Goldcorp's plan to buy Kaminak 'great news for the Yukon'

Goldcorp, one of the world's largest gold producers,has agreed to purchase theKaminak Gold Corporation, a junior mining company looking to develop a new mine near Dawson City.

The deal comes as the price ofgold continues totrend upward. On Thursday, it was trading at about $1,270 US ($1,630 Cdn)an ounce.

Under the agreement, Vancouver-basedGoldcorp will acquire all the outstanding shares of Kaminak for about $520 million, or$2.62 per share. That's 40 per cent more than the 20-day averaged share price.

Kaminak's main asset is the Coffee Gold project south of Dawson City. The junior mining company says the10-year project would generate more than $2 billion in gross revenues, and employ close to 500 people.

A statement fromKaminakon Thursday touts theGoldcorpdeal as a way to help the Coffee Gold project getoff the ground.

"Goldcorpis the world's fourth largest gold producer and is focused on responsible mining practices, delivering safe, low-cost production throughout the Americas from a portfolio of long-lived, high-quality assets,"Kaminak'sstatement reads.

A statement fromGoldcorp also highlighted the appeal of the Yukon project.

"Coffee is located within a politically stable jurisdiction and provides us with an opportunity to add high quality ounces to our development pipeline, at low all-in sustaining costs," Goldcorp president and CEODavid Garafalosaid in a statement on Thursday.

Goldcorp currently owns four mines in Canada, two in Mexico and four more in Central and South America.

'Pleased, and a little bit excited'

News of the deal was met with enthusiasm by many in Yukon, who see it as a bit ofsunshine on an otherwise gloomy horizon.

The territory's fortunes tend to rise and fall with commodities markets,so the last few years have been toughwith mines closing and exploration spending drying up.

"Yukon needs something like this," said Lynn Hutton, presidentof the Chief Isaac Group of Companies, a development arm of the Tr'ondkHwch'in First Nation in Dawson City.

The First Nation has thrown its support behind the Coffee Gold project, so Hutton says she's "really quite pleased, and a little bit excited."

Mike Burke, president of the Yukon Chamber of Mines agrees, saying it's "great news for the Yukon."

"Goldcorp isn't a company that messes around.I'm sure their intention is to develop a mineand sothat's exciting news for all Yukoners that in our future we likely have another producing mine, a really nice gold mine," Burke said.

"I doubt that they've acquired it to sit on it."

A 'motivated buyer'

John Ing, a gold analyst with Maison Placements Canada, agrees that Goldcorp will likely move to develop the minesooner rather than later though the mine has yet to go through Yukon's regulatory process.

"When you spend halfa billion dollars, that very much keeps you focussed," Ing said. "They are a motivated buyer."

Ing says gold's recent surge the price has gone upby about 20 per cent since the beginning of the year is driving many companies to seek out new resources.

"Some of the majors have to dust off projects and look to see where they can add big ounces, and [Kaminak's] Coffee definitely has that potential.

"It's a pretty big deal for Goldcorp because they have a dearth of projects looking ahead the next few years."

Needs approval of Kaminak shareholders

The agreement has already been approved by Goldcorp's and Kaminak's boards of directors, but is subject to approval of at least two-thirds ofKaminak's shareholders. A meeting must be held by July 14.

If the deal falls through,Kaminakmust payGoldcorpa$20.3 million US termination fee.

Kaminakhas said it would havepermitting applications for the Coffee Goldmine ready to submit to theYukon Environmental and Socio-economicAssessment Board (YESAB)by this summer.

It's aiming to beginconstruction in 2018.