Goldcorp Battles Penmont For Canplats

VANCOUVER– Goldcorp (G-T, GG-N) and Minera Penmont have proven themselves worthy adversaries in a bidding war for Canplats Resources (CPQ-V) and its gold-silver-lead-zinc project in Mexico: the original all-share offer from Goldcorp worth $238 million has been upped, matched, upped, and now matched once again, with the latest offer valuing the junior company at $317 million, most of it in cash.

Camino Rojo is just 50 km away from Goldcorp’s Penasquito gold-silver mine in Zacatecas state. In November, the major 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 all of Canplat’s properties outside of Camino Rojo, similar to the original Goldcorp deal.

As part of that 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, this time raising the value to $317 million.

It took Goldcorp less than a day to match Penmont’s new offer. The new deal will see Canplats investors receive $4.60 in cash and a share in a new exploration company for each Canplats share held. The new company shares hold a notional value of 20¢, giving the deal a $4.80-per-share price tag.

Canplats’ board of directors has recommended shareholders tender to the latest Goldcorp offer and a shareholder meeting is scheduled for mid-January.

The rapid-fire takeover battle is well suited to Canplats and Camino Rojo, as the project was only discovered, delineated, and economically studied 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 looked at 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, operations 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 would translate into 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 would 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. Since Dec. 23 Canplats has gained $1.95, closing at $5.10 on Jan 4. The company has 58 million shares outstanding, 66 million fully diluted.