Goldcorp's growth bets
By: Tim Wood
Posted: 2003/04/24 Thu 22:01 EDT | © Mineweb 1997-2003
NEW YORK -- Goldcorp [GG] has thus far shied away from the mergers or acquisitions that its competitors have relied on to bulk up. The reason is management’s conviction that corporate M&A is seldom accretive; so Goldcorp has elected to focus on expanding its Red Lake mine and making strategic investments in companies it believes have the ability to create value through generative exploration.
Goldcorp runs a secretive investment portfolio that is worth more than $20 million at recent market prices. Only when regulatory constraints necessitate disclosure does Goldcorp reveal its interests. Those disclosure hurdles are a boon for early investors in the juniors because it offers a partial safety net and publicity money cannot buy.
For the companies highlighted during the release of today’s (Thursday) first quarter financial results, there was an added bonus when Chris Bradbrook, Vice President of Corporate Development at Goldcorp, made it clear that majority control, at least of the targeted projects, would be sought should the exploration companies discover a lode.
These are the companies that Goldcorp likes, primarily because they operate in low risk areas and have impressive management teams. Here they are
Planet Exploration [PXI – Toronto Venture Exchange]
* Shares outstanding: 14,885,445
* Float quoted market value: C$6.9
* President: Ranjeet Sundher
Goldcorp spent C$500,000 last month to acquire what is now 6.7% of Planet through a private placement. The C$0.50 share paid is in the money with the Planet stock last traded at 55.32 cents. Consider that the 52-week high of C$1.21, hit earlier this year, for an idea of where it has been and might return. Goldcorp has the right to double its shares by exercising warrants at C$0.60 per share.
Planet controls over 4,000 hectares of ground in the Red Lake district which has become an exploration magnet in the wake of Goldcorp’s success.
Planet acquired a 100% interest in a land position “that is interpreted to be the northeast extension of the East Bay trend.” As a part of the acquisition, Planet acquired additional claims in the area from joint venture partner Madalena Ventures which now owns nearly one quarter of Planet although it lacks board representation.
Goldcorp can earn a 50% interest in Planet’s Red Lake properties by funding a three year exploration program. Initial exploration planning has commenced.
Early drill results have been promising with reported grades of 3.12 grams per tonne over 11.58 metres and over 20g/t, but over less than half a metre.
Planet also has a copper/gold project in Mongolia, close to Ivanhoe Mining’s Turquoise Hill prospect.
Candente Resources [DNT – Toronto Venture Exchange]
* Shares outstanding: 27,536,970
* Float quoted market value: C$20.9
* President: Joanne Freeze
Candente hardly needs any introduction thanks to the fame of president and CE, Joey Freeze. She co-discovered the Pierina deposit in Peru, which was subsequently sold to Barrick for a handsome sum.
Goldcorp owns just over 6% of Candente with other major shareholders Prudent Bear Fund at nearly 17% and Canada’s Dynamic Precious Metal Funds controlling over 7%. Goldcorp spent C$1,020,000 to buy 1,700,000 shares at C$0.60 each, which includes a one half share purchase warrant, with a full price of C$0.90 per full warrant during the first twelve months and $1.10 per share during the second twelve months.
Goldcorp has professed little interest in non-North American projects, so Candente’s exciting Peruvian assets play second fiddle to its Newfoundland properties in this case. Besides, AngloGold has a large “do not disturb sign” on the Peruvian interests as it is.
The Newfoundland properties consist of the Linear Property, the Virgin Arm Property and the Staghorn Property. All the properties have turned up tremendous early results that would add a clutch of arrows to Goldcorp’s bow if they pan out to be substantial and economic.
Whilst Peru may be off the public relations radar for Goldcorp, it has a sufficiently settled mining law and plenty of Gringo companies with hard experience there to add comfort. If there is a foreign country that might attract Goldcorp’s interest, it would be Peru, but it would have to be something substantial to convince CE Rob McEwen to spend much time away from Toronto.
Madison Enterprises [MNP – Toronto Venture Exchange]
* Shares outstanding: 55,527,867
* Float quoted market value: C$15.1
* President: Chet Idziszek
Goldcorp acquired 5 million shares of Madison, a stake equal to 9%, in a February private placement of 11 million units at a price of C$0.20 per unit. Each unit comprises one common share of Madison and one half warrant. Each full warrant allows the holder to purchase of an additional common share for $0.25 per share for one year.
Madison is best known for its Mt. Kare project in Papua New Guinea and the Belencillo property in Panama. Neither of those are of the slightest interest to Goldcorp; it is eyeing its Lewis project in Nevada. The Lewis Property is contiguous with Newmont’s Phoenix Property (ex Battle Mountain) which has past production and current mineable reserves exceeding nine million ounces of gold. The project was shelved because of sustained low gold prices.
The Lewis property is presently being mapped to better understand the geology after initial drill holes returned best gold results of 0.196 oz/t over 170 feet and 0.122 oz/t over 240 feet.
Its proximity to Phoenix and any substantive exploration success is likely to make it interesting to Newmont which would be able to bring better regional economies of scale and efficiency to bear. Consequently, Madison is probably not a potential an open pit string to the Goldcorp bow, but a strategic bet on consolidation in Nevada at premium prices.
American Bonanza Gold Mining [BZA – Toronto Venture Exchange]
* Shares outstanding: 114,906,251
* Float quoted market value: C$31
* President: Brian Kirwin
Bonanza has generated massive wealth for early shareholders thanks to successful results from its American properties.
Goldcorp controls just under 10% of Bonanza after buying 11,363,636 units in a February private placement. Each unit was priced at C$0.22 and consists of one common share and one half share purchase warrant. Each full warrant offers the right to purchase one common share at a price of C$0.28 per share until January 31, 2004.
Goldcorp’s investment went toward funding underground development and drilling of the Copperstone gold project in Arizona which has become more attractive at higher gold prices. The project boasts a mineral resource of 1.2 million gold ounces according to a 1999 MRDI Canada study.
Recent drill results showed three holes with “apparently continuous gold mineralization” of 4.35opt over 15 feet; 1.6opt over 25 feet and 2.74opt over 20 feet.
Bonanza is currently completing a drift to collect a 50,000 ton bulk sample. The drift will also allow further underground exploration and definition drilling as well as surface exploration drilling of the footwall structure. Conversion of resources to reserves is the medium-term target.
Bonanza also has interests in the Pamlico property in Nevada which has also returned some interesting results this year. The company also controls the Gold Bar property in Nevada. |
