Acquisition of 30% stake
On August 27, Goldcorp (GG) announced that it has entered into an agreement with New Gold (NGD) to acquire its 30% interest in the El Morro gold-copper project in Chile. On completion of the acquisition, Goldcorp will own 100% of this project.
Under the terms of the agreement, Goldcorp will pay $90 million in cash plus 4% gold stream of future production from El Morro to NGD.
According to Goldcorp, New Gold will make payments of $400 per ounce of gold delivered under the contract. This is subject to a 1% per annum adjustment once 217,000 ounces have been delivered.
About El Morro project
The El Morro project is located in Northern Chile. It covers an area of 417 square kilometers. A late 2011 feasibility study estimated the development costs of the project to be $3.9 billion. Copper and gold reserves are estimated at 16.6 billion pounds and 8.9 million ounces, respectively, with a production of approximately 190,000 tons per year of copper and 315,000 ounces of gold per year.
In the next part of this series, we’ll see how Goldcorp plans to combine its 100% stake in El Morro with Teck Resources’ (TCK) project in Chile to form a 50:50 joint venture.