Goldcorp to sell San Dimas mine to Mala Noche

Vancouver – Goldcorp (G-T, GG-N) has announced the sale of its San Dimas gold and silver mine in Mexico a month after entering into a similar arrangement for its Escobal deposit.

For the San Dimas mine, Mala Noche Resources (MLA-V) is to buy it for a total consideration of 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 6% interest. After the deal Goldcorp is expected to hold a 30% stake in Mala Noche.

The Escobal deal has Goldcorp selling the silver deposit for US$505 million to the currently private Tahoe Resources, consisting of a proposed US$230 million in cash and roughly 40% of Tahoe shares once the company goes public.

Chuck Jeannes, Goldcorp’s president and chief executive, said in a press release that the company is pursuing a strategy of concentrating on its “cornerstone assets that will drive our 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, consisting of three underground mines, 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 oz. 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.

The company, which is to be re-named 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 as president Eduardo Luna, who was formerly the 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 president of the Mexican division of the company.

Wade Nesmith, former chief executive of Mala Noche and now executive chairman, said in a press release that Conway’s experience as president of IAMGOLD (IMG-T, IAG-N) and general operational experience would be a boost to 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. of payable silver to the company and 50% of any excess at approximately US$4 per oz. silver. Starting in year five Mala Noche will deliver the first six 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 before at 24.5¢ with 60 million shares outstanding. Goldcorp’s share price closed up 30¢ on the day at $45.91.