RPT-Canadian miners scrap over gold discovery after mega deal

September 29, 2014 Posted by admin

(Repeats with no changes to text)

By Allison Martell

TORONTO, Sept 5 (Reuters) – On one side, the founder of top
miner Goldcorp Inc, his young apprentice, an aggressive
securities lawyer, and a tiny company based in a Quebec mining
town. On the other, the chief executives of two leading Canadian
gold miners, fresh off one of the biggest deals of their
careers.

Some of Canada’s best-known mining executives are sparring
over the early-stage but promising Odyssey gold discovery in
Quebec, near Canadian Malartic, the country’s biggest gold mine.

The legal fight has its roots in the C$3.9 billion ($3.6
billion) takeover of Osisko Mining Corp, the mine’s builder,
this year. Yamana Gold Inc and Agnico Eagle Mines Ltd
teamed up to beat a hostile bid by Goldcorp,
taking control of Canadian Malartic.

At the heart of the dispute is who, if anyone, will profit
from Odyssey, one of Osisko’s assets. If early drilling results
at the exploration site pan out, it could be a choice addition
to the Canadian Malartic mine, extending its life.

Abitibi Royalties Inc, listed on Venture, the
Toronto Stock Exchange’s market for small, growth companies says
it was Osisko’s minority partner, and the deal has triggered its
right to take control of part of Odyssey. Yamana and Agnico
dispute that claim.

Tiny Abitibi was little known before it challenged the two
mining heavyweights, but it has a big backer in Rob McEwen, who
ran Goldcorp until 2005, and it has doubled down even as Yamana
and Agnico dismiss its challenge as opportunistic.

In June, McEwen’s protege Ian Ball joined Abitibi’s board,
along with Joe Groia, a lawyer and former head of enforcement at
Canada’s top securities regulator. In July, McEwen invested C$2
million in Abitibi. In August, Ball became president.

Canada’s tightly-knit gold industry, home to three of the
world’s top five gold producers, has been split by conflict in
the wake of major deals before. Barrick Gold Corp
tussled with Goldcorp for two years over the El Morro project in
Chile until 2012.

“The point here is a point of principle,” Yamana Chief
Executive Peter Marrone said, discussing Abitibi’s challenge on
a July 31 conference call. “You cannot make actions like this,
certainly with a company of the stature of Agnico and Yamana,
without consequences.”

He did not say what the consequences would be, and Abitibi’s
Ball is undeterred.

“You don’t work for Rob McEwen for ten and a half years
without learning that sometimes good things come with a battle,”
Ball told Reuters.

McEwen showed his combative side shortly after he left
Goldcorp, criticizing his successor’s plan to buy a rival miner
and later trying to block the deal in court as a shareholder.

Abitibi, which is based in the Quebec town of Val-d’Or,
French for valley of gold, could become a top gold miner, said
Ball, emulating legendary growth stories such as Barrick
predecessor American Barrick and Goldcorp.

Shares of Abitibi have more than tripled since April 14. The
shares traded at C$3.40 on Thursday.

LEGAL ODYSSEY

Abitibi says it has a 30-percent interest in the property
that contains the northern section of Odyssey, and that the
interest is “free carried,” meaning it would not have to fund
development to enjoy its proceeds.

It took Osisko to court over that interest before the
conclusion of the takeover, which Abitibi says has triggered its
right of first refusal to acquire the 70 percent it does not
own. Yamana and Agnico reject that claim.

“It seemed to me that there was a large rush to buy Osisko
and sometimes, well, when you buy something, I’ve found there’s
always something hiding in the closet that you didn’t expect,”
McEwen said in an interview at his Toronto office.

“Abitibi Royalties is on pretty solid ground. They had
contracts, and those were just swept aside when these larger
companies came in and said ‘let’s get this deal done’.”

Agnico and Yamana declined to comment for this story.

Yamana and Agnico closed the Osisko deal in June, taking
over Canadian Malartic and several other properties and hiving
off other prospects into a new company.

The deal focused on Malartic, but on a call shortly after
its announcement Yamana noted that early drilling results
indicated “a significant underground deposit” at Odyssey.

Exploratory drilling at Odyssey was halted by Yamana and
Agnico in July, “pending determination of the project’s
financial viability and the resolution of ongoing disputes.”

Abitibi has appealed a Quebec court decision that would send
it into arbitration with Yamana and Agnico. It will have a
chance to make its case either way, and it is not yet clear how
long it might take to get a ruling.

($1 US = $1.09 Canadian)

(Additional reporting by Euan Rocha; Editing by Amran Abocar
and Tomasz Janowski)

(c) Copyright Thomson Reuters 2014. Click For Restrictions – http://about.reuters.com/fulllegal.asp

Article source: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140905&id=17908459

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