Goldcorp cracks the vault for shopping spree (March 23, 2005)

Newly appointed chief executive Ian Telfer has wasted little time in putting his personal stamp on the new Goldcorp (G-T) being fashioned via a merger with his Wheaton River Minerals (WRM-T).

Telfer has forsaken Goldcorp’s trademark policy of hoarding a third of its gold production in favour of growing by acquisition, a practise he honed as CEO of Wheaton River. Telfer took over the reins of the new Goldcorp just less than a month ago; he replaces Rob McEwen who championed hoarding. McEwen remains as Goldcorp’s chairman.

Under the new regime, Goldcorp will sell its current gold bullion inventory of 240,000 oz. early in the second quarter of 2005. That golden nest egg converts to around US$104 million, based on an afternoon gold fix of US$432.15 per oz. in London on March 22, the day of the company’s announcement.

Goldcorp will US$70 million of the proceeds to acquire the Bermejal gold project in Mexico from a joint venture between Newmont Mining (NEM-N) and Industrias Peoles. The deal is expected to close by the end of March.

“By financing this acquisition through the sale of our gold bullion inventory, we are converting 240,000 ounces of gold in the bank vault into 2.4 million ounces of gold in the ground,” said Telfer in a prepared statement.

At the end of 2004, indicated reserves at Bermejal totalled 93.6 million tonnes grading 0.79 gram gold per tonne, for around 2.4 million contained ounces of gold. The estimate was completed by Peoles, and employs a cutoff grade of 0.35 gram gold and a gold price of US$400 per oz. It conforms to National Instrument 43-101 standards.

Test work by Peoles and Goldcorp (during due diligence) indicates that run-of-mine ore is amenable to heap leaching. Goldcorp plans further metallurgical, geotechnical, and engineering studies.

The Bermejal deposit is situated 2 km south of Wheaton’s Los Filos gold project where feasibility studies are nearing completion. Plans call for Bermejal to be exploited in unison with Los Filos, with two open pits trucking ore to a proposed central heap leach pad. Geotechnical and design studies have begun on the new pad location; designs for Los Filos’ crushing/agglomeration plant remain unchanged.

Telfer says combining Bermejal with Los Filos will create the largest gold mining operation in Mexico, with average annual production of more than 300,000 oz.

At the end of 2004, Los Filos’ measured and indicated resources stood at 88.2 million tonnes grading 0.89 gram gold, based on a gold price of US$400 per oz. Included is a crush/leach resource amounting to 51 million tonnes of 1.28 grams.

Closer to home, Goldcorp has acquired a half-interest in the Sidace Lake property, near Red Lake, Ont. Under an existing option deal, Goldcorp has spent more than $1.5 million on exploration, and paid $1.05 million in cash. The company can boost its stake to 60% for $600,000 in cash. Planet Exploration (PXI-V) owns the remainder of the project.

Early last year, drilling by the partners turned up a new zone of gold mineralization on the property. The discovery hole targeted a folded extension of the quartz-sericite schist found at the property’s Main zone, and yielded a 0.7-metre interval of 4.8 grams gold per tonne, and a 2.7-metre section lower in the hole running 10.1 grams gold.

The latest batch of 9 holes from Sidace Lake are highlighted by hole 62, which returned 8.2 metres of 4.7 grams gold, beginning at a depth of 516.9 metres, included 3.4 metres of 10.2 grams gold from the Discovery zone.

Hole 62B was wedged off hole 62 at a depth of 422 metres, and encountered several mineralized intervals, including 1.5 metres running 15.4 grams gold, at a depth of 703 metres. The hole cut the zone about 30 metres from hole 62.

Another three holes were sunk perpendicular to the fold’s central lobe, and returned:

• Hole 63 24.8 metres (from 301.2 metres) grading 2.7 grams gold, including 16 metres of 3.6 grams;
• Hole 64 59 meters (from 126 m) averaging 1.55 grams gold, including 14.8 metes of 3.5 grams, and 1 meter of 24.8 grams; and
• Hole 65 6 metres (from 84 m) at 1 gram, and a lower 6-metre section of 2.1 grams.

Elsewhere, a single hole on the South zone yielded 3 metres grading 3.1 grams gold. Planet says the hole confirms that mineralization trends roughly north-south, following the stratigraphy.

Another 4 holes tested the nearby Upper Duck zone (UDZ), with the best result coming in hole 68, which surrendered 15 metres (from 30 m) running 4.1 grams gold, including a 1-metre section of 59.2 grams. The hole cut a black biotite band hosted by feldspar porphyry; the interval includes visible gold. Planet says the drilling confirms that the UDZ is a separate unit from the South zone.

Goldcorp owns 16.7% of Planet Exploration.

Goldcorp’s merger with Wheaton is slated to close in April. In the end, Wheaton shareholders will own 43% of the new company.