Goldcorp and Glamis Agree to Merge

Engineering and Mining Journal, Oct 2006

On Aug. 31, 2006, Goldcorp and Glamis Gold announced an agreement to merge. Assuming the transaction closes as planned, the merger will create a 2.4 million-oz/y gold producer having a market capitalization of about $21 billion. Gold reserves of the new company, which will be called Goldcorp, will total 41.1 million oz, backed by measured and indicated resources of 14 million oz and inferred resources of 30.9 million oz. Estimated 2006 cash costs of production at about $120/oz will be well below those of any other major gold producer. Advanced development projects held by the merged company will have the potential to increase its gold production by more than 50% over the next four years.

Goldcorp is headquartered in Toronto and rose to prominence through its 1995 discovery and subsequent development of the high-grade Red Lake mine in Ontario, Canada. More recently, it has grown through its acquisitions of Wheaton River Minerals in February 2005 and of former Placer Dome properties from Barrick Gold in May 2005.

Glamis Gold is headquartered in Reno, Nevada, and currently operates four mines in the Americas: the Marigold mine in Nevada; the El Sauzal mine in Mexico, the Marlin mine in Guatemala, and the San Martin mine in Honduras.

The merged company will have a strong pipeline of development projects. Glamis' Peñasquito gold-silver-zinc-lead project in Zacatecas, Mexico, was the focus of most of the attention during a conference call announcing the planned merger. Glamis acquired Peñasquito in May 2006 when it acquired Western Silver and shortly thereafter announced plans to proceed with project development. In June 2006, Glamis reported updated, dramatically higher reserve and resource totals at Peñasquito, providing strong indication that the project will become a world-class mine. Peñasquito reserves now stand at 10 million oz of gold, 575 million oz of silver, 3.62 million mt of zinc, and 1.67 million mt of lead. Goldcorp owns the Luismin mines in Mexico, and Luismin's operators are expected to provide valuable assistance in advancing the Peñasquito project toward production.

Other development projects held by the merged company will include Goldcorp's nearly complete Los Filos gold project in Mexico, its expansion project at Red Lake, its Éléonore advanced exploration project in Québec, and its share of the Pueblo Viejo joint venture in the Dominican Republic. Glamis will contribute its Cerro Blanco exploration project in Guatemala and its 40% interest in the Dee exploration joint venture in Nevada.

The Goldcorp/Glamis merger is structured as a plan of arrangement, with Glamis common shareholders receiving one Goldcorp share for each 1.69 Glamis shares held, representing a premium of 32.7% to the closing price of Glamis' shares on the Toronto Stock Exchange on Aug. 30, 2006. After completion of the transaction, current Goldcorp shareholders will own approximately 60% of Goldcorp and current Glamis shareholders will own approximately 40%.

Ian Telfer, president and CEO of Goldcorp, will become chairman of the new Goldcorp. Kevin McArthur, president and CEO of Glamis, will become its president and CEO.