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Why Goldcorp Plans to Acquire Kaminak Gold

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Acquisition of Kaminak

On May 12, 2016, Goldcorp (GG) announced the acquisition of Kaminak Gold (KMKGF) for 520 million Canadian dollars (~$406 million) in a share swap transaction. Each Kaminak share will be exchanged for 0.11 common shares of Goldcorp. This values each Kaminak share at 2.62 Canadian dollars, which represents a premium of 40% over Kaminak’s 20-day volume-weighted average share price and a 33% premium over its closing price on May 11, 2016. Goldcorp indicated that ~21.6 million shares will be issued based on Kaminak’s outstanding shares on the announcement date. However, there could be an adjustment based on the number of options exercised prior to the completion of the arrangement.

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Acquisition consistent with Goldcorp’s strategy

According to David Garofalo, Goldcorp’s president and CEO, “This acquisition is consistent with our strategy of partnering with junior exploration companies to identify and develop mining districts with significant exploration potential that is expected to grow our net asset value per share.”

This transaction has been approved by the board of directors of Goldcorp and Kaminak but will be subject to other things like a favorable vote from 66.7% of Kaminak shareholders.

M&As in gold miner space

This announcement comes after gold prices (GLD) have risen by 20% since the start of the year. The gold miners (GDX) (GDXJ) have been cutting down their costs and lowering their financial leverage, which has positioned them well to take advantage of potential merger and acquisition opportunities in the precious metals and mining space. This acquisition is the second biggest transaction announced so far in 2016 in the gold miner space. It ranks behind Tahoe Resources’ (TAHO) acquisition of Lake Shore Gold (LSG) for $540 million in February.

In the next part of this series, we’ll discuss Kaminak’s key asset, its Coffee Gold Project, and what it could mean for Goldcorp.

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