Andean board chooses Goldcorp, rejects Eldorado offer

Finance

The board of Andean Resources Ltd has recommended a US$3.4 billion cash and share bid from Goldcorp Inc, just hours after Eldorado Gold Corp announced that its own all-scrip offer had been rejected.

Andean's principal asset is the Cerro Negro gold project in Argentina, with a resource of 3.1Moz of gold and 23.56Moz of silver.

Eldorado’s announced on Thursday that the board of Andean had rejected its proposal of a 0.31/share exchange ratio, which would result in Andean shareholders owning 24% of the combined company. At current share prices, Eldorado’s offer values each Andean share at C$6.36.

Andean would represent less than 10% of the much larger Goldcorp, with a current market capitalisation of US$32.5 billion. The company has also offered a cash option of up to C$1 billion (US$950 million) to Andean shareholders. Goldcorp’s share offer is currently valued at C$6.46, the cash option is at C$6.40/share.

Chuck Jeannes, Goldcorp’s chief executive, said the deal would add another asset to his company’s strong growth profile. “Cerro Negro is a high-grade, near-surface system that is expected to generate significant gold production at low cash operating costs following a relatively short construction period.”

Sentient, Andean’s largest shareholder, with a 21% stake, has agreed to vote in favour of the transaction in the absence of a superior offer. The transaction is expected to close in late 2010 or early 2011.

Andean has agreed on a termination fee of 1% of the total offer plus Goldcorp has the right to match other offers.