Goldcorp Inc. is selling an undeveloped silver deposit for $505-million (U.S.) to upstart Tahoe Resources Inc., a company run by Goldcorp.'s former chief executive officer Kevin McArthur.
To pay for the Escobal silver project in Guatemala, Mr. McArthur is taking six-month-old Tahoe public on the Toronto Stock Exchange in an offering that aims to raise more than $300-million (Canadian).
Vancouver-based Tahoe plans to pay Goldcorp at least $230-million (U.S.) in cash for the silver project and 40 per cent of the fully diluted shares issued in the Tahoe IPO, a deal led by GMP Securities and Genuity Capital Markets.
"There's a good appetite for new stories in the silver space," Mr. McArthur said in an interview Monday. He retired from Goldcorp at the end of 2008 after running the company for two years.
For Goldcorp, whose market value of $32-billion (Canada) makes it the 12th-largest on the TSX, the sale of the Escobal silver project monetizes an asset for which it received little credit on the stock market.
Goldcorp has two drill rigs operating at the site, which Tahoe plans to continue, spending upward of $10-million on additional exploration. Goldcorp, on its website, describes Escobal as a "world-class" silver project and said at the end of last year the measured and indicated silver resource was 130.1 million ounces and the inferred resources totalled 187.5-million.
"They're basically monetizing an asset that previously received little value in their portfolio of assets," said analyst Haytham Hodaly of Salman Partners.
Goldcorp stock fell Monday to $43.16, down 75 cents or 1.71 per cent. The decline occurred in the morning. The news of the silver sale was announced with about an hour left in the trading session and did not significantly affect the shares as they bounced in a 20-cent range.
Mr. McArthur started Tahoe last November and has been hunt for a silver asset in Central America. He said he had been in talks with Goldcorp for several months about Escobal. Mr. McArthur owns 86 per cent of Tahoe.
"We have brought together a team of seasoned mining professionals and a board of directors with extensive experience in Latin America, and in Guatemala in particular," said Mr. McArthur in a statement announcing the IPO.
David Ebner