Kaminak filings reveal multiple potential bids for Coffee

Kaminak Gold's Coffee gold camp, 130 km south of Dawson City, Yukon. Credit: Matthew Keevil.

VANCOUVER — In early May, Goldcorp (TSX: G; NYSE: GG) launched a $520 million, all-share bid for explorer Kaminak Gold (TSXV: KAM; US-OTC: KMKGF) and its feasibility-stage Coffee gold project in the Yukon. Kaminak’s subsequent management circular filings have revealed there were two other potential bidders for the junior, and that Goldcorp had to sweeten its first informal offer to secure a friendly bid.

The Coffee project encompasses 52.4 million indicated tonnes grading 1.68 grams gold for 2.8 million contained oz. gold, and 43 million inferred tonnes of 1.52 grams gold for 2.08 million contained oz. gold.

Interest in Kaminak heated up after it updated the feasibility study on the project in January, outlining a heap-leach operation on 2.2 million oz. gold-oxide reserves that carries a US$455 million, after-tax net present value at a 5% discount rate and a 37% internal rate of return.

According to the new filings, the first interested bidder came forward in March to informally enquire about a transaction. These discussions reportedly continued through April, when Goldcorp delivered its initial, non-binding transaction proposal.

Kaminak management determined the proposal “was not sufficiently compelling to enter into exclusive discussions,” but said it would “work with Goldcorp to help complete its due diligence if it was prepared to consider delivering more value.”

Two weeks after Goldcorp’s first offer, a third company entered the fray and requested a site visit to Coffee to “pursue a transaction.”

Kaminak subsequently heard the first interested bidder intended to offer a proposal, while Goldcorp indicated it would deliver a “revised” offer by May.

On May 6, Kaminak received the new proposal from Goldcorp and an offer from the first interested party. There was no further mention by Kaminak of the third company.

On May 8, Kaminak and Goldcorp agreed to enter into exclusive negotiations on the basis that, among other things, the consideration would increase to $2.70 per share.

Directors, officers and shareholders of Kaminak representing 27.5% of its outstanding shares agreed to vote in favour of the arrangement, which is expected to close no later than Aug. 15. Goldcorp retains the right to match any superior offer and is entitled to a $20.3 million break fee.

The multiple-offer situation hints at the lack of attractive development projects in North America, with new Goldcorp president and CEO David Garofalo stating during marketing presentations in June that “there is a lack of opportunity, given a focus on investing in politically safe jurisdictions.”

BMO Research said in a June 8 note that Goldcorp’s message to investors was clear: “expect future acquisitions.”

Goldcorp shares have traded in a 52-week range of $13.55 to $25.35 per share, and closed at $22.81 at press time. The company has 832 million shares outstanding for a $19 billion market capitalization.

Meanwhile, Kaminak shares have gained nearly 50%, or 80¢, since news of the friendly Goldcorp bid, en route to a $2.46-per-share close. The company has 186 million shares outstanding for a $459 million market capitalization.


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