Osisko Mining outlines $1.37-bn deal with Yamana Gold

Canadian gold miner Osisko Mining Corp yesterday struck a deal to sell a 50-per cent stake in its mining and exploration assets to Yamana Gold Inc for $1.37-billion, a deal that torpedoes a hostile bid from Goldcorp Inc.

Early this year, Montreal-based Osisko had rejected a hostile C$2.6 billion ($2.37 billion) takeover bid from rival Goldcorp, saying that the stock-and-cash offer is "financially inadequate and not in the best interests of Osisko." (See: Canadian gold miner Osisko rejects $2.37-bn bid from Goldcorp)

Goldcorp's bid is to expire on Friday, and has a day to raise its offer or walk away from buying the owner of Canada's largest gold mine.

Under the Yamana Gold deal that values Osisko at about $3.4-billion, Yamana will buy a 50-per cent interest in Osisko's mining and exploration assets for C$441.5 million in cash and 95.7 million common shares of Yamana worth $929.6-million for total consideration of $1.37-billion.

Yamana cash and share offer represents a premium of about 10 per cent over Osisko's closing price yesterday for a total of C$7.60, compared to Goldcorp's cash and stock offer of C$5.95.

Under the terms of the deal, Yamana will become an equal partner in all of Osisko's mining and exploration assets.  Osisko will continue to operate the Canadian Malartic Mine and all other projects under a joint operating committee, and will also maintain its head office in Montreal. 

Osisko will transfer all of its rights, titles and interests in its mining assets, including the Canadian Malartic Mine and its advanced and greenfield exploration properties to one or more general partnerships. Yamana will then acquire a 50 per cent interest in the units of each of the General Partnerships.

Osisko has agreed to pay C$70 million as termination fees if the transaction is not completed, and a further C$10 million to reimburse expenses incurred by Yamana during the deal process.

Osisko has also reached two separate deals with two of Canada's largest pension funds, who are existing Osisko lenders.

Osisko has also reached separate deals with the two large Canadian pension funds - Canada Pension Plan Investment Board (CPPIB) and Caisse de depot et placement du Quebec, conditional on the Yamana deal's closing.

Canada Pension Plan Investment Board has agreed to increase its C$150 million credit facility to C$275 million, while Caisse de depot et placement du Quebec will give Osisko a $275-million upfront payment in return for a stream of future production from Malartic. The deal will see the Caisse buy 37,500 ounces of gold per year from Osisko for 42 per cent of the spot gold price.

Osisko's flagship asset is Canadian Malartic in Quebec, one of the world's largest gold mines.

With over 10 million ounces of established proven and probable reserves, Canadian Malartic is a world-class gold mine, with superior scale and costs relative to many of the producing assets held within the five largest North American domiciled gold producers.

The deal is expected to close by 30 May, following receipt of all shareholder and court, regulatory and exchange approvals.