Falling gold prices whack billions off deal for Glamis
October 30, 2006
Here’s a way to figure what the recent softening in gold prices has meant:
When executives of Reno’s Glamis Gold struck a deal in August to be acquired by Goldcorp Inc., the price a combination of cash and Goldcorp stock was set at about $8.6 billion.
But as gold prices declined to their recent $586 an ounce from the $650 levels of late summer, the value of Goldcorp’s stock declined as well.
The upshot: As Glamis shareholders voted on the acquisition last week, the deal was worth $6.5 billion more than $2 billion less than the original offer.
Goldcorp’s stock was trading at about $26 last week, down about $9 from its August peaks.
But the prices remained enough above last year’s levels, and Glamis’ production continued to grow enough, that the Reno company reported a 12-fold increase in profit for the third quarter.
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Another Reno-based mid-sized mining company, Meridian Gold, last week reported earnings of $5.7 million on revenues of $62.2 million for the third quarter. This compares with earnings of $9 million on revenues of $42.2 million a year earlier.
Possibly reporting its earnings for the last time as a stand-alone public company, Glamis said it earned $19.2 million on revenues of $91.8 million in the third quarter.
A year earlier, it earned $1.6 million on revenues of $41.1 million.
Its production and the prices it received both were up.
Glamis said it sold 144,113 ounces of gold at an average price of $609 during the third quarter. A year ago, it sold 91,625 ounces at an average price of $446.
In Nevada, production at the Marigold Mine that is two-thirds owned by Glamis totaled 20,890 ounces compared with 29,035 ounces a year ago. The cash costs of that production ran $317 an ounce compared with $276 last year.
Glamis President and Chief Executive Officer Kevin McArthur said crews at Marigold now are moving into richer deposits, and operating costs should decline.
The mine 35 miles southeast of Winnemucca is jointly owned by Glamis and Barrick Gold.
At Meridian Gold, meanwhile, the company said its earnings fell from year-earlier figures partly as the result of the cost of putting in place a successor to Brian Kennedy, its president and chief executive officer.
Those expenses, which included incentive payments and pension costs to Kennedy as well as the costs of attracting CEO-designate Edward Dowling, totaled about $5.5 million.
Dowling is scheduled to take the reins at Meridian at the end of this year.
The company said its gold production during the third quarter totaled 74,180 ounces compared with 75,416 ounces a year earlier. Its cash costs of producing that gold ran $216 an ounce compared with $132 a year earlier.
During the quarter, the company acquired controlling interest of a Chilean mine, Minera Florida S.A. It paid $100 million for the property, which produced 20,461 ounces of gold in the third quarter. NNBW staff