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6/22/17

Goldcorp's (GG) bizarre and highly suspicious sale of Camino Rojo to Orla Mining (OLA.v)

Consider some facts:

  • In late 2009 (closed Feb 2010) and after beating out Penmont for the prize, Goldcorp (GG) paid C$308.5m in cash for Canplats and its Camino Rojo project ($4.60 a share plus a 20c valuation on the spin-out).
  • At that time, Camino Rojo had an all-categories 43-101 resource of 3.44m oz gold (and no reserve, see below).
  • On its books, GG folded Camino Rojo into the carry of its nearby Peñasquito mine, which made sense because the plan was to use Camino Rojo as a new source of feed for its big mine. However, it means that we on the outside can't track how much money GG spent on developing Camino Rojo over the seven years of its ownership. (Edit: See update).
  • However, there's little doubt that GG has sunk plenty of cash into the development of Camino Rojo. That we know because now, GG has it on its books with a 1.7m oz gold reserve and a M+I resource of 7.5m oz gold. That kind of resource bump-up costs serious money to achieve.
  • It's no secret that GG under Garofalo has wanted to get shot of Camino Rojo, a whole bunch of news reports in December last year told how GG had hired Scotiabank to look for a buyer. However, at that time and according to analyst estimates Camino Rojo had a ticket price of around $200m.
  • Yesterday, Orla Mining (OLA.v) agreed to buy Camino Rojo. The price; 31.9m shares, plus a 2% NSR. As OLA.v is a $1.30 stock today (it popped from $1.10 or so on the news) those shares GG gets are worth around C$41.5m right now. 
  • The Chairman of OLA.v is Chuck Jeannes, who was CEO of Goldcorp between 2009 and 2016. In other words, Chuck bought Camino Rojo for over C$300m, spent untold millions of GG's money on its development afterwards (Edit: see update) and now gets to buy it for his new company for a pittance of paper. 

WTF? Seriously, WTF is this? Does Chuck have photos of Garofalo in bed with a goat? How the hell can GG shareholders let this deal happen at such a low price? How the devil can the Canadian regulatory authorities give this a green light?


UPDATE: According to Chuck Jeannes on the OLA ConfCall, GG spent another $150m on drilling and development of Camino Rojo.