Goldcorp’s Probe Takeover Spurs Consolidation Talk

Probe Mines (TSXV:PRB) was up nearly 50 percent Monday morning after Goldcorp (TSX:G,NYSE:GG) announced that it will be acquiring the base and precious metals exploration company in a friendly all-stock takeover.

Prior to Monday, Goldcorp owned about 9.3 percent of Probe’s basic shares outstanding, and will now exchange 0.1755 Goldcorp shares for each common share of Probe that it does not own. The transaction values each Probe share at $5, which is a 49-percent premium on the company’s Friday closing price of $3.36; altogether, consideration for the purchase totals C$526 million.

Probe shareholders will also receive an interest in a new exploration company that will hold Probe’s assets in Ontario’s Ring of Fire, plus about $15 million in cash and some of Probe’s other assets. Goldcorp will own about 9.3 percent of that company.

As that division suggests, the main draw for Goldcorp in acquiring Probe was its Borden gold project, also located in Ontario. An updated mineral resource estimate for the project released in June 2014 shows that it has a high-grade underground resource with a constrained indicated resource of 1.6 million ounces of gold averaging 5.39 grams per tonne (g/t) gold plus a constrained inferred resource of 0.43 million ounces of gold averaging 4.37 g/t gold at a cut off of 2.5 g/t. Borden is also estimated to contain an open-pit constrained resource of 2.32 million ounces of gold averaging 1.03 g/t gold at a cut off of 0.5 g/t.

Execs at both companies are pleased with the deal. Chuck Jeannes, president and CEO of Goldcorp, said in a statement that the transaction “is consistent with Goldcorp’s longstanding strategy of securing growth opportunities in and around our existing districts with a focus on low-cost, high-quality gold production.” He also noted, “Goldcorp is uniquely suited to add Borden to its asset portfolio due to its proximity to our Porcupine operation.”

Meanwhile, Jamie Sokalsky, chairman of Probe and former CEO of Barrick Gold (TSX:ABX,NYSE:ABX), commented that he sees the deal as an “excellent outcome” for his company’s shareholders. “New Probe will be well funded and will continue to expose Probe shareholders to further potential exploration and development success. New Probe will also have an experienced Board of Directors and management team, and sufficient financial resources to immediately undertake active exploration,” he said.

Analysts are pleased about the transaction for another reason. Reuters quotes Tyron Breytenbach of Cormark as saying that Goldcorp’s move could spur interest in Probe’s competitors, which include Romarco Minerals (TSX:R), Kaminak Gold (TSXV:KAM), Premier Gold Mines (TSX:PG) and Pretium Resources (TSX:PVG,NYSE:PVG).

At time of publication, shares of Probe were selling for $4.99 each, up 48.51 percent.

Probe is currently attending Cambridge House International’s 2015 Vancouver Resource Investment Conference, which is being held at the Vancouver Convention Center from January 18 to 19. Stop by booth 907 to visit the company. 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.