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Kinross/Goldcorp gold/silver asset swap is a 'win-win'

Two of the world’s largest gold producers, Canadians Goldcorp and Kinross, announced an asset swap Wednesday that will consolidate individual corporate holdings in Canada and Chile.

DENVER - 

The asset swap between Canadian-based gold miners Kinross Gold and Goldcorp is a "win-win for both companies," a top Goldcorp executive told Mineweb Wednesday.

The two companies announced Wednesday they had entered into a binding agreement, which allows Goldcorp to acquire Kinross's 49% share of the Porcupine gold mine in northeastern Ontario, and Kinross's 39% share of the Musselwhite gold mine in northwestern Ontario.

Meanwhile, Kinross will gain Goldcorp's stake in the La Coipa silver-gold mine in Chile and $200 million in cash.

Chuck Jeannes, Goldcorp Executive Vice President of Corporate Development, told Mineweb that both gold companies use the same business model, which helped facilitate the swap. The swap increases Goldcorp's reserves by 5.6 million ounces at an estimated acquisition cost of $37/oz, he added.

In a news release, Kevin McArthur, President and CEO of Goldcorp said "In Porcupine and Musslewhite we have two solid operations with very long mine lives, outstanding growth potential and first-rate operating teams. We have enjoyed a great a relationship with Kinross and we are please that the La Coipa mine will remain in their capable hands."

During a presentation to the Denver Gold Forum, Tye Burt, President and CEO of Kinross, said the swap will add 27 million ounces of silver to his company. It also leaves six mines that will be controlled by Kinross, he explained.

UBS Analyst Tony Lesiak wrote that "on the downside, Kinross will produce approximately 110,000 to 120,000 ounces less gold per year and reserves and resources have declined 1.2 million ounces and 2.1 million ounces respectively with the deal."

Blackmont Capital analyst Richard Gray told Reuters that the increased silver exposure at La Coipa makes up for the Ontario production loss for Kinross.

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