The boards of directors at
The bids from Golden Star and Coeur surfaced on May 27, when Coeur made a takeover offer for Wheaton River, and Golden Star made one for Iamgold. The offers would have had the effect of breaking up the March 30 friendly deal under which Iamgold was offering 0.55 of a share for shares of Wheaton to form a new company called Axiom Gold.
Coeur d’Alene had priced its bid for Wheaton above the Iamgold offer, but the fall in the price of Coeur and Golden Star shares since the offer was announced has made it debatable whether the new bids outmatch the original merger agreement.
Coeur’s offer for Wheaton was a cash-and-shares bid, with $4.50 cash offered up to a limit of $285 million, and 0.649 of a Coeur share for one Wheaton share. Coeur’s cash bid, if accepted for all Wheaton shares, would mean a cash distribution of 50 per share and a share trade to cover the rest of the bid. The new Coeur shares would trade exchangeably on the New York and Toronto stock exchanges.
Based on closing prices at presstime, the Coeur offer valued Wheaton at $4.01 per share. At the time of the offer, the share trade would have been worth $4.50. Iamgold’s offer of 0.55 of a share valued Wheaton at $4.15.
Both new offers were conditional on Iamgold and Wheaton abandoning their deal. Golden Star’s offer, but not Coeur’s, also required a due-diligence investigation.
Wheaton’s board rejected Coeur’s offer, saying the Iamgold proposal remained the superior one. Under the Iamgold-Wheaton deal, if either company received a superior proposal — defined in the deal as $5.40 or more per Wheaton share — it could back away from the deal by paying a breakup fee equal to 3% of its market capitalization. Golden Star and Coeur agreed in advance that any break fee would be paid by the two, with Coeur then paying US$26 million to Golden Star to make up the difference in the size of the acquisition.
Iamgold knocked back the approach from Golden Star, which had made an all-share takeover offer of 1.15 Golden Star shares for one Iamgold share. That share exchange valued Iamgold at $8.33 when it was announced — a premium of 13% over Iamgold’s May 27 close of $7.38 — but a subsequent fall in Golden Star’s share price put the offer at $7.52 at presstime, against a market price of $7.55 for Iamgold.
Both Iamgold’s and Wheaton’s boards of directors stated their intention to force a shareholder vote on June 8, when shareholder meetings of both companies were scheduled in Toronto. The plan requires a two-thirds majority of Wheaton shares voted in its favour, and a simple majority from Iamgold shareholders.
The two boards contended that the original merger was still the one offering the best longer-term value, with Wheaton objecting in particular that Coeur has reported US$572 million in cumulative losses between January 1996 and March 2004. Coeur countered that it had cleared off its US$284-million debt and now had US$235 million in cash.
For Iamgold, the choice — apart from money — appears to be between specialization and diversification. A Golden Star merger would create an all-gold company whose assets were concentrated in West Africa; the Wheaton deal would create a large precious-metal and copper producer with production from Australia, Mexico, Argentina, and West Africa.
Iamgold and Wheaton together would annually produce precious metals equivalent to 1 million oz. gold, plus 66,700 tonnes copper. It would have about US$276 million in cash in the bank, and annual operating cash flow of US$250 million.
Iamgold’s principal producing assets are its 38% interest in the Sadiola gold mine and its 40% interest in the Yatela gold mine, both in Mali; and 18.9% interests in the Tarkwa and Damang gold mines in Ghana. Iamgold’s interests are all non-operating:
Wheaton operates and owns outright the Peak copper-gold mine in Australia and the silver mines of Luismin in central Mexico. It also owns a 37.5% non-operating interest in the Bajo de Alumbrera copper-gold mine in Argentina, operated by
A merged Iamgold and Golden Star would have annual production of about 800,000 oz. gold, and US$199 million in cash. Golden Star management contended that it had identified about US$8 million in annual savings that could be found if the two companies merged. Golden Star is currently forecasting negative cash flow for 2004 and 2005 but expects to be generating cash from operations by 2006.
Golden Star would bring 90% interests in one operating mine complex and one advanced project in Ghana. Its Bogoso-Prestea complex produced 174,000 oz. gold in 2003 and is forecast to produce 140,000-155,000 oz. in 2004. An expansion, now under study, would increase annual production to 230,000 oz. by 2005.
The Wassa open-pit gold mine, now under construction, is expected to start up in mid-2004, producing about 50,000 oz. Annual production from 2005 should be about 140,000 oz.
Coeur and Wheaton together would produce about 21 million oz. silver, from Wheaton’s assets and from Coeur’s Rochester mine in Nevada, its Silver Valley complex in Idaho, and two Latin American operations: Cerro Bayo in Chile and Martha in Argentina. Coeur also has two advanced projects, San Bartolome in Bolivia and Kensington, in the Alaska panhandle.
The combined company would have US$178 million in cash after the payouts of US$205 million to Wheaton shareholders and US$26 million to Golden Star to clear off the breakup fee. Coeur forecasts US$200 million in annual cash flow from the combination.
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