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.

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.

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.