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The Canadian Malartic mine.

Agnico Eagle Mines Ltd. surprised the market when it teamed up with Yamana Gold Inc. to make a $3.9-billion bid for Osisko Mining Corp.

Although Osisko is a natural fit for Agnico because its Quebec mines sit along the same highway as Osisko's only mine, the company has traditionally bought projects that needed to be developed.

When Goldcorp Inc. launched its $3-billion hostile bid in January, Agnico was thought to be the obvious white knight, except that it did not have the same kind of cash to compete with the much larger Goldcorp.

Nevertheless, the Goldcorp bid piqued Agnico's interest.

The company immediately signed a confidentiality agreement with Osisko and drove down the highway from one of its Quebec operations to Osisko's Canadian Malartic mine.

"If this was in another part of the world, we wouldn't have any interest," Agnico's chief executive officer Sean Boyd said in an interview.

The Toronto-based company has agreed to use $500-million from its credit facility and dilute its stock by 17 per cent to buy half of Canadian Malartic and some of Osisko's exploration assets.

The Osisko acquisition would add up to 300,000 ounces of production a year to Agnico's annual production of about 1.2 million ounces.

"Because we had been there for so long and it was a quality asset that was generating net free cash flow, we decided to have a look and get involved in the process," Mr. Boyd said.

Agnico's last acquisition was in 2011 when the miner bought a small company with exploration assets in Mexico. The previous year it bought a small company with a gold project in Nunavut and acquired a stake in a junior miner with exploration assets in Quebec.

Mr. Boyd said his bid for Osisko was not a departure from Agnico's acquisition strategy and said he was not looking at other mines close to the company's operations in Nunavut, Finland and Mexico.

"This is unique. There is nothing else in Nunavut. There is nothing else in Northern Finland and there is nothing else that is producing and of size in Mexico, where we are currently operating," Mr. Boyd said.

Five years ago, Yamana had considered working with Agnico to buy Osisko when Canadian Malartic was not yet in production, sources said. But the partnership was never formed.

This time around, Agnico said yes.

After conducting its due diligence on Canadian Malartic, Agnico told Osisko that it would only get involved if it had a partner.

"We had always expressed an interest from day one that if we were going to get involved, we were not going to do it on our own," Mr. Boyd said.

Agnico was on the sidelines when Yamana struck its first deal with Osisko. The initial deal would have split Canadian Malartic between Osisko and Yamana and included capital from two Canadian pension funds.

When asked why Agnico was not part of the first deal, Mr. Boyd said the company had to follow a process.

"We had to wait for Osisko to allow us to speak to other potential partners," he said.

Mr. Boyd, who has worked for Agnico since 1985, has shied away from multibillion-dollar deals. Those big deals eventually became the death knell for mining chief executives when metal prices plunged.

Mr. Boyd would not say whether he would be willing to increase his offer one more time if Goldcorp trumped his offer.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 2:44pm EDT.

SymbolName% changeLast
AEM-N
Agnico-Eagle Mines Ltd
-1.14%55.3
AEM-T
Agnico Eagle Mines Ltd
-1.24%74.84
G-N
Genpact Ltd
+0.42%33.26
G-T
Augusta Gold Corp
-1.12%0.88
OSK-T
Osisko Mining Inc
-1.75%2.81

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