CANBERRA (Dow Jones)--One of Australia's and the world's most...

CANBERRA (Dow Jones)--One of Australia's and the world's most prospective
gold companies, Andean Resources Ltd. (AND.AU), has become the subject of a bidding war
between two Vancouver-based global gold majors.
Andean has rocketed to international industry prominence over the past two years
through the rapid development of its high-grade, low-cost Cerro Negro gold project in
Argentina, which contains 2.1 million ounces of gold and 20.6 million ounces of silver in
probable reserves.
A mining feasibility study issued early July by Andean for Cerro Negro underscored the
project's robust nature, with initial annual production of 285,000 ounces of gold at
an average cash cost of US$60/oz inclusive of silver by-product credits, compared with
gold's current spot price of $1,250/oz. Andean was targeting full production from
the US$275 million project from June 2012.
Goldcorp Inc. (GG) and Andean said Friday they had reached an agreement for Goldcorp to
acquire all Andean shares through a combination of shares or cash that values Andean at
C$3.6 billion. Under this arrangement, each common share of Andean will be exchanged for
either 0.14 share of Goldcorp or a cash payment of C$6.50/share, subject to an aggregate
maximum cash consideration of C$1 billion.
The transaction has been unanimously approved by the boards of both companies but is
subject to there being no superior proposal, the companies said in a joint statement.
Shareholders representing 21% of Andean's capital have already agreed to vote in
favor of the deal. The deal is expected to close in late 2010 or early 2011, subject to
75% of Andean shareholders and 50% of Goldcorp's shareholders voting in favor of the
deal.
Chuck Jeannes, Goldcorp's president and chief executive, said an exciting feature
of Cerro Negro beyond its shallow depth, strong production at low cost and short
construction time, is the opportunity for significant continued growth of gold resources
through expansion of the existing deposits and the discovery of additional zones along
the strike of the veins.
Earlier Friday, Eldorado Gold Corp. (ELD.T) said it had approached Andean with a
"compelling" proposal to combine to create "the world's fastest
growing and lowest cost gold producer."
Eldorado's proposal was for a share exchange at a fixed ratio of 0.310 Eldorado
share for each Andean share, through a friendly transaction supported by most Andean
directors, Eldorado said in a statement.
The proposal "is extremely compelling" for Andean shareholders and follows an
earlier initial approach to Andean on Aug. 18 that valued Andean at C$6.36 a share and
that was verbally rejected by Andean's board, according to Eldorado.
Andean called a trading halt on its shares Friday morning, but not before its shares
soared A$1.51, or 31%, to a record A$6.40, giving it a market capitalization of A$3.47
billion.
Analysts at Fairfax said Goldcorp's cash and shares deal values Andean Resources
at C$6.50 a share, or 2.2% more than Eldorado's offer. It is a "very
punchy" offer, said analysts at Liberum Capital, noting that the deal represent
another clear indication that some gold miners are still undervalued bid targets.
Goldcorp's offer represents a 35% premium to GoldCorp's Toronto-listed
closing share price on Sept. 2 and represents a 56% premium to Andean's 20-day
volume weighted average trading price on the Toronto Stock Exchange.
The contested bid for Andean Resources comes hot on the heels of another large deal in
the gold sector. Kinross Gold Corp. (KGC, K.T) announced a month ago it will acquire Red
Back Mining Inc. (RBIFF, RBI.T) for $7.1 billion in an all-stock deal that will give the
company access to large new gold projects in West Africa.