Goldcorp (NYSE:GG) Issuing 61 Million Shares in Andean Deal

Goldcorp (NYSE:GG) announced it will issue 61 million shares as part of their deal to close the Andean Resources acquisition.

The giant gold miner is acquiring Andean for C$3.6 billion, with the remaining amount to be settled with C$765 million in cash.

Shareholders in Andean were given the option of $0.14 of a share in Goldcorp, C$6.50 in cash, or a combination of the two. That was subject to an overall maximum cash consideration of C$1 billion.

The cash being paid out will be draw from existing cash reserves, said Goldcorp.

Goldcorp (NYSE:GG) Confident in Andean Acquisition

The acquisition of Andean by Goldcorp (NYSE:GG) will pay dividends quickly for the company, as their flagship asset the Cerro Negro gold mine is positioned to generate benefits immediately.

Goldcorp's vice president of investor relations Jeff Wilhoit, recently said Cerro Negro is the type of mine the company looks for, as it's located in a safe region, and has high production and low costs.

Wilhoit said a deal like this only comes around about once every ten years or so.

Goldcorp closed Friday at $45.75, gaining $0.12, or 0.26 percent.

Goldcorp (NYSE:GG) Growth Looks Good for Short- and Long Term

Growth for Goldcorp (NYSE:GG) looks good over the near and long term, according to Barclays, who maintains their "Underweight" on the gold miner whil raising their price target.

Barclays said, "The company's growth profile continues to develop in both the near and long term. Over the next several months, Goldcorp anticipates to complete scoping studies at Cochenour and Noche Buena, environmental reviews at El Morro, and the pending acquisition of Andean Resources and the Cerro Negro project. With good cost control and a strengthening pipeline, we are increasing our earnings estimates over the next year and modestly upping our target price...While we appreciate the dividend increase, Goldcorp's 0.8% yield must rise further before we consider this a competitive yield play within mining."

Goldcorp closed Monday in New York at $44.37, losing $0.22, or 0.49 percent. Barclays raised their price target on them from $25 to $28.

Goldcorp (NYSE:GG) Growing Organically and by Acquisition

Goldcorp (NYSE:GG) has lagged the surge in gold prices in 2010, up only about 7 percent, while gold prices have soared by 17 percent so far.

A couple of concerns are missing their numbers last quarter, falling 2 cents a share below earnings expectations of 29 cents a share. The other is the acquisition of Andean Resources for $3.4 billion, which came with a 35 percent premium.

In an interview with The Street, CEO Chuck Jeannes said he didn't feel Goldcorp overpaid for Andean.

Jeannes said, This is one of those once-in-a-decade kind of opportunities that comes around. It's a very high-quality deposit which in our business means extremely low cost, both capital cost and operating cost, and it's got the opportunity to grow significantly over many, many years ... so we think actually the price we paid is accretive to Goldcorp's shareholders particularly on cash flow per share."

As far as how quickly it'll be accretive to the earnings of the company, Jeannes said starting in 2013 and onward there should be "significant accretion."

When queried about organic growth, Jeannes said the company wants to grow organically, which he described as exploration at existing projects, as well as via acquisitions.

Even though Andean will make the company better, Jeannes said without it the gold miner was still growing at a projected rate of 50 percent annually over the next five years.

So while they didn't need Andean for growth, it has made them a stronger company going forward, concluded Jeannes.

Eldorado (NYSE:EGO) and Low Cost Benefits

Eldorado Gold (NYSE:EGO) received a lot of attention recently when they were named as the fastest growing company in 2010 by Fortune, but growth isn't the only strengh of Eldorado, as their low operational costs puts them in an enviable place.

The two major benefits of any company with low costs advantage are the flexibility it has and the ability to navigate its way through difficult economic times.

In gold mining, and mining in general, that's one of the major differentiators and moats separating the miners as a quality investment.

Even though Eldorado suffered some negative media coverage when they were openly outbid for Andea Resources by Goldcorp (NYSE:GG), all it revealed is what everyone already knew: they aren't able to successfully wage a bidding war against the major miners.

But as Eldorado CEO Paul Wright noted recently, they have two solid in Turkey and China, with another in the permitting stage in Greece. That will keep them busy for several years even if nothing else happens.

Wright wasn't concerned over the major miners' strength to outbid them on companies either, as most the time they don't end up interested in the same assets.

While Wright has said he would be open to another potential acquisition, it would have to be a very opportunistic one. Much of that is related to geographic preferences for the company they want to work in.

In his mind it'll probably be a couple of years before they start looking in the acquisition area again.

Over the long term Wright says he making decisions on the assumption the price of gold will continue rising, and being one of the top low cost miners in the industry, can do well in strong and weak economic environments.

The cash cost for gold production in the latest quarter for Eldorado was $375 an ounce.

Eldorado Gold (NYSE:EGO) and Fallout from Andean (TSE:AND) Bid

Eldorado Gold (NYSE:EGO) has suffered some unexpected backlash when they were suddenly outbid by Goldcorp (NYSE:GG) for Andean Resources (TSE:AND).

Most of the fallout from the lost bid is in the rumor mill, more than anything else, and it didn't help that they were named the fastest-growing company by Fortune, when that isn't the case.

That invited intense scrutiny, which combined with the rumors, has seemed to hold the share price of the company down.

After the failed bid, the market was looking for Eldorado to attempt to snatch up other companies, which didn't work out, and they're pointing to organic growth instead rather than acquisitions going forward.

That created the problem of higher expectations in the market place, which, again, is holding down share price.

While open to the right acquisitions, the loss of the bid to Goldcorp showed the lack of financial power to make a good deal. CEO Wright sees possible acquisitions in a couple of years, rather than sooner.

That's probably due to the fact there will be consolidation as larger miners grab up the top assets as gold prices surge and the deals make sense.

Eldorado will be left with less desirable assets to look at, but still potentially very profitable ones.

The ultimate backlash in all this is Eldorado was seen as what they are, a smaller player in the big gold pond. That's not necessarily bad, but it is concerning short-term share price, which will have to work its way thorough lowered expectations.

Andean (TSE:AND) Down on Eldorado (NYSE:EGO) Dropping Bid

Andean Resources (TSE:AND) fell back to earth some on the news Eldorado Gold (NYSE:EGO) wouldn't be making a counter offer to Goldcorp's (NYSE:GG) bid.

The gold miner closed in Toronto at $6.17, dropping $0.22, or 3.44 percent.

There have been no hints or overtures from other companies showing interest in Andean, so Goldcorp should get it unless a suitor emerges at a later date.

Few parties of interest could get into a bidding war with Goldcorp, leaving a relatively small number of potential rivals.

Goldcorp made a $3.6 billion bid last week, beating out the Eldorado bid.

UBS (NYSE:UBS) Raises Goldcorp (NYSE:GG) Price Target on Andean (TSE:AND) Acquisition

UBS (NYSE:UBS) kept its "Buy" rating on Goldcorp (NYSE:GG), but raised its price target on the company to $56 a share, an increase of $2.50, on the assumption they'll end up with Andean Resources (TSE:AND).

In a note to clients, UBS said, "We estimate that with its free cash flow under UBS assumptions and proceeds from recent asset sales, Goldcorp can easily fund the Andean transaction and the capital expenditures required for Cerro Negro without any impact on the funding for its current project pipeline."

It is believed that Cerro Negro's reserves are double what they're estimated at now, and that will add to the size of Goldcorp, even as large as it is.

"We believe there is a good opportunity to increase both Cerro Negro's reserves and its production profile. We are assuming both a doubling of production and reserves/resources and an increase in capital expenditures in our estimates. Based on these assumptions, our NAV per share for Goldcorp increases from $35.18 to $36.54," added UBS.

"Applying a P/NAV multiple of 1.55x to the gold component of our gold NAV of $35.76/share (using US$1250/oz gold) and adding non-gold assets of $0.78/share, we derive our target of $56. Based on the implied return, we maintain our Buy rating."

As usual, there have been rumors of other bidders, but there are few in the industry that could compete head-to-head with Goldcorp, and if they did, the value of Cerro Negro could be diluted to the point of irrelevance.

So the thought is more than likely Goldcorp will get the company without another bid.

Eldorado (NYSE:EGO) Drops Andean (TSE:AND) Bid

Eldorado Gold Corp. (NYSE:EGO) announced it has officially dropped its bid for Andean Resources (TSE:AND), after Goldcorp (NYSE:GG) submitted a higher bid of $3.4 billion for the company.

Chief Executive Officer Paul Wright said, referring to losing value in a bidding war, “The gold industry, as a whole, has an appalling track record of value destruction and Eldorado has no intention of following in these unfortunate footsteps.”

Shareholders of Eldorado agreed with him according to Wright, who added they “expressed a note of caution in terms of Eldorado entering a value-destroying auction whose main result will be the enrichment of short-term market participants.”

The other side of the situation is it would have been a waste of time for Eldorado, who didn't have the resources at its disposal Goldcorp has.

The gold miner concluded in a statement that the Cerro Negro mining project, which is the reason behind the bidding for Andean, was a good asset, but not a must-have asset.

Eldorado Gold (NYSE:EGO) Downgraded by Credit Suisse (NYSE:CS)

Credit Suisse (NYSE:CS) downgraded Eldorado Gold (NYSE:EGO) from "Outperform" to "Neutral," with a price target of $23 on them.

Even the soaring gold prices today weren't able to lift Eldorado up, as they've been flirting around the level mark, moving slightly down and up throughout the trading session.

As of 1:46 PM EDT, Eldorado Gold (NYSE:EGO) was at $19.06 a share, losing $0.04, or 0.21 percent.

Downward pressure is on the stock since they lost the anticipated takeover bid for Andean Resources (TSE:AND) to Goldcorp (NYSE:GG).

Goldcorp (NYSE:GG) Getting Competition for Andean Bid?

Speculation and rumors are swirling around the bid by Goldcorp (NYSE:GG) for Andean (TSE:AND), where names like the original suitor, Eldorado Gold (NYSE:EGO) has been thrown around, with additional gold miners like Kinross (NYSE:KGC) and Barrick Gold (NYSE:ABX) also being offered as potential candidates to launch a bidding war.

Since Kinross isn't that much larger than Eldorado Gold, it probably couldn't be considered a serious contender for the potential bidding war, as their market cap is a little over $12 billion, while Eldorado's is about closer to $10 billion.

Goldcorp has a market cap of about $32 billion, making it pretty much impossible to compete in a bidding war with the by Eldorado and Kinross.

Barrick could obviously compete, but they haven't shown any interest at this time in Andean, and much of the value of the bid is based on potential rather than proven reserves.

Too high of a bid would make the acquisition more of a trophy than a practical success.

The interest in Andean is based on the possibilities of hidden resources which have yet to be discovered at its Cerro Negro gold project in Argentina.

With that in mind, it would be unusual for a bidding war to ensue based on speculation and theory, rather than proven resources.

It could happen, but it would be somewhat irresponsible on the part of those who may participate in it.

Goldcorp (NYSE:GG) Acquires Andean (TSE:AND) Shares for $3.4 Billion

Goldcorp (NYSE:GG) announced it has acquired Andean Resources (TSE:AND), eyeing its Cerro Negro gold project in Argentina.

Cerro Negro has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver. Inferred resources are 523,000 ounces of gold and 3.12 million ounces of silver.

The project is wholly owned by Andean, making it even more desirable to Goldcorp.

Goldcorp will pay a 35 percent premium of $3.4 billion for the company, as of closing on Thursday, September 2.

Chuck Jeannes, Goldcorp President and Chief Executive Officer said, "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. As well, the potential exists for discoveries of new veins within this large, prospective land position."

The boards of both companies have already unanimously approved the deal, which should close in late 2010 or the early part of 2011.

Eldorado Gold (NYSE:EGO) Offers $3.2 Billion for Andean (OTC:ANDPF)

Eldorado Gold Corp. has made a $3.2 Billion bid for Andean Resources Ltd. (OTC:ANDPF), a gold mining company based in Australia.

Terms of the transaction would be a straight stock deal for shares from Eldorado.

“The transaction is consistent with Eldorado’s stated strategy of building a geographically diversified, low cost, high growth gold producer,” said Eldorado’s chief executive officer Paul Wright,

Included with Andean will be an asset located in Argentina, which has 2.1 million ounces of gold coming with it.

Eldorado valued each Andean share at C$6.36, offering 0.31 share for each one of Andeans.