Comparing the Goldcorp and Kinross Takeovers

by: Streetwise Blog

Goldcorp Inc.’s (GG) overnight bid for Andean Resources Ltd. (ANDPF.PK) came as a surprise to some people Friday morning, but its initial shock value didn’t match that of Kinross Gold Corp.’s (KGC) $7.1-billion bid for Red Back Mining Inc. (RBIFF.PK), which could be in trouble.

With two major gold deals in a month, it makes sense to put the transactions side by side to compare metrics.

Location of Target's Major Asset(s):

  • Andean: Cerro Negro gold project in Argentina
  • Red Back: Gold mines in Ghana and Mauritania

Premium paid:

  • Andean: 35 per cent
  • Red Back: 21 per cent

Dilution to CFPS:

  • Goldcorp: Around 9 per cent in 2011, and 1 to 4 per cent for a few years after, according to Cormark Securities
  • Kinross: Around 20 per cent for the next three years, according to UBS Securities

Proven and probable gold reserves:

  • Andean: 2.5 million ounces
  • Red Back: 8.1 million ounces

Production after acquisition:

  • Goldcorp: Almost 4 million ounces by 2014, according to Bank of America Merrill Lynch
  • Kinross: Around 3.7 million ounces in 2015, according to National Bank Financial


Goldcorp/Andean: Both boards and Sentient Executive GP II, which owns 21 per cent of Andean

Kinross/Red Back: Both boards and 14 per cent of Red Back shareholders. But the deal has run into problems of late.