VANCOUVER — Goldcorp (G-T, GG-N) has announced the sale of its San Dimas gold-silver mine in Mexico, a month after entering into a similar arrangement for its Escobal silver deposit in Guatemala.
Mala Noche Re-sources (MLA-V) plans to buy San Dimas for US$500 million. The payment will be a combination of US$275 million in cash, US$175 million in Mala Noche shares valued at the offering price of Mala Noche’s proposed equity financing, which it will use to help finance the acquisition, and a US$50-million promissory note to be paid over five years at a 6% interest rate.
After the deal closes, Goldcorp would hold a 30% stake in Mala Noche.
The Escobal deal has Goldcorp selling its deposit for US$505 million to Tahoe Resources (THO-T), led by former Goldcorp president and CEO Kevin McArthur. The deal gave Goldcorp US$253 million in cash and roughly 40% of Tahoe shares, following Tahoe’s initial public offering that closed on June 8.
Chuck Jeannes, Goldcorp’s president and chief executive, said in a press release that the company is divesting its smaller assets so it could focus on its “cornerstone assets” to increase its “industry-leading production growth and future cash flow.” Jeannes said the San Dimas deal, much like the Escobal one, allows the company to raise capital without diluting its shareholders.
Last year, San Dimas produced 113,000 oz. gold and 5.1 million oz. silver at US$337 per oz. gold equivalent. The mine currently hosts reserves of 5.59 million tonnes grading 4.8 grams gold per tonne for 860,000 contained ounces gold and 338.9 grams silver per tonne for 60.9 million oz. silver. San Dimas has a further 15.17 million inferred tonnes grading 3.31 grams gold and 317.1 grams silver.
Mala Noche had been looking to acquire a producing or near-term producing precious metal project after suspending exploration work on Ventanas, its only project, in late 2008. The company is optioning the property from Goldcorp and recently extended certain time frames on the agreement after not fulfilling spending requirements.
Mala Noche, to be renamed Primero Mining, announced on the day of the San Dimas deal that Joseph Conway has been appointed president and chief executive of the company. He replaces Eduardo Luna as president, who was also the former president of the Goldcorp subsidiary that operated San Dimas, and came on as both president and chief operating officer of Mala Noche last September. Luna is now executive vice-president and president of the Mexican division of Mala Noche.
Wade Nesmith, former CEO of Mala Noche and now executive chairman, said in a press release that Conway’s track record as Iamgold’s (IMG-T, IAG-N) president and his operational experience would benefit the company.
“This is a very exciting day for Mala Noche’s shareholders. We have secured a well-known producing mine and have engaged a widely-respected CEO to join our team,” said Nesmith.
As part of the deal, Mala Noche will take on an amended silver purchase agreement with Silver Wheaton (SLW-T, SLW-N). For the first four years, Mala Noche will deliver the first 3.5 million oz. payable silver to the company and 50% of any excess at US$4 per oz. silver.
Starting in year five, Mala Noche will deliver the first 6 million oz. silver to Silver Wheaton and then again 50% of any excess.
Mala Noche’s shares were halted on the day of the announcement but closed the day prior at 24.5¢ with 60 million shares outstanding.
In Toronto, on news of the sale, Goldcorp’s share price climbed 30¢ to $45.91.
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