at some stage. It was a question of how and what price," said Tim Barker, Portfolio Manager at BT Financial Group. "The pricing and the premium looks pretty reasonable."

Goldcorp said its cash and share offer — at C$6.50 per share a 35 per cent premium to Andean's last traded price in Toronto — had been unanimously approved by the boards of directors of both companies.

Protracted negotiations

Andean Australian-listed shares jumped 30.9 per cent to a record high in Sydney trading to A$6.40 before being placed on trading halt.

Goldcorp's offer topped an all-share bid from Eldorado worth C$6.36 a share. Earlier yesterday, Eldorado said it was taking its offer to shareholders after the companies failed to reach a deal following protracted negotiations.

Goldcorp said Andean's principal asset was its 100-per cent owned Cerro Negro Gold project in the southern province of Santa Cruz in Argentina, which would add to its gold production pipeline.

With an estimated reserve roughly equal to the output of the world's second-biggest gold mine in a single year — Navoi Mining & Metals 2.4 million ounce per year Muruntau mine in Uzbekistan — Cerro Negro's owner are getting top dollar for the operation.

However, analysts said the willingness to pay the equivalent of the Joint Ore Reserves Committee (JORC) reserve at current gold prices, suggests the bidders expect to find more gold if they expand exploration.

While equity analysts put Andean's fair price at C$6.5 to C$6.6 a share, in line with the Goldcorp offer, they added Kinross, Yamana Gold and AngloGold Ashanti are well positioned to consider a bid.