TORONTO (Reuters) - Goldcorp Inc said on Thursday it will spend $513 million to buy mining giant Xstrata's 70 percent interest in the El Morro copper-gold project in Chile, foiling Barrick Gold's plans to acquire the stake.
Goldcorp will buy the stake through a creatively structured deal with fellow Canadian miner New Gold Inc, the minority stakeholder and Xstrata's partner in El Morro.
In October, Swiss-based Xstrata agreed to sell its interest in the project to Canada's Barrick, the world's No. 1 gold miner, for $465 million. But, New Gold had the right of first refusal on Barrick's purchase -- meaning it had the right to match the offer -- until January 2010.
New Gold, through a wholly owned subsidiary, will exercise that right and acquire the 70 percent interest.
Goldcorp will advance $463 million to New Gold to fund the deal. After the acquisition by the New Gold subsidiary, Goldcorp will acquire that subsidiary from New Gold.
Goldcorp will pay New Gold $50 million in cash upon closing the acquisition of the subsidiary. Goldcorp has also agreed to amend certain terms of the El Morro shareholders agreement, with respect to New Gold's capital funding obligations.
On closing, Goldcorp will hold 70 percent of El Morro and New Gold 30 percent.
El Morro is an advanced stage copper-gold project located in north-central Chile. It contains proven and probable reserves of 6.7 million ounces of gold and 5.7 billion pounds of copper.
Goldcorp looks for large, high quality assets that have low operating costs and a long mine life, Chief Executive Chuck Jeannes told Reuters.
"This ticks all of those boxes. Additionally, we look for large property positions that are relatively unexplored, so that we have the opportunity for continued organic growth -- this property also fits that bill," said Jeannes.
For Barrick, the property had the additional appeal of promising costs-savings, as it is located not far from its Veladero mine, and Pascua Lama and Cerro Casale projects.
Barrick spokesman Vince Borg said the company would review the agreement and then decide whether it might try to stay in the process.
"It would depend on the agreement that they struck (but) we haven't seen that yet," he said.
Borg played down the prospect of frosty relations between Barrick and Goldcorp, which are the world's top two gold miners by market size and partners on the Pueblo Viejo project in the Dominican Republic.
"We're partners, peers and competitors," he said.
The deal comes as Goldcorp is also entangled in a bidding war for Canplats Resources (CPQ.V), which owns the Camino Rojo gold-silver deposit in Mexico that sits close to Goldcorp's Penasquito gold-silver mine.
Construction of the Penasquito mine is nearing completion and Goldcorp plans to use the expertise of the team that led the build of that mine, to help spearhead work on the El Morro project.
Goldcorp expects its first full-year of production from El Morro in 2015, said Jeannes.
New Gold shares were up 6.5 percent at C$4.28 midday on the Toronto Stock Exchange, while Goldcorp fell 8 Canadian cents to C$43.30.