Goldcorp and Minera Penmont battle it out for Canplats Resources

Vancouver – The battle for Canplats Resources (CPQ-V) continues – the original all-share offer from Goldcorp (G-T), GG-N) worth $238 million has been upped, matched, and upped again, and now the major has five days to decide whether to match rival suitor Minera Penmont’s latest offer, which proposes an all-cash deal worth $317 million. The prize in the battle is Canplat’s flagship Camino Rojo project, a rapidly growing gold-silver-lead-zinc project in Zacatecas state, Mexico.

In November, Goldcorp offered Canplats shareholders 0.074 Goldcorp shares, and an interest in a new exploration company, for each Canplats share held. Canplats agreed to the deal, which was expected to close in January.

Then, on Dec. 23, a rival suitor emerged. Minera Penmont, a company jointly owned by Fresnillo (FNLPF-O, FRES-L) and Newmont Mining (NMC-T, NEM-N), offered $4.20 in cash for each Canplats share, upping the value of the deal to $254 million. The Penmont proposal also gave Canplats shareholders shares of a new company that would hold $10 million in cash and would own all of Canplat’s properties outside of Camino Rojo, in a similar manner to the original Goldcorp deal.

As part of its original deal, Goldcorp had the right to match any superior offers. So, on Christmas Eve, the Vancouver-based major matched Penmont’s offer. It seemed the battle was over, but then on Dec. 28 Penmont upped its offer again.

The latest Penmont offer, which Canplats’ board of directors has recommended, offers $4.60 in cash and a share in a new exploration company carrying a notional value of 20¢, for a $4.80 combined value. The new offer values Canplats, or more specifically values Camino Rojo, at $317 million.

Under the terms of the Goldcorp agreement, the major now has five business days to match or better the new Penmont deal. Considering holidays and weekends, the period lasts until Jan. 5. If Goldcorp decides against matching or bettering its offer, Canplats will have to hand over $9.3 million, the deal break fee.

The rapid-fire takeover battle is well suited to Canplats and Camino Rojo, the project discovered, delineated, and advanced to economics studies in just two years. In mid-2007 Canplats geologists driving along a secondary road south of Goldcorp’s Penasquito mine in Zacatecas state noticed the distinctive reddish-brown of mineralized alteration in the crushed-rock road fill. They traced the crushed rock back to its quarry, staked the ground, and were soon pulling broad mineralized intercepts from the ground, such as 183 metres grading 1.61 grams gold per tonne, 12.84 grams silver, 0.49% lead and 0.31% zinc.

Within a year, Canplats defined a significant resource at the project, which had been named Camino Rojo, or Red Road. The Represa deposit at Camino Rojo is home to 163.4 million measured and indicated tonnes grading 0.66 gram gold, 11.56 grams silver, 0.37% lead and 0.19% zinc. Inferred resources add 31 million tonnes averaging 0.56 gram gold, 7.63 grams silver, 0.31% lead and 0.1% zinc. Combining all three resource categories, Canplats has defined 4 million contained ounces gold and 68 million oz. silver.

In mid-October, Canplats completed a preliminary assessment of Camino Rojo. The study investigated the economics of an open-pit, heap-leach operation processing only oxide and transitional mineralization; the deposit’s extensive sulphide mineralization was not considered.

Over a 10-year mine life, an operation at Camino Rojo would churn out 1.7 million oz. gold and 34.2 million oz. silver from an open pit with a strip ratio of 0.7:1 and average head grades of 0.71 gram gold and 14.2 grams silver. A daily throughput of 20,000 tonnes results in annual production of 122,300 oz. gold and 902,100 oz. silver.

Using base-case prices of US$750 per oz. gold and US$13.50 per oz. silver, the mine should be able to produce an ounce of gold for US$340, net of byproduct credits. The operation would generate a pretax internal rate of return (IRR) of 32.5% and a net present value (NPV) of US$194.9 million, using a 5% discount rate. Using prices closer to today’s spot values, namely a gold price of US$1,036 per oz. and a silver price of US$17.19 per oz., the IRR climbs to 65.7% and the NPV reaches US$477.2 million.

To develop the open-pit, heap-leach operation is expected to cost only US$133.8 million.

Canplats’ share price spent most of 2009 ranging between $1.60 and $2.40. When news broke of Goldcorp’s original offer, the junior’s share price jumped a dollar and hovered between $3.20 and $3.60 until Penmont entered the fray. Holiday closures have limited investors’ ability to respond to the latest offers and matches, but on Dec. 23 and 24 Canplats’ shares gained $1.81 to close at $4.96. Canplats has 58 million shares outstanding, 66 million fully diluted.