Wheaton River, Iamgold beget million-ounce producer

Iamgold (IMG-T) has agreed to a share-swapping deal with Wheaton River Minerals (WRM-T) that will see the combined pair lock down a spot among the world’s ten biggest gold producers.

Wheaton will exchange each of its 567.7 million shares for 0.55 of an Iamgold share, a rate that represents a 25% premium over Wheaton’s closing price on the Toronto Stock Exchange on March 30, the day before the deal’s announcement. The deal values Iamgold at just shy of $1.1 billion.

If either company decides to accept a competing offer, it must pay a breakup fee equivalent to 3% of its market capitalization. Both companies have also agreed to reject any competing bid that does not include a 5% premium over the existing deal.

At least two-thirds of Wheaton’s shareholders are required to approve the deal, whereas Iamgold needs only a simple majority. Shareholder meetings are planned for June.

In the end, Wheaton’s existing shareholders would own 68% of the combined company, with Iamgold shareholders holding the remainder. Iamgold CEO Joseph Conway will retain his title under the new colours, while Wheaton boss Ian Telfer will become co-executive chairman. Iamgold Chairman William Pugliese will co-chair with Telfer.

With operating interests in seven gold mines in West Africa, the Americas, and Australia, the enlarged company will boast annual production of 1 million gold-equivalent ounces at a total cash cost of less than US$100 per oz., ranking it fourth among Canadian gold producers. Production is expected to reach 1.3 million equivalent ounces in 2006 as the Amapari project in Brazil, the Los Filos project in Mexico, and the expanded Tarkwa mine in Ghana come on-stream.

Proven and probable reserves would total 9 million oz., plus a measured and indicated resource of 4 million oz. and an inferred resource of 10.5 million oz. It would also have “strong operating cash flow and excellent financial flexibility” with US$300 million in cash and gold bullion, the pair said in a joint statement.

Wheaton’s producing assets include the 37.5%-owned Alumbrera copper-gold mine in Argentina, the wholly owned Peak gold-silver mine in Australia, and the Luismin operations in Mexico. Luismin comprises the San Dimas, La Guitarra and San Martin deposits, all of which were acquired during the 2002 takeover of Mexican-based Minas Luismin. Wheaton is also acquiring a 21.2% interest in the El Limn gold deposits in Mexico, and bought the Amapari gold project in Brazil in January.

Wheaton produced 450,100 gold-equivalent ounces and 113.7 million lbs. copper in 2003 at an average cash cost of US$62 per oz., net of byproduct copper sales. The year’s net earnings came in at US$57.6 million.

Iamgold’s key assets are all in West Africa and include a 38% stake in the Sadiola mine and 40% of the Yatela gold mine, both of which are in Mali. In Ghana, the company has an 18.9% stake in each of the Tarkwa and Damang mines. Iamgold also has a 1% royalty on diamond production from the Diavik project in the Northwest Territories.

Iamgold’s attributable gold production for 2003 amounted to 421,000 oz. at US$225 per oz.; net earnings for 2003 were US$15 million

The Wheaton-Iamgold deal is only the latest consolidation in the mining industry. In Ghana, the government recently approved a merger between AngloGold (AU-N) and Ashanti Goldfields (ASL-N) that would create a rival for Denver-based gold goliath Newmont Mining (NEM-N).

More recently, Russia’s largest miner, Norilsk Nickel, bought Anglo American‘s (AAUK-Q) 20% stake in South Africa’s Gold Fields (GFI-N) for US$1.16 billion in cash. Many market-watchers believe Norilsk will eventually take full control.

Back in Canada, NovaGold Resources (NG-T) plans to consolidate ownership of its 56%-owned subsidiary, SpectrumGold (SGX-T), by offering one of its own shares for each of SpectrumGold’s publicly held 11.6 million shares. The larger Novagold would hold interests in three of the largest undeveloped mineral deposits in North America: the Donlin Creek gold project in Alaska; the Galore Creek copper-gold-silver project in northwestern British Columbia; and the Ambler Creek polymetallic project in Alaska.

Shareholders also recently approved a merger of Vancouver-based explorers Strongbow Resources (SR-V) and Navigator Exploration (NVR-V). Navigator shareholders will receive 0.7 of a Strongbow share for each Navigator share tendered. Strongbow Exploration will continue to explore for diamonds and precious and base metals on 40 properties in Canada’s north.

The recent activity has even given rise to renewed rumours that Newmont may take a run at Barrick Gold (ABX-T), Canada’s biggest gold producer. Barrick dismisses the stories as wild speculation.