This morning, Goldcorp announced it would acquire Kaminak Gold for C$520 million, securing ownership of Kaminak’s high-grade, heap-leach Coffee project in Canada’s Yukon.
This morning, Goldcorp (TSX:G) announced it would acquire Kaminak Gold (TSXV:KAM) for C$520 million.
Kaminak’s flagship asset is the Coffee gold project in Canada’s Yukon, set to be developed as a high-grade, open pit, heap leach mining project. Currently, the project holds 3 million ounces of gold in indicated resources and 2.2 million ounces of gold in inferred resources.
Shares of Kaminak spiked over 25 percent to $2.50 per share on the news on Thursday.
“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,” said Goldcorp president and CEO David Garofalo. “Coffee is located within a politically stable jurisdiction and provides us with an opportunity to add high quality ounces to our development pipeline, at low all-in sustaining costs.”
Kaminak has been a favorite among junior mining market watchers in recent years due to the company’s strong management team and strong economics of the deposit. A feasibility study for Coffee released earlier this year showed the project having a net present value (NPV) of $455 million at a 5 percent discount, and an internal rate of return (IRR) of 37 percent.
This isn’t the first time CEO Eira Thomas has seen exploration success either. She was responsible for discovering the Diavik diamond mine in the Northwest Territories, and helped found Lucara diamond (TSX:LUC).
“This transaction realizes many immediate benefits for our shareholders and at the same time ensures that the Coffee Gold Project will be developed in a timely and responsible manner,” Thomas said in a company release. “Coffee is a natural fit within [Goldcorp’s] portfolio and they have the experience, expertise and financial flexibility to build Coffee for the benefit of our First Nations partners and all Yukon stakeholders.”
Certainly, despite the weakness in the gold price in recent years, Brent Cook of Exploration Insights has drawn attention to the simple fact that top gold producers such as Goldcorp still need to acquire and develop projects to keep their pipeline healthy. And with what he sees as a lack of new gold discoveries, gold deposits that truly work will be in high demand.
What’s more, it appears that the gold price rout may be no longer, as gold is up over 20 percent this year and market watchers and analyst firms are starting to suggest that gold may be entering a bull market. Meanwhile as the Globe noted, Goldcorp recently reported its first profit in three quarters.
Cook and Exploration Insights co-editor Joe Mazumdar stated earlier this year that they viewed Kaminak as “a likely acquisition candidate,” according to the Globe and Mail. However, they added, “there is no urgency to acquire the stock now, and we would wait for the inevitable pullbacks as the gold market swings over the coming year.”
Certainly, there’s been more M&A in the mining sector as of late, with prices for many metals on the rise year-to-date, and savvy investors are no doubt keeping an eye out for other potential acquisiton targets.
Goldcorp’s acquisition of Kaminak is expected to close by August 15.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.