"Eleonore is a unique and significant property located in the core of what Goldcorp believes is one of the most promising new gold districts in North America," said Ian Telfer, President and Chief Executive Officer of Goldcorp. "The incredible success that Virginia has had in the short time since discovery in late 2004, when combined with accessible infrastructure and a mining friendly regulatory environment, reinforce the quality of this asset. Of the 212 drill holes completed to date on the entire property, over 70% have reported assays greater than 10 grams of gold per tonne, and the principal Roberto deposit remains open in both strike and depth. Goldcorp plans to continue aggressive exploration and development on Eleonore, with resource and scoping studies to be initiated early in 2006."
"All of us at Virginia wanted to see Eleonore developed by a qualified and experienced mine development team and Goldcorp with their Canadian expertise is without any doubt one of the best in the industry," said Andre Gaumond, President of Virginia.
Based on the 10 day weighted average trading price for Goldcorp's common shares on the Toronto Stock Exchange of Cdn$24.70, the transaction values the Eleonore gold project at approximately US$420 million. Goldcorp will issue 19.6 million common shares pursuant to the transaction, representing approximately 5% of the 359.5 million common shares outstanding after giving effect to this transaction.
Completion of the transaction is subject to entering into definitive agreements, approval by Virginia shareholders and the receipt of regulatory approvals, including the approval of the Toronto Stock Exchange. Goldcorp expects that the transaction will close in the first quarter of 2006.
The Board of Directors of each company have unanimously approved the transaction. The Board of Directors of Virginia has received an opinion from Orion Securities Inc. that the transaction is fair, from a financial point of view, to Virginia shareholders. Officers and directors of Virginia have entered into lock-up and support arrangements with Goldcorp under which they have agreed to vote in favour of the transaction. Virginia has agreed to pay Goldcorp a break fee equal to 4% of Virginia's market capitalization, calculated on a fully-diluted basis, in the event that the transaction is not completed in certain circumstances.
Under the agreement, shareholders of Virginia will receive 0.4 of a Goldcorp common share and 0.5 of a share in a new public exploration company ("New Virginia") for each issued and outstanding Virginia share. Virginia will be acquired by Goldcorp and will retain the Eleonore project. New Virginia will hold all other assets of Virginia, including net working capital, cash to be received prior to closing from the exercise of Virginia options and warrants, its non-Eleonore exploration assets and a sliding scale 2% net smelter return royalty on the Eleonore project.
In addition, the holders of Virginia warrants will receive warrants of Goldcorp and New Virginia, based on applicable exchange ratios, in exchange for such Virginia warrants, and all stock options or other rights to subscribe for unissued securities of Virginia will either be exercised or terminated.
In connection with this transaction, Goldcorp also has the right to subscribe for up to 5% of New Virginia's common shares with warrants to enable Goldcorp to acquire up to an additional 2%. Pricing of the shares and the warrants will be determined in the context of the market.
Goldcorp is the world's lowest cost and fastest growing million ounce gold producer. Gold production in 2006 is expected to exceed 1.4 million ounces at a cash cost of less than US$100 per ounce. Goldcorp has approximately US$400 million in cash and equivalents, no debt and no hedging.
Cautionary Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements", within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, concerning the business, operations and financial performance and condition of each of Goldcorp Inc. Forward-looking statements include, but are not limited to, statements with respect to the future price of gold, silver and copper, the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, permitting time lines, currency exchange rate fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Goldcorp to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the integration of acquisitions; risks related to international operations; risks related to joint venture operations; actual results of current exploration activities; actual results of current reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of gold, silver and copper; possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in (a) the section entitled "Description of the Business - Risk Factors" in Goldcorp's Form 40-F for the year ended December 31, 2004 on file with the Securities and Exchange Commission in Washington, D.C., and (b) the section entitled "Description of the Business - Risk Factors" in Wheaton River Minerals Ltd.'s Form 40-F for the year ended December 31, 2004 on file with the Securities and Exchange Commission in Washington, D.C.
Although Goldcorp has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Goldcorp does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws.
Goldcorp Inc. (TSX:G) (NYSE:GG)