Goldcorp Agrees to US$500 Million Sale of San Dimas Mine to Mala Noche Resources

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Includes: GG, IAG, WPM
by: Proactive Investor

Goldcorp Inc (NYSE:GG) has agreed to sell its San Dimas gold-silver mine in Mexico, to Mala Noche Resources Corp. [TSX-V:MLA] in a cash-and-stock deal worth US$500m. The company said that the disposal will allow it to focus on its cornerstone assets.

Under the terms of the deal, Goldcorp will receive US$275 million in cash, Mala Noche common shares worth US$175 million, and a 5-year US$50 million promissory note bearing 6% interest per annum. Upon completion, Goldcorp is expected to own approximately 30% of Mala Noche.

"This transaction is consistent with Goldcorp's ongoing strategy of creating value for shareholders while concentrating our focus on the cornerstone assets ... Like the recently announced sale of the Escobal silver deposit, the capital derived from monetizing this asset will be re-deployed into funding our growth without diluting our shareholders,” Goldcorp President and Chief Executive Chuck Jeannes commented.

“San Dimas has been an important contributor to Goldcorp's success over the years, with new discoveries enhancing the long term production profile at this historic mine. We look forward to participating in the future success of Mala Noche and San Dimas through our significant ownership interest in the company."

Whilst Goldcorp owns more than a 10% shareholding, it is entitled to maintain its percentage stake in Mala Noche, as well as proportional representation on Mala Noche's board.

In 2009, San Dimas produced 113,000 ounces of gold and 5.1 million ounces of silver. Currently, the mines silver off-take is contracted to Silver Wheaton, whereby Goldcorp sells all produced silver from San Dimas for approximately US$4.00 per ounce.

Following the asset sale, Silver Wheaton has agreed to amend the existing agreement, which will subsequently be assumed by Mala Noche. Under the new deal, for the first four years, Mala Noche will deliver the first 3.5 million ounces of the payable San Dimas silver, and 50% of any excess per year. In addition to supplement the San Dimas silver, Goldcorp will provide an additional 1.5 million ounces of silver for approximately US$4.00 per ounce.

After this initial four-year provision, from the fifth year onwards, Mala Noche will supply Silver Wheaton with an amount equal to the first six million ounces of payable silver and 50% of any excess.

Also today, Mala Noche announced that it has appointed former Iamgold (NYSE:IAG) Chief Executive Joseph Conway, the company’s new Chief Executive. Additionally, Eduardo Luna has been appointed as Mala Noche Executive VP and President of Mexican operations.

Disclosure: No position