Goldcorp Inc. is selling a gold-and-silver mine in Mexico in a $500-million (U.S.) deal that furthers the company's strategy of selling small projects to focus on its bigger gold operations.
Vancouver-based Goldcorp, the world's second-largest gold miner by market capitalization, said it agreed to sell its San Dimas gold-silver deposit in Mexico to exploration firm Mala Noche Resources Corp.
As part of the agreement, Goldcorp will receive a controlling 30-per-cent stake in Vancouver-based Mala Noche, which will be headed by former Iamgold Corp. chief executive Joseph Conway.
Goldcorp will receive $275-million in cash and $175-million worth of Mala Noche shares valued at the offering price of Mala Noche's proposed equity financing. Goldcorp will also receive a $50-million promissory note payable over five years.
The cash from the transaction will pay for Goldcorp's $277-million purchase earlier this year of Canplats Resources Corp. and its Camino Rojo project in Mexico. Goldcorp bought the mine, after raising the offer price twice, for its proximity to its flagship Penasquito mine, which began production this year.
For Goldcorp, the Mala Noche deal is its second in as many months where it sold off a smaller asset, then took a major stake in the buyer, that would then be run by a former mining executive making a comeback.
In May, Goldcorp sold its Escobal silver deposit in Guatemala for $505-million to upstart Tahoe Resources Inc., a company run by Goldcorp's former CEO Kevin McArthur, who retired at the end of 2008.
Goldcorp is taking a 40-per-cent stake in Tahoe, which is expected to go public next week after recently completing a $348-million (Canadian) initial public offering at $6 per share.
"This latest deal is consistent with the strategy we've been discussing and that is to manage our portfolio of assets, meaning not just buying new high-quality things, but also be willing to dispose of non-core assets," Goldcorp CEO Chuck Jeannes said Wednesday.
San Dimas, which produced 113,000 ounces of gold and 5.1 million ounces of silver last year, doesn't generate as much cash for Goldcorp when compared to its much larger properties, Mr. Jeannes said. "Our attention is better served focused on our core assets."
Taking a stake in both Mala Noche and Tahoe also gives Goldcorp a continued investment in assets its has nurtured to this point, Mr. Jeannes said.
Goldcorp bought San Dimas in 2002 for $75-million and has an arrangement to sell silver from the mine to Silver Wheaton Corp. That deal will continue under different terms.
Mala Noche has been on the hunt to buy its first producing mine, and targeted San Dimas since it was a property well known to its president Eduardo Luna, a former chairman of Silver Wheaton.
It was during the negotiations with Goldcorp that Mr. Conway's name came up as someone who could run Mala Noche, given his seven years at the helm of Iamgold Corp., helping turn it into an intermediate producer from a junior.
Mr. Conway left Iamgold in January after what sources say was a disagreement with the board over the future direction of the company.
"I am very excited about this Mala Noche opportunity. With the San Dimas acquisition we've created a new Americas play," Mr. Conway said Wednesday, adding that his goal is to turn the company into an intermediate producer within three years. "We want to become a new low-risk growth vehicle in this space."
Mala Noche's CEO Wade Nesmith will move the role of chairman, while president Mr. Luna becomes president of its Mexican operations. When the deal closes next month, Mala Noche, which translated from Spanish means "bad night," will change its name to Primero Mining Corp.