Yamana's deal with Osisko may thwart Goldcorp bid but at a premium price

Yamana Gold (AUY) looks to have captured a huge prize in the Malartic gold mine via the acquisition of a 50% stake in Osisko Mining's (OSKFF) mining and exploration assets, but analysts are skeptical about AUY effectively paying a premium without gaining a controlling interest in the mine itself.

Cowen analyst Adam Graff approves of the deal as it would help generate some tax savings for AUY in Canada, but he doubts the savings will offset the negative impact of the purchase premium.

Investor Adrian Day says the implied price AUY would pay doesn't look grossly high, but the deal structure, where Yamana will not get control, is unusual; if hostile takeover bidder Goldcorp (GG) comes back with a better offer, he thinks many shareholders will find it easier to wrap their heads around than AUY's deal.

Analysts had not expected another mining company to challenge Goldcorp, and some see a higher bid coming: "They have been chasing this asset for five years and there is no reason they would let it slip through their fingers."

AUY shares -2.2% on the day, but most gold miners gained: OSKFF +7.7%, GG +2%, NGD +4.4%, ABX +4%, AGI +4%, NEM +3.3%, ANV +3.3%, NG +3%, GFI +2.7%, KGC +2.6%.

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Comments (4)
  • TAS
    , contributor
    Comments (3996) | Send Message
    Could it be that if one chases an asset for five years, those holding the asset know this and wait until your offer is too rich to pass up?


    Who is the winner in this case?
    2 Apr 2014, 06:53 PM Reply Like
  • james.
    , contributor
    Comments (1377) | Send Message
    The Gold Miners listed above did well today , except AUY .
    3 Apr 2014, 12:12 AM Reply Like
  • mjrcme
    , contributor
    Comments (105) | Send Message
    Mr. Market has allowed us to buy AUY near 52 week lows when GLD has already turned higher. Buy AUY !!
    3 Apr 2014, 01:02 AM Reply Like
  • 6151621
    , contributor
    Comments (1172) | Send Message
    Time will tell but does seem to offer a good risk reward .. I'm in with a small stake.
    3 Apr 2014, 09:13 AM Reply Like
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