By Tim Wood –
ST. LOUIS (ResourceInvestor.com) — Goldcorp’s [GG] newly minted president and chief executive, Ian Telfer, is holding to his publicly announced playbook with the $70 million cash acquisition of the Bermejal gold deposit in Mexico.
Despite Telfer flagging his ‘new’ strategy repeatedly even before the Goldcorp-Wheaton deal, many investors thought the newly enlarged company would quickly go shopping for big ticket items. Not at all.
Telfer, with exquisite cycle timing, started presenting a new development phase for Wheaton by early 2004. He was indicating then that the go-go growth phase using torrents of scrip was over. Indeed, within mere weeks Wheaton was attempting a reverse takeover for IAMGold, essentially spending $800 million to acquire $1 billion in assets.
That deal may have collapsed, but Telfer laid out his vision, and some strategy and tactics, in discussions about the M&A future of the proposed merged companies. Nothing has changed with Goldcorp.
He wants to focus on narrow time zones; preferred private deals; is more inclined to use cash than equity to pay for transactions; and is “very” risk averse.
That has all been reaffirmed as Goldcorp moves to close its takeover of Wheaton, and it’s what Bermejal is. No messy dogfight involving publicly traded stock; leveraging personal relationships to find the asset; and expending Goldcorp’s processed, but unsold, bullion to buy potential bullion in the ground.
The only problem is that the market now lies in wait for Goldcorp to offload $70 million in gold “early in the second quarter”. Announcing the timing of the sale of the gold is not altogether helpful to the gold price even though it’s a smidgeon. The physical gold market is not all that liquid, and the players will make a run at shorting Goldcorp.
The Bermejal gold deposit is close to Wheaton’s Los Filos gold deposit and will allow the use of a joint processing facility for ore from both deposits, the company said. Combining the assets is expected give Los Filos annual production in excess of 300,000 ounces of gold a year.
“The acquisition of Bermejal will turn our Los Filos project into the largest gold mining operation in Mexico,” Telfer said in a statement. That’s a good platform for further consolidation and rationalization in the country.
The deal also reveals for investors the balance of power emerging in Goldcorp since it was widely believed that chairman Rob McEwen would clash with Telfer’s rapid-paced decision making.
Whilst Goldcorp is conforming to type, investors should not assume that it will not attempt something audacious even as it uses the cover of Bermejal style transactions to find its choice prize.
Source: ResourceInvestor.com
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