Goldcorp closes Glamis deal

In an unusual weekend manoeuvre, Goldcorp (G-T, GG-N) closed its controversial US$8.6-billion acquisition of Glamis Gold (GLG-T, GLG-N) on the Saturday evening of Nov. 4, exchanging each Glamis share for 1.69 Goldcorp shares and $0.0001 in cash, and adding a whopping 283.6 million newly issued shares to the 418 million already outstanding.

Glamis shareholders had already heartily approved the plan of arrangement with Goldcorp, with 98.6% voting support at its shareholder meeting in late October.

Goldcorp moved quickly to complete the deal after receiving news a day earlier of a key decision by the Divisional Court of the Ontario Superior Court of Justice. The court had dismissed an appeal brought by former Goldcorp CEO Robert McEwen of a court decision that Goldcorp was not obligated to hold a shareholder vote on the proposed acquisition.

Since the Goldcorp offer for Glamis was structured as a “plan of arrangement” rather than a “takeover bid” and the offer had already been approved by both boards, McEwen had argued that, under the Ontario Business Corporations Act, an Ontario corporation such as Goldcorp must receive shareholder approval to complete a “fundamental change,” such as this highly dilutive plan of arrangement.

McEwen, who has been Goldcorp’s largest single shareholder with 6.1 million shares, had also received support statements from about 7% of Goldcorp’s shareholders. That would have been enough to force the company to hold a special meeting, but the earliest meeting would have been held long after the deal closed.

McEwen’s efforts to broaden his struggle and gain wider support to correct what he views as a fundamental flaw in Canadian Securities regulations were mostly met by a wall of silence on Bay Street.

Meanwhile back in the boardroom, Ian Telfer, president and CEO of Goldcorp, will become Goldcorp’s chairman by mid-November while Kevin McArthur, president and CEO of Glamis, will become president and CEO of Goldcorp.

Goldcorp’s board will be reconstituted and comprised of 10 members: six from the pre-existing Goldcorp board and four from the old Glamis board.

At its mines, Goldcorp has ratcheted down its gold production guidance for the second half of 2006, primarily due to lower-than-expected gold grades at the Red Lake and Peak mines in Ontario and Australia, respectively.

Goldcorp now reckons it’ll produce about 875,000 oz. gold in the second half of 2006, down from previous guidance of 950,000 oz., and translating to 1.75 million oz. on an annualized basis for 2006 — a 54% rise from last year. The company also expects to produce 160 million lbs. copper and 13.5 million oz. silver in 2006.

Total cash costs are expected to hold steady at less than US$100 per oz.

Goldcorp will release its full third-quarter results on Nov. 14, and will provide gold production guidance for 2007 in mid-December.