they weren't nearly as harsh as most OSK investors would have been ...

Osisko harsh in its formal rejection of Goldcorp’s hostile bid

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Accusing Goldcorp Inc. of years of low-ball offers, Osisko Mining Corp. urged its shareholders on Monday to reject the $2.6-billion hostile bid from its larger gold mining rival.

Osisko’s formal rejection is the fourth time the Montreal-based miner has spurned Goldcorp, which has been trying to buy Osisko and its flagship Canadian Malartic mine in Quebec for five years.

Osisko’s stock is trading around $6.44 a share, above Goldcorp’s cash and stock bid of $5.95 a share.

The hostility between Osisko and Goldcorp became public last week when the Vancouver-based miner launched the unwanted bid and accused Osisko of acting in bad faith, including withholding information after they signed a confidentiality agreement.

Osisko and Goldcorp began their relationship during the financial crisis when Osisko’s stock was plunging and it desperately needed a cash infusion to build Canadian Malartic.

At Osisko’s request in September, 2008, Goldcorp agreed to buy a small stake in the company at $2.50 a share when Osisko was trading as low as $1.86 per share.

Then over the course of a year, Goldcorp made three offers for Osisko that were all rejected and below Osisko’s stock price.

“To make it very clear, Goldcorp never provided reasonable proposals. For them to now suggest otherwise is entirely false,” Mr. Roosen said.

According to Osisko, Goldcorp’s first offer on Nov. 27, 2008, was valued at $1.78 a share when Osisko was trading in a range between $1.60 and $2.

Goldcorp’s second offer in April of 2009 was valued at $4.85, when Osisko was trading above $5 a share. Goldcorp’s third offer in September, 2009, was valued at $5.89, when Osisko was trading above $7 a share.

“We tried unsuccessfully to have Goldcorp increase the price to a reasonable number. But the response back was that Osisko would never be able to finance, never be able to build on a standalone basis and it was time to accept this fate,” Mr. Roosen said.

Osisko’s chief executive since 2006, Mr. Roosen has led the company as it develops Canadian Malartic into one of the biggest gold mines in the country.

Canadian Malartic, which started commercial production in 2011, holds 10.1 million ounces of gold reserves and is considered a low-cost producer.

On a conference call with investors on Monday where Osisko managers refused to take questions, Mr. Roosen said the company was aggressively pursuing alternatives to Goldcorp’s bid but provided no detail.

It is unlikely that another gold producer will be able to rescue Osisko as miners are trying to preserve cash amid the weaker gold price.

Gold is now trading around $1,250 (U.S.) an ounce, well off its high of $1,900 reached in fall of 2011.

Osisko said it is being undervalued by Goldcorp in terms of estimates of price/net asset value multiples for other large-scale gold producers.

As well, the company said Goldcorp has under-delivered when it comes to developing its own assets, including the Eleonore project in Quebec, the Cerro Negro project in Argentina and the Cochenour project in Ontario.

Mr. Roosen pointed out that over the past five years Goldcorp’s stock has dropped whereas Osisko’s has made gains.

Goldcorp is down 30 per cent to $25.78 over five years. Osisko is up 40 per cent to $6.44 over the same period.

“Goldcorp’s best days are behind them and we are in a brand new mine with our best days in front of us,” Mr. Roosen said.

Goldcorp did not respond to a request for comment.