How You Can Profit from a “Canadian Global Powerhouse”

As George Leong already discussed, Barrick Gold Corp. has placed a multi-billion-dollar bid to take over its rival Placer Dome Inc. If this deal goes through, it would create not only a North American conglomerate, but the largest gold miner in the world, moving the current leader — Newmont Mining Group — to the second position.

 Not even Placer saw this bid coming — a bid that also includes a side deal with a smaller Toronto company: Goldcorp Inc.

 If and when all is said and done, the Canadian company will be ahead of the crowd and at a better standpoint that its foreign counterparts who must still seek regulatory approval.

 “The combined company will be greater than the sum of its parts, a truly Canadian global powerhouse,” Greg Wilkins, Barrick’s chief executive, said.

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 “It certainly was an unsolicited offer,” Gayle Stewart, a spokesperson for Placer, said, adding that the actual bid has not been received by the board and the company has not yet had a chance to review the proposal.

 It seems that this bid has been hush-hush since this past August with prior attempts not working out.

 “We have had a number of conversations over the years, but never really had much traction,” Wilkins said.

 That is until yesterday when the founder and chairman, Peter Munk, placed a personal call to the chairman of the Placer board to inform him of the upcoming bid.

 “We’re really setting out to take Barrick to the next level,” Wilkins said.

 It seems that if this deal goes through, Barrick would save about $240 million a year in operation and purchasing costs.

 Shareholders in Placer, if the deal goes through, would receive $20.50 Canadian per share. This is 27% higher than the current closing price. In this deal they would receive 13% in cash and the rest in shares in Barrick.

 However, analysts are suggesting that after the public announcement of this proposed deal, other companies, such as Newmont, might look to take over Placer. But, Wilkins is confident that their offer is top-notch.

 “I think we have a very high likelihood of being successful. Peter (Munk) did make the approach (to Placer yesterday) and opened the dialogue, hopefully, which we would like to foster in the weeks ahead,” Wilkins said.

 If the deal goes as anticipated, Goldcorp — who has in the past tried to make a deal with Placer — will be in a position to finally purchase shares in Placer — $1.35 billion worth.

 Michael’s been touting the benefits of investing in small gold producers for some time now — if this deal goes through, investors that have been following his advice could profit handsomely. And I agree with Michael’s statement above that it’s not too late to get in on this booming sector, especially with news like this takeover in the headlines…