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1: 6-K Report of Foreign Private Issuer HTML 71K
2: EX-99.1 Notice and Information Circular HTML 2.12M
11: EX-99.10 Consent of Author (Voorhees-Penasquito) HTML 22K
12: EX-99.11 Consent of Author (Wythes) HTML 22K
13: EX-99.12 Consent (Amec) HTML 19K
14: EX-99.13 Consent (Barnes) HTML 21K
15: EX-99.14 Certificate of Qualified Person (Barnes) HTML 22K
16: EX-99.15 Consent (Barton) HTML 19K
17: EX-99.16 Certificate of Qualified Person (Barton) HTML 20K
18: EX-99.17 Consent (Berthelsen) HTML 21K
19: EX-99.18 Consent (Blais) HTML 21K
20: EX-99.19 Consent (Burgess-Peak/Almumbrera) HTML 20K
3: EX-99.2 Press Release HTML 29K
21: EX-99.20 Consent (Burgess-Amapari) HTML 20K
22: EX-99.21 Certificate of Author (Burgess-Peak/Alumbrera) HTML 24K
23: EX-99.22 Certificate of Author (Burgess-Amapari) HTML 24K
24: EX-99.23 Consent (Eggleston) HTML 19K
25: EX-99.24 Consent (Gormely) HTML 19K
26: EX-99.25 Certificate of Qualified Person (Gomerly) HTML 20K
27: EX-99.26 Consent (Grace) HTML 20K
28: EX-99.27 Certificate (Grace) HTML 23K
29: EX-99.28 Consent (Hennessey) HTML 20K
30: EX-99.29 Certificate of Author (Hennessey) HTML 23K
4: EX-99.3 Form of Proxy HTML 16K
31: EX-99.30 Consent (Hester) HTML 19K
32: EX-99.31 Certificate of Qualified Person (Kappers) HTML 23K
33: EX-99.32 Consent (Hooley) HTML 19K
34: EX-99.33 Certificate of Author (Hooley) HTML 22K
35: EX-99.34 Consent of Qualified Person (Kappes) HTML 19K
36: EX-99.35 Certificate of Qualified Person (Kappes) HTML 23K
37: EX-99.36 Certificate of Author (Lomas) HTML 24K
38: EX-99.37 Consent of Expert (Macfarlane) HTML 22K
39: EX-99.38 Certificate (Macfarlane) HTML 22K
40: EX-99.39 Consent (Micon-Peak/Alumbrera) HTML 20K
5: EX-99.4 Consent of Author (Drielick) HTML 21K
41: EX-99.40 Consent (Micon-Amapari) HTML 20K
42: EX-99.41 Consent (Ross) HTML 21K
43: EX-99.42 Consent (Lomas) HTML 20K
44: EX-99.43 Consent (Snowden) HTML 21K
45: EX-99.44 Consent (Stechishen) HTML 20K
46: EX-99.45 Consent (Spring) HTML 21K
47: EX-99.46 Certificate (Spring) HTML 22K
48: EX-99.47 Consent of Expert (Vasquez) HTML 20K
49: EX-99.48 Consent (Wells) HTML 20K
50: EX-99.49 Certificate of Author (Wells) HTML 22K
6: EX-99.5 Consent of Author (Hanks) HTML 22K
51: EX-99.50 Consent of Expert (Watts, Griffis and McOuat) HTML 22K
52: EX-99.51 Notice of Special Meeting of Shareholders HTML 23K
53: EX-99.52 Certificate of Qualified Person (Drielick) HTML 23K
54: EX-99.53 Certificate of Qualified Person (Hanks) HTML 23K
55: EX-99.54 Certification of Qualified Person (Huss) HTML 23K
56: EX-99.55 Certification of Qualified Person (Johnson) HTML 27K
57: EX-99.56 Certification of Qualified Person HTML 24K
(Voorhees-Marlin)
58: EX-99.57 Certification of Qualified Person (Pegnam) HTML 24K
59: EX-99.58 Certification of Qualified Person HTML 24K
(Voorhess-Penasquito)
60: EX-99.59 Certification of Qualified Person (Wythes) HTML 24K
7: EX-99.6 Consent of Author (Huss) HTML 22K
61: EX-99.60 Officer's Certificate HTML 20K
62: EX-99.61 Consent (Taylor) HTML 19K
63: EX-99.62 Consent (Floyd) HTML 19K
64: EX-99.63 Consent (McGibbon) HTML 19K
65: EX-99.64 Consent (Mello) HTML 19K
66: EX-99.65 Confirmation of Mailing HTML 19K
8: EX-99.7 Consent of Author (Johnson) HTML 22K
9: EX-99.8 Consent of Author (Voorhees-Marlin) HTML 22K
10: EX-99.9 Consent of Author (Pegnam) HTML 22K
TAKE NOTICE THAT, pursuant to an order (the
“Interim Order”) of the Supreme Court of
British Columbia (the “Court”) dated
September 25, 2006, a special meeting (the
“Meeting”) of the shareholders (“Glamis
Shareholders”) of Glamis Gold Ltd.
(“Glamis”) will be held at The Cheakamus Room,
The Fairmont Waterfront Hotel, 900 Canada Place Way,
Vancouver, British Columbia, on October 26, 2006, at
9:30 a.m. (Vancouver time), for the following purposes:
1.
To consider and, if thought fit, pass, with or without
variation, a special resolution (the “Arrangement
Resolution”) approving an arrangement (the
“Arrangement”) under section 288 of the
Business Corporations Act (British Columbia) (the
“BCBCA”) which involves, among other things,
the acquisition of Glamis by Goldcorp Inc.
(“Goldcorp”) through the exchange of the issued
common shares of Glamis (“Glamis Shares”) for
common shares of Goldcorp (“Goldcorp Shares”)
and cash on the basis of 1.69 Goldcorp Shares and
Cdn.$0.0001 in cash for each Glamis Share, all as more fully set
forth in the accompanying information circular (the
“Circular”) of Glamis; and
2.
To transact such further or other business as may properly come
before the Meeting and any adjournments thereof.
Copies of the Arrangement Resolution, Plan of Arrangement made
pursuant to the Arrangement Agreement, Interim Order, and Notice
of Hearing of Petition for Final Order are attached to the
Circular as Appendices A, C, F and G, respectively.
AND TAKE NOTICE that Glamis Shareholders who validly dissent
from the Arrangement will be entitled to be paid the fair value
of their Glamis Shares, subject to strict compliance with
Sections 237 to 247 of the BCBCA, as modified by the
provisions of the Interim Order, the Final Order and the Plan of
Arrangement. Failure to comply strictly with the requirements
set forth in Sections 237 to 247 of the BCBCA, as
modified by the provisions of the Interim Order, the Final Order
and the Plan of Arrangement may result in the loss of any right
of dissent.
The Circular provides additional information relating to the
matters to be dealt with at the Meeting and is deemed to form
part of this Notice. Also accompanying this Notice is a form of
proxy. Any adjourned meeting resulting from an adjournment of
the Meeting will be held at a time and place to be specified
either by Glamis before the Meeting or by the Chair at the
Meeting. Only Glamis Shareholders of record at the close of
business on September 26, 2006 will be entitled to receive
notice of and vote at the Meeting.
Registered Glamis Shareholders unable to attend the Meeting are
requested to date, sign and return their form of proxy in the
enclosed prepaid envelope. To be used at the Meeting, proxies
must be received by Glamis’ registrar and transfer agent,
Computershare Investor Services Inc., before 9:30 a.m.
(Vancouver time) on October 24, 2006 or, in the case of any
adjournment or postponement of the Meeting, no later than
48 hours (excluding Saturdays, Sundays and holidays) before
the time that any adjourned or postponed Meeting is reconvened
or held, as the case may be. If you are a non-registered Glamis
Shareholder and receive these materials through your broker or
through another intermediary, please complete and return the
materials in accordance with the instructions provided to you by
your broker or the other intermediary. Failure to do so may
result in your Glamis Shares not being voted at the Meeting. If
you have any questions about the information contained in the
Circular or require assistance in completing your proxy form,
please contact Glamis’ proxy solicitation agent, Georgeson,
at 1-866-904-8739 (toll-free in North America). Banks and
brokers should call 212-440-9800.
(Capitalized terms in this part of the Circular not otherwise
defined have the meanings set out in the Glossary of Terms in
the Circular.)
THE SECURITIES ISSUABLE IN CONNECTION WITH THE ARRANGEMENT
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE
SECURITIES REGULATORY AUTHORITIES IN ANY STATE, NOR HAS THE SEC
OR THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE PASSED ON
THE ADEQUACY OR ACCURACY OF THIS INFORMATION CIRCULAR. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
The Goldcorp Shares to be issued under the Arrangement have not
been registered under the U.S. Securities Act and are being
issued in reliance on the exemption from registration set forth
in Section 3(a)(10) thereof on the basis of the approval of
the Court as described under “Securities Laws
Considerations” in this Circular. The solicitation of
proxies is not subject to the requirements of Section 14(a)
of the U.S. Exchange Act by virtue of an exemption applicable to
proxy solicitations by foreign private issuers as defined in
Rule 3b-4 of the U.S. Exchange Act. Accordingly, this
Circular has been prepared in accordance with applicable
Canadian disclosure requirements. Residents of the United States
should be aware that such requirements differ from those of the
United States applicable to proxy statements under the U.S.
Exchange Act.
Likewise, information concerning the properties and operations
of Glamis and Goldcorp has been prepared in accordance with
Canadian standards under applicable Canadian securities laws,
and may not be comparable to similar information for United
States companies. The terms “Mineral Resource”,
“Measured Mineral Resource”, “Indicated
Mineral Resource” and “Inferred Mineral
Resource” used in this Circular are Canadian mining
terms as defined in accordance with NI 43-101 under
guidelines set out in the Canadian Institute of Mining,
Metallurgy and Petroleum (the “CIM”) Standards
on Mineral Resources and Mineral Reserves adopted by the CIM
Council on December 11, 2005.
While the terms “Mineral Resource”,
“Measured Mineral Resource”, “Indicated
Mineral Resource” and “Inferred Mineral
Resource” are recognized and required by Canadian
regulations, they are not defined terms under standards of the
SEC. As such, certain information contained in this Circular
concerning descriptions of mineralization and resources under
Canadian standards is not comparable to similar information made
public by U.S. companies subject to the reporting and disclosure
requirements of the SEC. “Inferred Mineral
Resource” has a great amount of uncertainty as to its
existence and as to its economic and legal feasibility. It
cannot be assumed that all or any part of an “Inferred
Mineral Resource” will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or other
economic studies. Investors are cautioned not to assume that
all or any part of Measured or Indicated Resources will ever be
converted into Mineral Reserves. Investors are also cautioned
not to assume that all or any part of an “Inferred Mineral
Resource” exists, or is economically or legally
mineable.
In addition, the definitions of “Proven Mineral
Reserves” and “Probable Mineral
Reserves” under CIM standards differ in certain
respects from the SEC standards.
Financial statements included or incorporated by reference
herein have been prepared in accordance with Canadian generally
accepted accounting principles and are subject to auditing and
auditor independence standards in Canada, and thus may not be
comparable to financial statements of United States companies.
Glamis Shareholders should be aware that the exchange of their
Glamis Shares for Goldcorp Shares as described herein may have
tax consequences in both the United States and Canada. Such
consequences for Glamis Shareholders who are resident in, or
citizens of, the United States may not be described fully
herein. See “Canadian Federal Income Tax
Considerations” and “United States Federal Income Tax
Considerations” in this Circular.
With respect to the unaudited pro forma financial statements of
Glamis included in the business acquisition report of Glamis
dated July 14, 2006 relating to the acquisition of Western
Silver and incorporated by reference herein, the independent
chartered accountants have reported that they applied limited
procedures in accordance with Canadian professional standards
for preparation of a compilation report. However, their separate
compilation report included in the above-mentioned business
acquisition report states that they are unable to express any
opinion in accordance with standards of reporting generally
accepted in the United States with respect to the compilation of
the accompanying unaudited pro forma financial information.
Accordingly, the degree of reliance on their report for such
information should be restricted in light of the limited nature
of the review procedures applied. The independent chartered
accountants may not be subject to the liability provisions of
Section 11 of the U.S. Securities Act for their report on
the pro forma financial information and the related comments
because that report is not a “report” or a
“part” of a registration statement prepared or
certified by the accountants within the meaning of
Sections 7 and 11 of the U.S. Securities Act.
With respect to the unaudited pro forma condensed consolidated
financial statements of Goldcorp included herein, the
independent chartered accountants have reported that they
applied limited procedures in accordance with Canadian
professional standards for preparation of a compilation report.
The enforcement by Glamis Shareholders of civil liabilities
under the United States federal securities laws may be affected
adversely by the fact that Glamis and Goldcorp are incorporated
or organized under the laws of a foreign country, that some or
all of their officers and directors and the experts named herein
may be residents of a foreign country, and that all or a
substantial portion of the assets of Glamis, Goldcorp, and those
persons may be located outside the United States.
Except for the statements of historical fact contained herein,
the information presented in this Circular and the information
incorporated by reference herein, constitutes
“forward-looking statements” within the meaning of the
United States Private Securities Litigation Reform Act of
1995 and “forward-looking information” within the
meaning of applicable Canadian securities legislation concerning
the business, operations and financial performance and condition
of each of Glamis, Goldcorp and the Combined Company. Often, but
not always, forward-looking statements and forward-looking
information can be identified by words such as
“plans”, “expects”, “may”,
“should”, “budget”, “scheduled”,
“estimates”, “forecasts”,
“intends”, “anticipates”,
“believes”, or variations of such words and phrases
that refer to certain actions, events or results that may,
could, would, might or will occur or be taken or achieved.
Forward-looking statements and forward-looking information
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements
of Glamis, Goldcorp or the Combined Company to differ materially
from any future results, performance or achievements expressed
or implied by those forward-looking statements or
forward-looking information. Such risks and other factors
include, among others, actual results of exploration activities,
actual results of reclamation activities, estimation or
realization of mineral reserves and resources, timing and amount
of estimated future production, costs of production, capital
expenditures, costs and timing of the development of new
deposits, requirements for additional capital, future prices of
metal, possible variations in ore grade or recovery rates,
failure of plant, equipment or processes to operate as
anticipated, accidents, labour disputes and other risks of the
mining industry, delays in obtaining governmental approvals,
permits or financing or in the completion of development or
construction activities, hedging practices, currency
fluctuations, title disputes or claims limitations on insurance
coverage and the timing and possible outcome of pending
litigation, risks associated with international operations,
risks related to joint venture operations, risks related to the
integration of acquisitions, as well as those factors discussed
under “The Narrative Description of the
Business — Risk Factors” in Glamis’ Annual
Information Form for the year ended December 31, 2005 and
under “Description of Business — Risk
Factors” in Goldcorp’s Renewal Annual Information Form
for the year ended December 31, 2005. In addition, there
are certain risks related to the consummation of the Arrangement
and the business and operations of the Combined Company
including, but not limited to, realizing the increased earnings
and enhanced growth opportunities currently anticipated for the
Combined Company, realizing the benefits of the Combined
Company’s growth projects, meeting key production and cost
estimates by the Combined Company, construction and
technological risks related to the Combined Company, capital
requirements and operating risks associated with the expanded
operations of the Combined Company, the market price of the
shares of the Combined Company and other risks discussed in this
Circular. Although Glamis and Goldcorp have attempted to
identify important factors that could cause actual actions,
events or results to differ materially from those described in
forward-looking statements and forward-looking information in
this Circular, and the documents incorporated by reference
herein, there may be other factors that cause actions, events or
results not to be as anticipated, estimated or intended. There
is no assurance that such statements will prove to be accurate
as actual results and future events could differ materially from
those anticipated in such statements or information.
Accordingly, readers should not place undue reliance on
forward-looking statements and forward-looking information in
this Circular, nor in the documents incorporated by reference
herein.
Certain of the forward-looking statements and forward-looking
information and other information contained herein concerning
the mining industry and Glamis’ and Goldcorp’s general
expectations concerning the mining industry, Glamis, Goldcorp
and the Combined Company are based on estimates prepared by
Glamis or Goldcorp using data from publicly available industry
sources as well as from market research and industry analysis
and on assumptions based on data and knowledge of this industry
which Glamis or Goldcorp believe to be reasonable. However,
although generally indicative of relative market positions,
market shares and performance characteristics, these data are
inherently imprecise. While Glamis and Goldcorp are not aware of
any misstatement regarding any industry data presented herein,
the mining industry involves risks and uncertainties that are
subject to change based on various factors.
Neither Glamis nor Goldcorp undertakes any obligation to update
any of the forward-looking statements or forward-looking
information in this Circular or incorporated by reference
herein, except as otherwise required by law.
The following documents, filed by Glamis with securities
commissions or similar regulatory authorities in Canada (the
“Canadian Securities Authorities”) and with the
SEC, are specifically incorporated by reference into, and form
an integral part of, this Circular:
the audited consolidated financial statements of Glamis as at
December 31, 2005 and 2004 and for each year in the
three-year period ended December 31, 2005, together with
the auditors’ report thereon and the notes thereto;
(c)
management’s discussion and analysis of financial condition
and results of operations of Glamis for the fiscal year ended
December 31, 2005;
(d)
the unaudited interim consolidated financial statements of
Glamis for the six months ended June 30, 2006 and 2005
together with the notes thereto;
(e)
management’s discussion and analysis of financial condition
and results of operations of Glamis for the six months ended
June 30, 2006;
(f)
the business acquisition report of Glamis dated July 14,2006 relating to the acquisition of Western Silver by Glamis;
(g)
the management information circular of Glamis dated
March 6, 2006 distributed in connection with the annual
general meeting of shareholders held on May 3, 2006;
(h)
the material change report of Glamis dated March 3, 2006
relating to the acquisition of Western Silver;
(i)
the material change report of Glamis dated May 5, 2006
relating to the completion of the acquisition of Western Silver;
(j)
the material change report of Glamis dated September 7,2006 relating to the Arrangement; and
(k)
the amended and restated arrangement agreement dated as of
August 30, 2006 between Glamis and Goldcorp.
The following documents, filed by Goldcorp with the Canadian
Securities Authorities and with the SEC, are specifically
incorporated by reference into, and form an integral part of,
this Circular:
management’s discussion and analysis of financial condition
and results of operations of Goldcorp for the financial year
ended December 31, 2005;
(c)
management’s discussion and analysis of financial condition
and results of operation of Goldcorp for the six months ended
June 30, 2006;
(d)
the business acquisition report of Goldcorp dated July 26,2006 relating to the acquisition of certain assets of Placer
Dome Inc. other than the unaudited pro forma condensed
consolidated financial statements of Goldcorp as at
March 31, 2006 and for the three months then ended and for
the year ended December 31, 2005;
the management information circular of Goldcorp dated
March 20, 2006 prepared in connection with the annual and
special meeting of shareholders of Goldcorp held on
April 19, 2006;
(f)
the management information circular of Goldcorp dated
April 10, 2006 prepared in connection with the meeting of
warrantholders of Goldcorp held on May 9, 2006 other than
the audited comparative consolidated financial statements of
Goldcorp for the year ended December 31, 2005 and for the
years ended December 31, 2004, 2003 and 2002 and the
audited comparative consolidated financial statements of Wheaton
River Minerals Ltd. for the years ended December 31, 2004,
2003 and 2002;
(g)
the material change report of Goldcorp dated March 8, 2006
relating to new management appointments;
(h)
the material change report of Goldcorp dated May 12, 2006
relating to the approval by warrantholders of Goldcorp’s
proposal relating to its publicly traded warrants;
(i)
the material change report of Goldcorp dated June 12, 2006
relating to the early exercise of publicly traded warrants;
(j)
the material change report of Goldcorp dated June 23, 2006
relating to the appointment of a new director;
(k)
the material change report of Goldcorp dated August 29,2006 relating to an unsolicited below market
“mini-tender” offer (the “TRC Offer”)
by TRC Capital Corporation;
(l)
the material change report of Goldcorp dated September 8,2006 relating to the Arrangement;
(m)
the material change report of Goldcorp dated September 19,2006 relating to the TRC Offer; and
(n)
the news release of Goldcorp dated April 20, 2006 relating
to the Feasibility Study on the Los Filos Project.
Copies of the Glamis documents incorporated herein by reference
may be obtained on request without charge from the Executive
Vice President, Administration of Glamis at 5190 Neil Road,
Suite 310, Reno, Nevada89502 (telephone
(775) 827-4600, Ext. 3107). Copies of the Goldcorp
documents incorporated by reference in this Circular may be
obtained upon request without charge from the Director, Investor
Relations of Goldcorp at Suite 3400 — 666 Burrard
Street, Vancouver, British Columbia, V6C 2X8 (Telephone:
(604) 696-3000). These documents are also available on
SEDAR, which can be accessed online at www.sedar.com. For the
purposes of the Province of Québec, this Circular contains
information to be completed by consulting the permanent
information records for each of Glamis and Goldcorp. A copy of
the Glamis permanent information record may be obtained from the
Executive Vice President, Administration of Glamis and a copy of
the Goldcorp permanent information record from the Director,
Investor Relations of Goldcorp at the above mentioned addresses
and telephone numbers.
Material change reports (other than confidential reports) and
all other documents of the type referred to above filed by
Glamis and Goldcorp with the Canadian Securities Authorities
after the date of this Circular and before the Meeting are
deemed to be incorporated by reference into this Circular.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for the purposes of this Circular to the
extent that a statement contained in this Circular or in any
subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not
constitute a part of this Circular, except as so modified or
superseded. The modifying or superseding statement need not
state that it has modified or superseded a prior statement or
include any other information set forth in the document that it
modifies or supersedes. Making such a modifying or superseding
statement shall not be deemed to be an admission for any purpose
that the modified or superseded statement, when made,
constituted a misrepresentation, untrue statement of a material
fact, nor an omission to state a material fact that is required
to be stated or that is necessary to make a statement not
misleading in light of the circumstances in which it was
made.
REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES
Unless otherwise indicated, all references to “$” or
“dollars” in this Circular refer to U.S. dollars.
Glamis’ financial statements incorporated by reference
herein are reported in U.S. dollars and are prepared in
accordance with Canadian GAAP. Certain financial information in
Glamis’ financial statements is reconciled to U.S. GAAP.
For a discussion of the principal differences between U.S. GAAP
and Canadian GAAP in the context of Glamis, see Note 15 to
the Glamis audited consolidated financial statements as at
December 31, 2005 and Note 9 to the Glamis unaudited
consolidated interim financial statements as at June 30,2006. Goldcorp’s financial statements that are included
herein and incorporated by reference are reported in U.S.
dollars and are prepared in accordance with Canadian GAAP.
EXCHANGE RATES
The following table sets forth, for each indicated period, the
ending, average, high, and low exchange rates for one U.S.
dollar expressed in Canadian dollars, based on the noon buying
rates, as provided by the Bank of Canada:
On August 30, 2006, the last trading day before the
announcement of the Arrangement, the exchange rate for one U.S.
dollar expressed in Canadian dollars, based on the noon buying
rates provided by the Bank of Canada, was Cdn.$1.1100.
On September 25, 2006, the exchange rate for one U.S.
dollar expressed in Canadian dollars, based upon the noon buying
rates provided by the Bank of Canada, was Cdn.$1.1162.
INFORMATION CONTAINED IN THIS CIRCULAR
The information contained in this Circular is given as at
September 25, 2006, except where otherwise noted and except
that information in documents incorporated by reference is given
as of the dates noted therein.
No person has been authorized to give any information or to make
any representation in connection with the Arrangement and other
matters described herein other than those contained in this
Circular and, if given or made, any such information or
representation should be considered not to have been authorized
by Glamis.
This Circular does not constitute the solicitation of an offer
to purchase any securities or the solicitation of a proxy by any
person in any jurisdiction in which such solicitation is not
authorized or in which the person making such solicitation is
not qualified to do so or to any person to whom it is unlawful
to make such solicitation.
Information contained in this Circular should not be construed
as legal, tax or financial advice and Glamis Shareholders are
urged to consult their own professional advisers in connection
therewith.
Descriptions in this Circular of the terms of the Arrangement
Agreement and the Plan of Arrangement are merely summaries of
the terms of those documents. Glamis Shareholders should refer
to the full text of the Arrangement Agreement and Plan of
Arrangement for complete details of those documents. The full
text of the Arrangement Agreement may be viewed on SEDAR at
www.sedar.com, or on EDGAR at www.sec.gov. The Plan of
Arrangement is appended hereto as Appendix C.
INFORMATION PERTAINING TO GOLDCORP
CERTAIN INFORMATION PERTAINING TO GOLDCORP INCLUDED OR
INCORPORATED BY REFERENCE HEREIN HAS BEEN PROVIDED BY GOLDCORP
OR IS BASED ON PUBLICLY AVAILABLE DOCUMENTS AND RECORDS ON FILE
WITH THE CANADIAN SECURITIES AUTHORITIES OR THE SEC AND OTHER
PUBLIC SOURCES. ALTHOUGH GLAMIS DOES NOT HAVE ANY KNOWLEDGE THAT
WOULD INDICATE THAT ANY SUCH INFORMATION IS UNTRUE OR
INCOMPLETE, GLAMIS ASSUMES NO RESPONSIBILITY FOR THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION, NOR FOR THE FAILURE BY SUCH
OTHER PERSONS TO DISCLOSE EVENTS WHICH MAY HAVE OCCURRED OR
WHICH MAY AFFECT THE COMPLETENESS OR ACCURACY OF SUCH
INFORMATION BUT WHICH IS UNKNOWN TO GLAMIS.
In this Circular, the following capitalized words and terms
shall have the following meanings:
“Acquisition Proposal” means, in respect of
Glamis, any bona fide inquiry, proposal or offer made by
a party with whom Glamis and each of its officers and directors
deals at arm’s length regarding any merger, amalgamation,
plan of arrangement, share exchange, business combination,
take-over bid, tender offer, sale or other disposition of all or
substantially all of its assets, in a single transaction or a
series of related transactions, (or any lease, long term supply
agreement or other arrangement having the same economic effect
as a sale of all or substantially all of Glamis’ assets),
any recapitalization, reorganization, liquidation, material sale
or issue of treasury securities or rights therein or thereto or
rights or options to acquire any material number of treasury
securities, any exchange offer, secondary purchase or any type
of similar transaction that would, or could, in any case,
constitute a de facto acquisition or change of
control of Glamis or would or could, in any case, result in the
sale or other disposition of all or substantially all of the
assets of Glamis (other than the Arrangement and all other
transactions to be completed in connection with the Arrangement
contemplated in the Arrangement Agreement);
“Arrangement” means the Arrangement involving
Glamis, Glamis Shareholders and Goldcorp to be completed
pursuant to Division 5 of Part 9 of the BCBCA on the terms
and conditions set out in the Plan of Arrangement and any
amendments thereto or variations thereof made in accordance with
its terms or at the direction of the Court in the
Final Order;
“Arrangement Agreement” means the amended and
restated arrangement agreement dated as of August 30, 2006
between Glamis and Goldcorp which amended and restated the
arrangement agreement dated as of August 30, 2006 among
Glamis, Goldcorp and 0756808 B.C. Ltd., and any amendment
thereto or amendment and restatement thereof;
“Arrangement Resolution” means the special
resolution substantially in the form attached as Appendix A
to this Circular approving the Arrangement to be voted on, with
or without variation, by Glamis Shareholders at the Meeting;
“BCBCA” means the Business Corporations Act
(British Columbia), as amended;
“Beneficial Shareholder” means a Glamis
Shareholder who is not a Registered Shareholder;
“Canadian GAAP” means the generally accepted
accounting principles in effect in Canada, including the
accounting recommendations published in the Handbook of the
Canadian Institute of Chartered Accountants;
“Canadian Resident” means a beneficial owner of
Glamis Shares immediately before the Effective Time who is a
resident of Canada for the purposes of the ITA (other than a Tax
Exempt Person), or a partnership any member of which is a
resident of Canada for the purposes of the ITA (other than a Tax
Exempt Person);
“Canadian Securities Acts” means the securities
acts or the equivalent securities legislation of each province
and territory of Canada, as amended;
“CEO” means Chief Executive Officer;
“Change in Glamis Recommendation” means the
withdrawal, modification or qualification by Glamis of, or
Glamis making public a proposal to or publicly stating that it
intends to, withdraw, modify, or qualify in any manner adverse
to Goldcorp, its recommendation to Glamis Shareholders that they
vote in favour of the Arrangement Resolution;
“CIM Standards” means the Definition Standards
for Mineral Resources and Mineral Reserves adopted by the
Canadian Institute of Mining, Metallurgy and Petroleum Council
on December 11, 2005;
“Circular” means this information circular for
the Meeting, including all appendices hereto, and all amendments
hereof;
“Code” means the United States Internal
Revenue Code of 1986, as amended;
“Combined Company” means Goldcorp after
completion of the Arrangement;
“Competition Act” means the Competition Act
(Canada), as amended;
“Computershare” means Computershare Investor
Services Inc., the registrar of and transfer agent for the
Glamis Shares;
“Confidentiality Agreement” means the
confidentiality agreement dated August 14, 2006 between
Goldcorp and Glamis;
“Converted Goldcorp Options” means the options
to purchase Goldcorp Shares to be issued in exchange for Glamis
Options pursuant to the Plan of Arrangement;
“Court” means the Supreme Court of British
Columbia;
“Depositary” means CIBC Mellon
Trust Company, which will act as the depositary for the
exchange of Glamis Shares for Goldcorp Shares pursuant to the
Plan of Arrangement;
“Dissent Rights” means the rights of Glamis
Shareholders to dissent from the Arrangement, as more
particularly described under “Rights of Dissenting Glamis
Shareholders” in this Circular;
“Dissent Procedures” means the procedures
described in the Dissent Rights to be taken by a Glamis
Shareholder in exercising Dissent Rights;
“DOJ” means the Antitrust Division of the
United States Department of Justice;
“EDGAR” means the Electronic Data Gathering,
Analysis and Retrieval System maintained by the SEC;
”Effective Date” means the date designated by
Goldcorp and Glamis by notice in writing as the effective date
of the Arrangement, after all of the conditions of the
Arrangement Agreement and the Final Order have been satisfied or
waived;
“Effective Time” means 12:01 a.m.
(Vancouver time) on the Effective Date;
“Eligible Holder” means a beneficial owner of
Glamis Shares, whether or not registered, immediately before the
Effective Time who is either a Canadian Resident or an Eligible
Non-Resident;
“Eligible Non-Resident” means a beneficial
owner of Glamis Shares, whether or not registered, immediately
before the Effective Time who is not, and is not deemed to be, a
resident of Canada for purposes of the ITA, and whose Glamis
Shares are “taxable Canadian property” and not
“treaty-protected property”, in each case as defined
in the ITA;
“Exchange Ratio” means 1.69 Goldcorp Shares for
each Glamis Share;
“Final Order” means the final order to be made
by the Court approving the Arrangement, as such order may be
amended at any time before the Effective Date or, if appealed,
then unless such appeal is withdrawn or denied, as affirmed or
amended on appeal;
“Financial Advisers” means Orion and JPMorgan;
“FTC” means the United States Federal Trade
Commission;
“Georgeson” means Georgeson Shareholder
Communications Canada Inc., proxy solicitation agent to Glamis;
“Glamis” means Glamis Gold Ltd., a company
existing under the BCBCA;
“Glamis Board” means the board of directors of
Glamis;
“Glamis Equity Plan” means the Equity Incentive
Plan of Glamis dated January 1, 2004, as amended;
“Glamis Options” means the options to purchase
Glamis Shares which are outstanding immediately before the
Effective Time;
“Glamis Restricted Shares” means Glamis Shares
issued pursuant to the Glamis Equity Plan in respect of which
the restricted period has not expired;
“Glamis Rights Plan” means the Shareholder
Rights Plan of Glamis made pursuant to an agreement dated
February 25, 2000 between Glamis and Computershare, as last
amended on May 3, 2006;
“Glamis SAR” means a stock appreciation right
granted pursuant to the Glamis Equity Plan;
“Glamis Shareholders” means, at the relevant
time, the holders of Glamis Shares;
“Glamis Shares” means the common shares in the
capital of Glamis;
“Goldcorp” means Goldcorp Inc., a company
existing under the OBCA;
“Goldcorp Board” means the board of directors
of Goldcorp;
“Goldcorp Options” means the options to
purchase Goldcorp Shares which are outstanding under its various
share purchase option plans;
“Goldcorp Shareholders” means, at the relevant
time, the holders of Goldcorp Shares;
“Goldcorp Shares” means the common shares in
the capital of Goldcorp;
“HSR Act” means the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder;
“Indicated Mineral Resource” means that part of
a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics can be estimated
with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable
exploration and testing information gathered through appropriate
techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for
geological and grade continuity to be reasonably assumed;
“Inferred Mineral Resource” means that part of
a Mineral Resource for which quantity and grade or quality can
be estimated on the basis of geological evidence and limited
sampling and reasonably assumed, but not verified, geological
and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and
drill holes;
“Interim Order” means the interim order of the
Court dated September 25, 2006, providing for, among other
things, the calling of the Meeting, attached as Appendix F
hereto;
“Intermediary Registered Shareholder” means a
Glamis Shareholder’s broker or agent of the broker who is
the registered holder of the Glamis Shares beneficially owned by
the Glamis Shareholder;
“In the Money Amount” means, in respect of a
stock option at any time, the amount, if any, by which the
aggregate fair market value at that time of the securities
subject to the option exceeds the aggregate exercise price under
the option;
“IRS” means the United States Internal Revenue
Service;
“ITA” means the Income Tax Act (Canada),
as amended;
“JORC Code” means the Australasian Code for
Reporting of Mineral Resources and Ore Reserves prepared by the
Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and
Mineral Council of Australia, as amended;
“JPMorgan” means J.P. Morgan Securities Inc.,
co-financial adviser to Glamis;
“JPMorgan Opinion” means the opinion dated
August 30, 2006 prepared by JPMorgan in connection with the
Arrangement, as described under “The
Arrangement — Opinions of the Financial Advisers”
in this Circular and attached as Appendix E hereto;
“Material Adverse Change” means, in respect of
Goldcorp or Glamis, any one or more changes, events or
occurrences, and “Material Adverse Effect”
means, in respect of Goldcorp or Glamis, any state of facts,
which, in either case, either individually or in the aggregate,
are, or would reasonably be expected to be, material and adverse
to the business, operations, results of operations, prospects,
assets, liabilities or financial condition of Goldcorp and its
material subsidiaries, or Glamis and its subsidiaries,
respectively, on a consolidated basis, other than any change,
effect, event or occurrence: (i) relating to the global
economy or securities markets in general; (ii) affecting
the worldwide mining industry in general and which does not have
a materially disproportionate effect on Goldcorp and its
material subsidiaries on a consolidated basis, or Glamis and its
subsidiaries on a consolidated basis, respectively;
(iii) resulting from changes in the price of gold, silver
or copper; or (iv) relating to the rate at which Canadian
dollars can be exchanged for United States dollars or vice
versa, and references in the Arrangement Agreement to dollar
amounts are not intended to be, and shall not be deemed to be,
interpretive of the amount used for the purpose of determining
whether a “Material Adverse Change” has occurred or
whether a state of facts exists that has or could have a
“Material Adverse Effect” and such defined terms and
all other references to materiality in the Arrangement Agreement
shall be interpreted without reference to any such amounts;
“Measured Mineral Resource” means that part of
a Mineral Resource for which quantity, grade or quality,
densities, shape and physical characteristics are so well
established that they can be estimated with confidence
sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and
evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling
and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and
drill holes that are spaced closely enough to confirm both
geological and grade continuity;
“Meeting” means the special meeting of Glamis
Shareholders scheduled to be held at 9:30 a.m. (Vancouver time)
on October 26, 2006 for the purpose of voting on the
Arrangement Resolution and all other matters that may properly
come before the Meeting and any adjournment or postponement
thereof;
“Mineral Reserve” means that part of a Mineral
Resource which, after the application of all mining factors,
results in an estimated tonnage and grade which, in the opinion
of the person making the estimate, is the basis of an
economically viable project after taking account of all relevant
processing, metallurgical, economic, marketing, legal,
environment, socio-economic and government factors. Mineral
Reserves are inclusive of diluting material that will be mined
in conjunction with the Mineral Reserves and delivered to the
treatment plant or equivalent facility. The term “Mineral
Reserve” need not necessarily signify that extraction
facilities are in place or operative or that all governmental
approvals have been received. It does signify that there are
reasonable expectations of such approvals;
“Mineral Resource” means a concentration or
occurrence of diamonds, natural solid inorganic material or
natural solid fossilized organic material, including base or
precious metals, coal and industrial minerals, in or on the
Earth’s crust in such form and quantity and of such a grade
or quality that it has reasonable prospects for economic
extraction. The location, quantity, grade, geological
characteristics and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and
knowledge;
“NI 43-101” means National
Instrument 43-101,
Standards of Disclosure for Mineral Projects, of the Canadian
securities administrators;
“NYSE” means the New York Stock Exchange;
“OBCA” means the Business Corporations Act
(Ontario), as amended;
“Orion” means Orion Securities Inc.,
co-financial adviser to Glamis;
“Orion Opinion” means the opinion dated
August 30, 2006 prepared by Orion in connection with the
Arrangement, as described under “The
Arrangement — Opinions of the Financial Advisers”
in this Circular and attached as Appendix D hereto;
“Peñasquito Feasibility Study” means the
technical report dated July 27, 2006 relating to the
Peñasquito Project and titled “Peñasquito
Feasibility Study 100,000 MTPD”;
“Peñasquito Project” means the proposed
development of Glamis’ Peñasquito property in Mexico,
as described under “Information Concerning
Glamis — Recent Developments —
Peñasquito Project, Mexico” in this Circular;
“Plan of Arrangement” means the plan of
arrangement in respect of the Arrangement attached as
Appendix C hereto, and any amendment thereto;
“Probable Mineral Reserve” means the
economically mineable part of an Indicated and, in some
circumstances, a Measured Mineral Resource demonstrated by at
least a preliminary feasibility study. This study must include
adequate information on mining, processing, metallurgical,
economic and other relevant factors that demonstrate, at the
time of reporting, that economic extraction can be justified;
“Proven Mineral Reserve” means the economically
mineable part of a Measured Mineral Resource demonstrated by at
least a preliminary feasibility study. This study must include
adequate information on mining, processing, metallurgical,
economic and other relevant factors that demonstrate, at the
time of reporting, that economic extraction is justified;
“QA/QC” means quality assurance and quality
control;
“Record Date” means September 26, 2006,
the date for determining Glamis Shareholders entitled to receive
notice of and vote at the Meeting;
“Registered Shareholder” means a registered
holder of Glamis Shares as recorded in the shareholder register
of Glamis maintained by Computershare;
“Registrar” means the British Columbia
Registrar of Companies appointed under Section 400 of the
BCBCA;
“Regulation S” means Regulation S
promulgated under the U.S. Securities Act;
“SEC” means the United States Securities and
Exchange Commission;
“Section 3(a)(10) Exemption” means the
exemption from the registration requirements of the U.S.
Securities Act provided under Section 3(a)(10) thereof;
“Securities Laws” or “Securities
Legislation” means the Canadian Securities Acts, the
U.S. Exchange Act, the U.S. Securities Act and the “blue
sky” or securities laws of the states of the United States,
each as now enacted or as amended, and the applicable rules,
regulations, rulings, orders, instruments and forms made or
promulgated under such laws, as well as the rules, regulations,
by-laws and policies of the TSX and the NYSE;
“SEDAR” means the System for Electronic
Document Analysis and Retrieval of the Canadian Securities
Administrators;
“Superior Proposal” means a written Acquisition
Proposal to acquire all or substantially all of the assets of
Glamis (on a consolidated basis) or, directly or indirectly,
more than
662/3%
of the Glamis Shares: (a) in respect of which any required
financing to complete such Acquisition Proposal has been
demonstrated to the satisfaction of the Glamis Board, acting in
good faith (after receipt of advice from its financial advisers
and legal counsel) is reasonably likely to be obtained;
(b) that is reasonably capable of being completed without
undue delay, taking into account all legal, regulatory,
financial and other aspects of the proposal and the party making
the proposal and is not subject to an extraordinary due
diligence condition; (c) that is offered or made to all
Glamis Shareholders in the United States and Canada on the same
terms; and (d) in respect of which the Glamis Board has
determined in good faith, after consultation with, and receiving
advice (which may include written opinions) from, as
appropriate, the financial, legal and other advisers to Glamis
to the effect that such Acquisition Proposal would, if
consummated in accordance with the terms thereof, but without
assuming away the risk of non-completion, result in a
transaction which is more favourable to Glamis Shareholders,
from a financial point of view, than the terms of the
Arrangement, taking into account the long-term value and
synergies anticipated to be realized as a result of the
combination of Goldcorp and Glamis and any adjustment to the
terms of the Arrangement that may be proposed by Goldcorp as
permitted by the terms of the Arrangement Agreement;
“Support Agreement” means the agreement dated
August 30, 2006 among Goldcorp and the executive officers
and directors of Glamis to, among other things, vote their
Glamis Shares in favour of the Arrangement and all related
matters at the Meeting as described in this Circular under
“The Arrangement — Support Agreement”;
“Tax Exempt Person” means a person who is
exempt from tax under Part I of the ITA;
“Termination Fee” means the $215 million
fee payable by Glamis to Goldcorp on the termination of the
Arrangement Agreement on the occurrence of certain prescribed
events;
“TSX” means the Toronto Stock Exchange;
“U.S. Exchange Act” means the United States
Securities Exchange Act of 1934, and the regulations made
thereunder, as promulgated or amended from time to time;
“U.S. GAAP” means generally accepted accounting
principles in effect in the United States;
“U.S. Securities Act” means the United States
Securities Act of 1933, and the regulations made
thereunder, as promulgated or amended from time to time; and
“Western Silver” means Western Silver
Corporation, a company existing under the BCBCA.
The following summarizes the principal features of the
Arrangement and certain other matters and should be read
together with and is qualified in its entirety by the more
detailed information and financial data and statements contained
elsewhere in this Circular, including the appendices hereto and
documents incorporated in this Circular by reference.
Capitalized terms in this Summary have the meanings set out in
the Glossary of Terms or as set out in this Summary. The full
text of the Arrangement Agreement may be viewed on SEDAR at
www.sedar.com or on EDGAR at www.sec.gov under filings made by
Glamis.
The Meeting
Date, Time and Place of Meeting
The Meeting will be held on October 26, 2006, at 9:30 a.m.
(Vancouver time) at The Cheakamus Room, The Fairmont Waterfront
Hotel, 900 Canada Place Way,Vancouver, British Columbia.
The Record Date
The Record Date for determining the Glamis Shareholders entitled
to receive notice of and to vote at the Meeting is as of the
close of business on September 26, 2006.
Purpose of the Meeting
The purpose of the Meeting is for Glamis Shareholders to
consider and, if thought fit, pass, with or without variation,
the Arrangement Resolution.
This Circular is furnished in connection with the solicitation
of proxies by management of Glamis for use at the Meeting. At
least two thirds of the votes cast on the Arrangement
Resolution at the Meeting must be voted FOR the Arrangement
Resolution in order for it to be approved.
The Arrangement
Purpose
The purpose of the Arrangement is to effect the acquisition of
Glamis by Goldcorp. The Arrangement among Glamis, Glamis
Shareholders and Goldcorp is to be carried out pursuant to the
Arrangement Agreement and the Plan of Arrangement.
The Arrangement will involve the following transactions:
•
the issue and payment by Goldcorp to Glamis Shareholders of
1.69 Goldcorp Shares and Cdn.$0.0001 in cash for each
Glamis Share held; and
•
the exchange of Glamis Options for financially equivalent
Converted Goldcorp Options.
On completion of the Arrangement, Glamis Shareholders should
hold approximately 40% of the total issued and outstanding
Goldcorp Shares.
Reasons for the Arrangement and Recommendation of the
Glamis Board
After careful consideration, the Glamis Board has unanimously
determined that the consideration to be received by Glamis
Shareholders under the Arrangement is fair from a financial
point of view and that the Arrangement is in the best interest
of Glamis. Accordingly, the Glamis Board unanimously recommends
that Glamis Shareholders vote FOR the Arrangement Resolution.
In the course of its evaluation of the Arrangement, the Glamis
Board consulted with Glamis’ senior management, legal
counsel and financial advisers, reviewed a significant amount of
information, including information derived from Glamis’ due
diligence review of Goldcorp, and considered a number of factors
including, among others, the following (see “The
Arrangement — Reasons for the Arrangement and
Recommendation of the Glamis Board” in this Circular for
further details of the reasons why the Glamis Board is
recommending that Glamis Shareholders vote for the Arrangement
Resolution):
•
Significant Premium to Glamis Shareholders. Goldcorp has
offered Glamis Shareholders a significant premium to the Glamis
Share price, which provides immediate value for Glamis
Shareholders. The Arrangement provides a premium of 35% based on
the volume-weighted average share price of Glamis Shares
on the TSX for the 20 trading days preceding announcement of the
Arrangement, or 32.7% based on the closing TSX price of Glamis
Shares on the day preceding the announcement of the Arrangement,
and also represents, based on the closing TSX price of Glamis
Shares on the day preceding the announcement of the Arrangement,
a premium to Glamis’ 52-week high on both the TSX and NYSE.
•
Expected Benefits From Owning Shares of the Combined
Company. The Glamis Board believes that share ownership in
the Combined Company offered by the Arrangement would result in
a number of benefits to Glamis Shareholders, including:
o
Participation in a company that would be well-positioned to
compete with the other senior North American gold companies;
o
Participation in a company that would have one of the best
production growth profiles among senior gold producers;
o
Participation in a company that would be the lowest-cost senior
producer of gold and a leading producer of silver;
o
Participation in a company that would have revenues and
financial strength that should enable it to finance its
development projects;
o
The Combined Company’s scale and diversity of operations
throughout the Americas would position it as a leading producer
in both Canada and Mexico, minimizing the risks associated with
political or economic instability experienced by other mining
companies operating globally;
o
The Combined Company would benefit from the combination of the
Goldcorp and Glamis management teams which have exceptional
track records of shareholder wealth creation and integration
success, and proven operating, development and exploration
skills;
o
The Combined Company is expected to continue Goldcorp’s
policy of paying regular dividends; and
o
The Combined Company is expected to continue to maintain 100% of
gold reserves and gold production unhedged.
•
Continued Participation by the Glamis Shareholders in the
Assets of Glamis and Participation in the Assets of
Goldcorp. Glamis Shareholders, through their ownership of
Goldcorp Shares, would continue to participate in any increase
in the value of Glamis’ recently acquired Peñasquito
Project as well as the other assets of Glamis and would also
benefit from the current assets of Goldcorp. Glamis Shareholders
should hold approximately 40% of the issued Goldcorp Shares
after completion of the Arrangement.
•
Continuity at the Board and Management Levels of the Combined
Company. The board of directors of the Combined Company is
to consist of ten persons, of whom four would be nominees of
Glamis. Ian Telfer, the current President and CEO of Goldcorp,
would be Chairman of the board of directors of the Combined
Company, Kevin McArthur, the current President and CEO of
Glamis, would be President and CEO of the Combined Company,
Charles Jeannes, the current Executive Vice President,
Administration of Glamis, would be appointed as an Executive
Vice President of the Combined Company, and Charles Ronkos, the
current Vice President, Exploration of Glamis, would be
appointed Vice President, Exploration of the Combined Company.
The current officers of Goldcorp, other than Mr. Telfer,
are expected to continue to hold their current positions with
Goldcorp in the Combined Company. This would provide continuity
at the board and management levels of the Combined Company. See
“The Arrangement — Directors and Officers of
Goldcorp — Post-Arrangement” in this Circular.
•
Goldcorp Represents a Complementary Strategic Fit for
Glamis. The Glamis Board believes that the combination with
Goldcorp is the best available strategic move for Glamis and the
Glamis Shareholders for the following reasons:
o
The financial strength of the Combined Company should enable it
to fund the development and construction of the Peñasquito
Project;
o
The Combined Company would continue with 100% of its gold
reserves and gold production unhedged; and
o
The Combined Company would have increased asset diversity and
stability from that currently experienced by either Glamis or
Goldcorp and would be positioned for long-term industry growth
and leadership.
Terms of the Arrangement Agreement. The Glamis Board
considered the following terms of the Arrangement Agreement to
be advantageous:
o
Glamis has the ability to respond to Acquisition Proposals in
certain circumstances;
o
The Glamis Board believes that the $215 million Termination
Fee, which was the result of significant negotiation with
Goldcorp, is within the range of reasonable termination fees and
should not be a significant deterrent to other Acquisition
Proposals; and
o
Goldcorp may only terminate the Arrangement Agreement in limited
circumstances.
•
Advice from the Financial Advisers. The Glamis Board
considered the financial presentations of the Financial
Advisers, as well as their written opinions dated
August 30, 2006, as to the fairness, from a financial point
of view, to Glamis Shareholders of, in the case of Orion, the
consideration to be received by Glamis Shareholders under the
Arrangement, and, in the case of JPMorgan, the Exchange Ratio.
•
Required Shareholder and Court Approvals. The Glamis
Board considered the following required approvals to be
protective of the rights of Glamis Shareholders:
o
The Arrangement Resolution must be approved by not less than two
thirds of the votes cast at the Meeting; and
o
The Arrangement must be approved by the Court which will
consider, among other things, the fairness of the Arrangement to
Glamis Shareholders.
In the course of its deliberations, the Glamis Board also
identified and considered a variety of risks (as described under
“Risk Factors” in this Circular) and potentially
negative factors in connection with the Arrangement, including,
but not limited to:
•
If Glamis is required to pay the Termination Fee and an
alternative transaction is not concluded, Glamis’ financial
condition will be materially adversely affected;
•
If the Arrangement Agreement is terminated and the Glamis Board
decides to seek another merger or business combination, there is
no assurance that it will be able to find a party willing to pay
an equivalent value or more than the value to be paid pursuant
to the Arrangement with Goldcorp; and
•
Implementing the Arrangement will require the devotion of
significant management time and attention, which will have to be
diverted from the existing business of Glamis and which could
have an adverse impact on Glamis.
The Glamis Board’s reasons contain forward-looking
information, and are subject to various risks and assumptions.
See “Cautionary Statement Regarding Forward-Looking
Statements” and “Risk Factors” in this Circular.
The foregoing summary of the information and factors considered
by the Glamis Board is not, and is not intended to be,
exhaustive. In view of the variety of factors and the amount of
information considered in connection with its evaluation of the
Arrangement, the Glamis Board did not find it practical to, and
did not, quantify or otherwise attempt to assign any relative
weight to each specific factor considered in reaching its
conclusion and recommendation. The Glamis Board’s
recommendation was made after consideration of all of the
above-noted factors and in light of the Glamis Board’s
collective knowledge of the business, financial condition and
prospects of Glamis, and was also based upon the advice of
financial and legal advisers to the Glamis Board. In addition,
individual members of the Glamis Board may have assigned
different weights to different factors.
Support Agreement
The directors and executive officers of Glamis have entered into
the Support Agreement with Goldcorp pursuant to which they have
agreed, among other things, to support the Arrangement and vote
their Glamis Shares in favour of the Arrangement Resolution. As
of September 25, 2006, these directors and executive
officers held 3,037,046 Glamis Shares, representing
approximately 1.82% of the issued Glamis Shares on such date.
Opinions of Glamis’ Financial Advisers
As at the date of its opinion and based on the information
and procedures and subject to the limitations described in the
Orion Opinion, Orion has concluded that the consideration to be
received by Glamis
Shareholders pursuant to the Arrangement is fair, from a
financial point of view, to Glamis Shareholders. JPMorgan has
delivered an opinion to the Glamis Board to the effect that, as
of the date of the opinion and based on and subject to the
various assumptions, limitations and qualifications described in
its opinion, the Exchange Ratio was fair, from a financial point
of view, to Glamis Shareholders. See “The
Arrangement — Opinions of the Financial Advisers”
in this Circular and the Orion Opinion and the JPMorgan Opinion,
which are attached as Appendix D and Appendix E,
respectively.
Summary and Effect of the Arrangement
On completion of the Arrangement:
•
each Glamis Share held by a Glamis Shareholder (other than
Glamis Shareholders who exercise Dissent Rights or Goldcorp or
any subsidiary of Goldcorp) will be exchanged for 1.69 Goldcorp
Shares and Cdn.$0.0001 in cash;
•
Glamis Shareholders who would otherwise be subject to Canadian
federal income tax as a result of the exchange may generally
avoid that result by making an appropriate election under
Section 85 of the ITA, subject to certain rules and
restrictions set out therein;
•
each Glamis Option will be exchanged for a financially
equivalent Converted Goldcorp Option;
•
assuming there are 167,240,151 Glamis Shares issued and
outstanding at the Effective Time and outstanding Glamis Options
in respect of 3,058,938 Glamis Shares (based on
September 25, 2006 information), Goldcorp will issue
approximately 282,635,855 Goldcorp Shares to acquire the Glamis
Shares and reserve approximately 5,169,605 Goldcorp Shares for
issue upon exercise of Converted Goldcorp Options. On completion
of the Arrangement, there will be, using Goldcorp’s issued
share capital as at September 25, 2006, approximately
701,076,704 Goldcorp Shares issued and outstanding;
•
the board of directors of the Combined Company will consist of
ten directors, of whom six will be nominees of Goldcorp, and
four will be nominees of Glamis;
•
Ian Telfer, the current President and CEO of Goldcorp, would
become Chairman of the board of directors of the Combined
Company, Kevin McArthur, the current President and CEO of
Glamis, would become President and CEO of the Combined Company,
Charles A. Jeannes, the current Executive Vice President,
Administration of Glamis, would be appointed as an Executive
Vice President of the Combined Company, Charles J. Ronkos, the
current Vice President, Exploration of Glamis, would be
appointed Vice President, Exploration of the Combined Company,
and the current officers of Goldcorp other than the current
President and CEO are expected to continue to hold their
respective offices with the Combined Company; and
•
Glamis will be a wholly-owned subsidiary of Goldcorp and will
cease to be a publicly-traded company.
See “The Arrangement” in this Circular for additional
information.
Post-Arrangement Reorganization
Under the Arrangement Agreement, Goldcorp has agreed to cause
Glamis, within 30 days after the Effective Date, to
amalgamate with either Goldcorp or a wholly-owned subsidiary of
Goldcorp.
The Companies
Glamis is a reporting issuer (or equivalent) in each province of
Canada. Glamis Shares trade on the TSX and the NYSE under the
symbol “GLG”. Glamis is a premier intermediate
gold producer with low-cost production and a strong, consistent
growth profile. For nearly 30 years, Glamis has
successfully developed and operated gold mines. Its current
operations are located in the United States, Mexico, Guatemala
and Honduras.
Goldcorp is a reporting issuer (or equivalent) in each province
and territory of Canada. Goldcorp Shares trade on the TSX under
the symbol “G” and the NYSE under the symbol
“GG”. Goldcorp is one of the world’s
lowest-cost and fastest
growing multi-million ounce gold producers and has operations in
Canada, the United States, Mexico, Argentina, Brazil, Chile, the
Dominican Republic and Australia.
See “The Combined Company After the Arrangement” in
this Circular for a description of Goldcorp after giving effect
to the Arrangement.
The Arrangement Agreement provides that completion of the
Arrangement is subject to a number of specified conditions being
met or waived (where permitted) as of the Effective Date,
including the following:
•
two thirds of the Glamis Shares represented at the Meeting must
be voted in favour of the Arrangement Resolution;
•
the Court must grant the Final Order with respect to the
Arrangement;
•
unless waived, all covenants of Glamis and Goldcorp must have
been duly performed in all material respects and all
representations and warranties of Glamis and Goldcorp must be
materially true and correct as of the Effective Time;
•
no Material Adverse Effect with respect to Glamis or Goldcorp
will have occurred;
•
unless waived, Dissent Rights must not have been exercised in
respect of, in the aggregate, more than 3% of the outstanding
Glamis Shares;
•
all required regulatory approvals must have been obtained; and
•
Kevin McArthur, Charles Jeannes and Charles Ronkos must have
entered into employment agreements satisfactory to Goldcorp.
The TSX has conditionally approved the listing of the Goldcorp
Shares to be issued and reserved pursuant to the Arrangement,
subject to the satisfaction of the customary requirements of the
TSX. Goldcorp expects to obtain NYSE approval for the listing of
the Goldcorp Shares to be issued and reserved pursuant to the
Arrangement before the Effective Date.
See “The Arrangement — Effective Date and
Conditions of the Arrangement” in this Circular.
Non-Solicitation Covenant of Glamis
Glamis has agreed that it will not, except as provided below,
directly or indirectly, solicit or promote any inquiries or
proposals regarding any Acquisition Proposal or potential
Acquisition Proposal, or participate in any discussions or
negotiations regarding any Acquisition Proposal or potential
Acquisition Proposal, or take any action inconsistent with the
recommendation of the Glamis Board to approve the Arrangement.
Glamis also agreed to immediately terminate and cease any
discussions or negotiations with any person with respect to any
proposal that constitutes or could reasonably be expected to
constitute an Acquisition Proposal.
Notwithstanding the foregoing, the Glamis Board may, before the
approval of the Arrangement by Glamis Shareholders, consider or
negotiate any unsolicited Acquisition Proposal that may
constitute a Superior Proposal, in accordance with the
applicable terms of the Arrangement Agreement, but only if the
Acquisition Proposal does not result from a breach of the
Arrangement Agreement by Glamis and if the Glamis Board
determines in good faith after consulting outside legal counsel
that failure to take such action would be inconsistent with the
fiduciary duties of the directors of Glamis under applicable law.
See “The Arrangement — Additional Terms of the
Arrangement Agreement —
Non-Solicitation
Covenant of Glamis” in this Circular.
Superior Proposal
Glamis may not make a Change in Glamis Recommendation or accept,
approve, recommend or enter into an agreement in respect of an
Acquisition Proposal on the basis that it would constitute a
Superior Proposal unless (a) Glamis has complied with its
non-solicitation covenant under the Arrangement Agreement,
(b) such Superior Proposal does not provide for the payment
of any break, termination or other fee or expense to the other
party if Glamis completes the Arrangement with Goldcorp,
(c) Glamis has provided Goldcorp with information about the
Superior Proposal as required by the Arrangement Agreement, and
(d) five business days have elapsed from the later of the
date Goldcorp received notice of the determination of the Glamis
Board to accept, approve, recommend or enter into an agreement
in respect of the Superior Proposal and the date that Goldcorp
has received the information required to be provided by Glamis
in respect of an Acquisition Proposal as provided under the
Arrangement Agreement.
During this five business day period, Goldcorp will have the
opportunity to offer in writing to amend the terms of the
Arrangement Agreement and the Arrangement. The Glamis Board must
review any such amended offer by
Goldcorp and determine in good faith whether the amended offer
of Goldcorp would result in the Acquisition Proposal not being a
Superior Proposal, and if so determined by the Glamis Board,
Glamis must enter into an amended agreement with Goldcorp
reflecting the amended proposal of Goldcorp and must promptly
reaffirm its recommendation to Glamis Shareholders of the
Arrangement, as amended.
See “The Arrangement — Additional Terms of the
Arrangement Agreement — Superior Proposal” in
this Circular.
Termination of Arrangement Agreement
The Arrangement Agreement may be terminated at any time before
the Effective Date, in the circumstances specified in the
Arrangement Agreement, including:
•
by mutual written consent;
•
if any condition set out in the Arrangement Agreement is not
satisfied or waived by the party to whom it is of benefit;
•
by Goldcorp if an Acquisition Proposal in respect of Glamis has
been made or proposed and the Glamis Board makes a Change in
Glamis Recommendation, or has failed, after being requested by
Goldcorp to reaffirm its approval or recommendation of the
Arrangement as promptly as possible (but in any event within
five business days after receipt of the request to do so by
Goldcorp), or Glamis has accepted, approved, recommended, or
entered into an agreement in respect of any Acquisition Proposal;
•
by Goldcorp or by Glamis if the Meeting is held and completed
and the approval of Glamis Shareholders is not obtained;
•
by either Goldcorp or Glamis if the Arrangement is not completed
by the Completion Deadline; provided however, if the Arrangement
has not been completed by such date because the Meeting has not
been held due to the fault of Glamis, then Glamis will not be
entitled to terminate the Arrangement Agreement;
•
by Goldcorp if the Glamis Board makes a Change in Glamis
Recommendation; or
•
by Glamis if Glamis proposes to enter into a definitive
agreement with respect to a Superior Proposal in compliance with
the Arrangement Agreement, provided that Glamis has paid the
Termination Fee to Goldcorp.
See “The Arrangement — Amendment and Termination
of the Arrangement Agreement” in this Circular.
Termination Fee
The Arrangement Agreement provides that Glamis must pay the
$215 million Termination Fee to Goldcorp in certain
circumstances, including the following:
•
the Arrangement Agreement being terminated by Goldcorp if an
Acquisition Proposal in respect of Glamis has been made or
proposed and the Glamis Board has (i) made a Change in
Glamis Recommendation or (ii) has failed, after being
requested by Goldcorp in writing, to reaffirm its approval or
recommendation of the Arrangement as promptly as possible (but
in any event within five business days after receipt of the
request to do so by Goldcorp) or (iii) has accepted,
approved, recommended or entered into an agreement (other than a
confidentiality agreement permitted under the Arrangement
Agreement) in respect of any Acquisition Proposal;
•
a Change in Glamis Recommendation has occurred and Goldcorp has
elected to terminate the Arrangement Agreement;
•
the Arrangement Agreement being terminated by Goldcorp due to
any applicable condition set out in the Arrangement Agreement
not being satisfied or waived as a result of the breach by
Glamis of its covenants regarding non-solicitation and Superior
Proposals as set out in the Arrangement Agreement;
•
the Arrangement Agreement being terminated by Goldcorp as a
result of Glamis’ failing to submit the Arrangement for
approval to Glamis Shareholders on or before the date that is
five business days before the Completion Deadline or failing to
solicit proxies in accordance with the provisions of the
Arrangement Agreement;
•
if an Acquisition Proposal has been made to Glamis and made
known to Glamis Shareholders generally or has been made directly
to Glamis Shareholders generally or any person has publicly
announced an intention to
make an Acquisition Proposal, which is not publicly withdrawn
before the Meeting, and after which the Glamis Shareholders do
not approve the Arrangement at the Meeting or the Arrangement
Agreement is terminated by either Goldcorp or Glamis as a result
of the Glamis Shareholders not approving the Arrangement at the
Meeting or the Arrangement has not been completed by the
Completion Deadline, and Glamis completes an Acquisition
Proposal within 12 months following the termination of the
Arrangement Agreement;
•
if the Glamis Board makes a Change in Glamis Recommendation due
to a pending Acquisition Proposal as described above, after
which the Glamis Shareholders do not approve the Arrangement at
the Meeting and the Arrangement Agreement is terminated by
either Glamis or Goldcorp as a result of the non-approval of the
Arrangement by Glamis Shareholders at the Meeting; or
•
if Glamis proposes to enter into an agreement with respect to a
Superior Proposal in compliance with the terms of the
Arrangement Agreement.
See “The Arrangement — Additional Terms of the
Arrangement Agreement — Termination Fee” in this
Circular.
Exchange of Glamis Share Certificates and Treatment of
Fractional Shares
As soon as practicable after the Effective Date, a letter of
transmittal containing instructions for the deposit of
certificates for Glamis Shares with the Depositary at its
principal office in Toronto, Ontario will be forwarded to each
former Registered Shareholder for use in exchanging their Glamis
Share certificates for Goldcorp Share certificates and the cash
payment. Upon return of a properly completed letter of
transmittal by a Registered Shareholder, together with
certificates representing Glamis Shares and such other documents
as the Depositary may require, certificates for the appropriate
number of Goldcorp Shares and a cheque representing the cash
payment will be mailed to the Registered Shareholder. Registered
Shareholders who intend to make an election under
Section 85 of the ITA should indicate that intention in the
space provided in the letter of transmittal, and will be sent a
tax election package, including the necessary election forms.
Beneficial Shareholders will need to deal with their
Intermediary Registered Shareholder to receive the tax election
package and the necessary election forms.
No fractional Goldcorp Shares will be issued to Glamis
Shareholders. If a Glamis Shareholder is entitled to a
fractional share representing 0.5 or more of a Goldcorp Share,
the number of Goldcorp Shares to be issued to that Glamis
Shareholder will be rounded up to the nearest whole Goldcorp
Share. If a Glamis Shareholder is entitled to a fractional share
representing less than 0.5 of a Goldcorp Share, the number of
Goldcorp Shares to be issued to that Glamis Shareholder will be
rounded down to the nearest whole Goldcorp Share.
Any cash consideration to be received by a Glamis Shareholder
will be rounded up to the nearest whole cent.
See “The Arrangement — Procedure and Terms For
Exchange of Glamis Shares — Procedure for Exchange of
Glamis Shares” in this Circular.
Cancellation of Rights after Six Years
Any certificate which immediately before the Effective Date
represented outstanding Glamis Shares and which has not been
surrendered, with all other documents required by the Plan of
Arrangement or the Depositary, on or before the sixth
anniversary of the Effective Date, will cease to represent any
claim against or interest of any kind or nature in Glamis,
Goldcorp or the Depositary. Accordingly, persons who tender
certificates for Glamis Shares after the sixth anniversary of
the Effective Date will not receive Goldcorp Shares, will not
own any interest in Glamis, and will not be paid any cash or
other compensation.
Treatment of Dividends
No dividends or other distributions declared or made after the
Effective Time with respect to Goldcorp Shares, with a record
date after the Effective Time, will be paid to the holder of any
unsurrendered certificates for Glamis Shares until the holder
surrenders its certificates for Glamis Shares in exchange for
Goldcorp Shares and cash in accordance with the Plan of
Arrangement. Once such certificates are surrendered, the holder
will be sent, in addition to the holder’s Goldcorp Shares
and cash payment, such dividend or other distribution, if any,
without interest.
Glamis Shareholders have Dissent Rights with respect to the
Arrangement. These Dissent Rights must be strictly complied with
in order for a Glamis Shareholder to receive cash representing
the fair value of Glamis Shares held. See “Rights of
Dissenting Glamis Shareholders” in this Circular. It is a
condition of the Arrangement that Dissent Rights not be
exercised in an amount that exceeds 3% of the outstanding Glamis
Shares.
Income Tax Considerations
Glamis Shareholders should consult their own tax advisers
about the applicable Canadian or United States federal,
provincial, state and local tax consequences of the
Arrangement.
For Canadian federal income tax purposes, a Glamis Shareholder
who is a Canadian Resident and whose Glamis Shares constitute
“capital property” generally should be able to
exchange Glamis Shares for Goldcorp Shares and cash under the
Arrangement on a tax-deferred basis by making an appropriate
election under Section 85 of the ITA jointly with Goldcorp.
Such a Glamis Shareholder who does not make such an election
generally will realize a capital gain (capital loss) equal to
the amount by which the aggregate fair market value of the
Goldcorp Shares and cash received by the Glamis Shareholder on
the Arrangement, net of reasonable costs of disposition, exceed
(are less than) the adjusted cost base of the shareholder’s
Glamis Shares. Non-resident Glamis Shareholders whose Glamis
Shares do not constitute “taxable Canadian property”
generally will not incur any liability for Canadian federal
income tax as a result of the Arrangement. A summary of the
principal Canadian federal income tax considerations in respect
of the Arrangement is set out under “Canadian Federal
Income Tax Considerations” and the foregoing is qualified
in full by the information in that section.
For U.S. federal income tax purposes, the tax treatment of
the exchange of Glamis Shares for Goldcorp Shares plus Canadian
currency depends on whether the exchange is treated as part of a
reorganization for U.S. federal income tax purposes. If it is so
treated, a Glamis Shareholder who is a U.S. person
generally will recognize gain but only to the extent of the U.S.
dollar value of the Canadian currency on the date of receipt,
subject to the passive foreign investment company rules of
Sections 1291-1298
of the Code. If the exchange of shares is not treated as part of
a reorganization, the exchange by a U.S. person would be
taxable for U.S. federal income tax purposes. A summary of the
principal U.S. federal income tax considerations in respect of
the Arrangement is set out under “United States Federal
Income Tax Considerations” and the foregoing is qualified
in full by the information in that section.
Securities Laws Information for Canadian
Shareholders
The issue of Goldcorp Shares and Converted Goldcorp Options
pursuant to the Arrangement and the issue of Goldcorp Shares on
exercise of Converted Goldcorp Options will constitute
distributions of securities, which are exempt from the
registration and prospectus requirements of the Canadian
Securities Acts. The Goldcorp Shares may be resold in any
province or territory of Canada, provided (i) the trade is
not a “control distribution” as defined in National
Instrument 45-102,
(ii) no unusual effort is made to prepare the market or
create a demand for those securities, (iii) no
extraordinary commission or consideration is paid in respect of
that sale, and (iv) if the selling security holder is an
insider or officer of Goldcorp, the insider or officer has no
reasonable grounds to believe that Goldcorp is in default of
securities legislation.
See “Securities Laws Considerations — Canadian
Securities Laws” in this Circular.
Securities Laws Information for United States
Shareholders
The Goldcorp Shares to be issued to Glamis Shareholders pursuant
to the Arrangement will not be registered under the U.S.
Securities Act or the securities laws of any state of the United
States and will be issued in reliance on the exemption from
registration provided by the Section 3(a)(10) Exemption.
Applicability of restrictions on resale of shares imposed by the
U.S. Securities Act will depend on whether a holder of the
Goldcorp Shares issued pursuant to the Arrangement is an
“affiliate” of Goldcorp or Glamis before the
Arrangement or an “affiliate” of Goldcorp after the
Arrangement. As defined in Rule 144 under the U.S.
Securities Act, an “affiliate” of an issuer is a
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such issuer. See “Securities Laws
Considerations — U.S. Securities Laws” in
this Circular.
The following table sets out selected financial information of
Goldcorp for the periods indicated, and is qualified by the more
complete information contained in the audited consolidated
financial statements of Goldcorp for the years ended
December 31, 2005 and 2004, and the unaudited interim
consolidated financial statements of Goldcorp for the six months
ended June 30, 2006 and 2005, some of which are attached as
Appendix J to this Circular, as well as the Goldcorp
management’s discussion and analysis incorporated by
reference herein:
Six months ended
June 30
Year ended December 31
2006
2005
2005
2004
Production statistics:
Total cash cost per
ounce(1)(2)
$
(108
)
$
64
$
22
$
115
Ounces of gold produced
673,600
556,400
1,136,300
628,000
Average gold price realized per ounce
$
595
$
431
$
452
$
409
Operating summary (millions of $):
Revenues
$
777.7
$
424.5
$
896.4
$
191.0
Net earnings
282.8
127.5
285.7
51.3
Cash flow from operations (before changes in non-cash working
capital and site closure and reclamation expenditures)
383.1
202.1
422.3
102.5
Financial status (millions of $):
Working capital
$
216.6
$
431.0
$
581.6
$
400.0
Total assets
6,969.5
3,756.0
4,066.0
701.5
Long-term liabilities
2,205.3
751.7
792.8
97.0
Shareholders’ equity
4,141.3
2,808.9
2,973.8
577.8
Per common share ($):
Net earnings — basic
$
0.78
$
0.44
$
0.91
$
0.27
Net earnings — diluted
0.77
0.40
0.83
0.27
Net book value
9.91
8.36
8.76
3.04
Dividends
0.09
0.42
0.48
0.28
Notes:
(1)
Goldcorp reports total cash costs on a sales basis. In the gold
mining industry, this is a common performance measure but does
not have any standardized meaning, and is a non-Canadian GAAP
financial measure. Goldcorp follows the recommendations of the
Gold Institute standard. Goldcorp believes that, in addition to
conventional measures prepared in accordance with Canadian GAAP,
certain investors use this information to evaluate
Goldcorp’s performance and ability to generate cash flow.
Accordingly, it is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with Canadian
GAAP.
(2)
The calculation of total cash costs per ounce of gold for Peak
and Alumbrera is net of by-product copper sales revenue, Luismin
is net of by-product silver sales revenues of $3.90 per silver
ounce sold to Silver Wheaton Corp. and La Coipa is net of
by-product silver sales revenue at spot prices.
The following table sets out selected financial information of
Glamis for the periods indicated, and is qualified by the more
complete information contained in the audited consolidated
financial statements of Glamis for the years ended
December 31, 2005, 2004 and 2003, and the unaudited
consolidated interim financial statements of Glamis for the six
months ended June 30, 2006 and 2005, as filed on SEDAR at
www.sedar.com and on EDGAR at www.sec.gov and incorporated by
reference in this Circular:
Six months ended
June 30
Year ended December 31
2006
2005
2005
2004
2003
Production statistics:
Total cash cost per
ounce(1)
$
196
$
188
$
195
$
192
$
184
Ounces of gold produced
286,418
203,098
434,010
234,433
230,294
Average gold price realized per ounce
$
591
$
429
$
454
$
416
$
368
Operating summary (millions of $):
Revenues
$
176.4
$
90.8
$
202.6
$
94.7
$
84.0
Net earnings
47.2
10.4
27.1
20.9
18.2
Cash flow from operations (before changes in non-cash working
capital and site closure and reclamation expenditures)
82.8
38.6
89.0
37.4
33.9
Financial status (millions of $):
Working capital
$
67.3
$
29.3
$
36.7
$
27.4
$
145.4
Total assets
2,199.7
659.7
721.2
613.3
534.1
Long-term liabilities
572.4
162.1
188.6
123.6
88.6
Shareholders’ equity
1,584.6
472.8
503.6
460.3
434.7
Per common share ($):
Net earnings — basic
$
0.33
$
0.08
$
0.21
$
0.16
$
0.14
Net earnings — diluted
0.33
0.08
0.20
0.16
0.14
Net book value
9.51
3.61
3.82
3.52
3.34
Dividends
—
—
—
—
—
Note:
(1)
Total cash cost of production includes mining, processing
(including transportation and refining), costs associated with
movements in production inventories net of pre-production
stripping costs (which are capitalized to mine development
costs), direct mine overhead costs, local production taxes and
royalties, but excludes general and administrative costs at the
corporate level, depreciation and depletion and end-of-mine
reclamation accruals. Cash costs of production should not be
considered as an alternative to operating profit or net profit
attributable to shareholders, or as an alternative to other
Canadian GAAP or U.S. GAAP measures and may not be comparable to
other similarly titled measures of other companies. However,
Glamis believes that cash costs of production per ounce of gold
is a useful indicator of performance.
Goldcorp Selected Unaudited Pro Forma Financial
Information
The following selected unaudited pro forma consolidated
financial information for Goldcorp is based on the assumptions
described in the respective notes to the Goldcorp unaudited pro
forma condensed consolidated financial statements as at
June 30, 2006 and for the six month period ended
June 30, 2006 and the year ended December 31, 2005,
attached to this Circular as Appendix B. The pro forma
condensed consolidated balance sheet has been prepared based on
the assumption that, among other things, the Arrangement had
occurred on June 30, 2006. The pro forma condensed
consolidated statements of operations have been prepared based
on the assumption that, among other things, the Arrangement had
occurred on January 1, 2005. The unaudited pro forma
condensed consolidated financial statements are not necessarily
indicative of Goldcorp’s consolidated financial position
and results from operations if the events reflected therein were
in effect on January 1, 2005, nor do they purport to
project Goldcorp’s consolidated financial position or
results from operations for any future period.
The unaudited pro forma condensed consolidated financial
statements are based on certain assumptions and adjustments,
including the non-recurring expenditures related to the
Arrangement. The selected unaudited pro forma consolidated
financial information given below should be read in conjunction
with the description of the Arrangement contained in this
Circular, the unaudited pro forma condensed consolidated
financial statements contained in Appendix B, the audited
and unaudited consolidated financial statements of Glamis
incorporated by reference in this
Goldcorp has not yet determined the fair value of all
identifiable assets and liabilities acquired, the amount of the
purchase price that may be allocated to goodwill, or the
complete impact of applying purchase accounting on the income
statement. Therefore, after reflecting the pro forma purchase
adjustments identified to date, the excess of the purchase
consideration over the adjusted book values of Glamis’
assets and liabilities has been presented as “unallocated
purchase price”. Goldcorp is currently undergoing a process
whereby the fair value of all identifiable assets and
liabilities acquired, as well as any goodwill arising upon the
acquisition, will be determined. On completion of valuations,
with a corresponding adjustment to the historic carrying amounts
of mining interests, or on recording of any finite life
intangible assets on acquisition, these adjustments will impact
the measurement of amortization recorded in the consolidated
income statements of Goldcorp for periods after the date of
acquisition. Goldcorp estimates that a $100 million
adjustment to the carrying amount of mining interests of Glamis
would result in a corresponding adjustment to pre-tax
amortization expense in the pro forma condensed consolidated
statement of operations by approximately $6.25 million for
the six months ended June 30, 2006 and approximately
$12.5 million for the year ended December 31, 2005. No
pro forma adjustments have been reflected for any changes in
future tax assets or liabilities that would result from
recording Glamis’ identifiable assets and liabilities at
fair value as the process of estimating the fair value of
identifiable assets and liabilities is not complete.
Assuming an issued capital of 418,440,849 Goldcorp Shares (as at
September 25, 2006) and the issue of approximately
282,635,855 Goldcorp Shares under the Arrangement.
(2)
In addition, Goldcorp has outstanding warrants and options
providing for the acquisition of an aggregate of 20,390,876
Goldcorp Shares, at prices ranging from Cdn.$2.05 to Cdn.$45.75
and will reserve an additional 5,169,605 Goldcorp Shares for
issue under the Converted Goldcorp Options at prices ranging
from Cdn.$4.37 to Cdn.$25.74.
Risk Factors
There are risks associated with the completion of the
Arrangement. Some of these risks include: (i) the
Arrangement Agreement may be terminated in certain
circumstances, in which case the market price for Glamis Shares
may be adversely affected; (ii) as Glamis Shareholders will
receive Goldcorp Shares based on a fixed exchange ratio,
Goldcorp Shares received by Glamis Shareholders under the
Arrangement may have a market value lower than expected;
(iii) the closing of the Arrangement is conditional on,
among other things, the receipt of consents and approvals from
governmental bodies that could delay completion of the
Arrangement or impose conditions on the companies that could
adversely affect the business or financial condition of the
Combined Company; (iv) the exchange of Glamis Shares
pursuant to the Arrangement may be a taxable transaction for
Glamis Shareholders in the United States; (v) potential
payments to be made to Glamis Shareholders who exercise Dissent
Rights could have an adverse effect on the Combined
Company’s financial condition; (vi) the issue of
Goldcorp Shares under the Arrangement and their subsequent sale
may cause the market price of Goldcorp Shares to decline;
(vii) the Combined Company may not realize the benefits
currently anticipated from the combination of Glamis and
Goldcorp due to challenges associated with integrating the
operations, technologies and personnel of Glamis and Goldcorp;
(viii) the Combined Company may not realize the benefits of
its growth projects; (ix) the Combined Company may not meet
key production and cost estimates; (x) the Combined Company
will face permitting risks relating to its expanded portfolio of
development projects; (xi) the Combined Company will be
subject to significant capital requirements associated with its
expanded operations and portfolio of development projects; and
(xii) the Combined Company will be subject to a broad range
of environmental laws and regulations in the jurisdictions in
which it operates and will be exposed to potentially significant
environmental costs and liabilities. See “Risk
Factors” in this Circular.
In addition, investment in a natural resource issuer involves
a significant degree of risk. Both Glamis and Goldcorp are
subject to a number of risks in the operation of their
businesses. Glamis Shareholders should carefully review the risk
factors set forth under “Risk Factors” in this
Circular, in Glamis’ Annual Information Form dated
March 6, 2006, and in Goldcorp’s Renewal Annual
Information Form dated March 20, 2006.
QUESTIONS AND ANSWERS ABOUT THE ARRANGEMENT AND THE
MEETING
Following are some questions that you, as a Glamis Shareholder,
may have relating to the Meeting and answers to those questions.
These questions and answers, as well as the preceding summary,
do not provide all the information relating to the Meeting or
the matters to be considered at the Meeting and are qualified in
their entirety by the more detailed information contained
elsewhere in this Circular. You are urged to read this Circular
in its entirety before making a decision related to your Glamis
Shares.
Q:
What are Glamis and Goldcorp proposing?
A:
Glamis and Goldcorp are proposing to effect a business
combination to combine the business and assets of Glamis with
those of Goldcorp pursuant to a statutory plan of arrangement
under British Columbia law. Under the terms of the Arrangement,
Glamis will become a wholly-owned subsidiary of Goldcorp and in
connection therewith Glamis Shareholders will receive Goldcorp
Shares and a cheque representing the cash due under the
Arrangement for their Glamis Shares.
Q:
What will Glamis Shareholders receive?
A:
Under the Arrangement, each issued Glamis Share (other than
Glamis Shares held by a holder who has validly exercised Dissent
Rights, or by Goldcorp or any subsidiary of Goldcorp) will be
exchanged for 1.69 Goldcorp Shares and Cdn.$0.0001 in cash. If a
Glamis Shareholder is entitled to a fractional share
representing 0.5 or more of a Goldcorp Share, the number of
Goldcorp Shares to be issued will be rounded up to the nearest
whole Goldcorp Share. If a Glamis Shareholder is entitled to a
fractional share representing less than 0.5 of a Goldcorp Share,
the number of Goldcorp Shares to be issued will be rounded down
to the nearest whole Goldcorp Share. Any cash consideration to
be received by a Glamis Shareholder will be rounded up to the
nearest whole cent.
Q:
On what am I being asked to vote?
A:
At the Meeting, Glamis Shareholders will be asked to consider
and, if thought fit, pass, with or without variation, the
Arrangement Resolution authorizing and approving the
Arrangement. The full text of the Arrangement Resolution is set
out in Appendix A to this Circular.
Q:
How does the Glamis Board recommend that I vote on the
Arrangement Resolution?
A:
The Glamis Board unanimously recommends that Glamis Shareholders
vote FOR the Arrangement Resolution. See “The
Arrangement — Reasons for the Arrangement and
Recommendation of the Glamis Board” in this Circular. In
addition, the directors and executive officers of Glamis have
entered into the Support Agreement with Goldcorp under which
they have agreed to vote their Glamis Shares FOR the Arrangement
Resolution. As of September 25, 2006, approximately 1.82%
of the Glamis Shares were held by these directors and executive
officers. See “The Arrangement — Support
Agreement” in this Circular.
Q:
Why does the Glamis Board recommend that Glamis Shareholders
vote FOR the Arrangement Resolution?
A:
In the course of its evaluation of the Arrangement, the Glamis
Board consulted with Glamis’ senior management, legal
counsel and financial advisers, reviewed a significant amount of
information and considered a number of factors. Certain of the
expected benefits to the Glamis Shareholders are as follows (see
“The Arrangement — Reasons for the Arrangement
and Recommendation of the Glamis Board” in this Circular
for further details of the reasons why the Glamis Board is
recommending that Glamis Shareholders vote FOR the Arrangement
Resolution):
•
Goldcorp offered a significant premium (32.7%) to the market
price for Glamis Shares on the TSX, based on the closing price
of Glamis Shares on the day immediately before the announcement
of the Arrangement, which provides immediate value for Glamis
Shareholders;
•
The Glamis Board believes that share ownership in the Combined
Company offered by the Arrangement would result in a number of
benefits to Glamis Shareholders, including:
o
Participation in a company that would be well-positioned to
compete with the other senior North American gold companies;
o
Participation in a company that would have one of the best
production growth profiles among senior gold producers;
o
Participation in a company that would be the lowest-cost senior
producer of gold and a leading producer of silver;
Participation in a company that would have revenues and
financial strength that should enable it to finance its
development projects;
o
The Combined Company’s scale and diversity of operations
throughout the Americas would position it as a leading producer
in both Canada and Mexico, minimizing the risks associated with
political or economic instability experienced by other mining
companies operating globally;
o
The Combined Company would benefit from the combination of the
Goldcorp and Glamis management teams which have exceptional
track records of shareholder wealth creation and integration
success, and proven operating, development and exploration
skills;
o
The Combined Company is expected to continue Goldcorp’s
policy of paying regular dividends; and
o
The Combined Company is expected to continue to maintain 100% of
gold reserves and gold production unhedged.
•
Glamis Shareholders, through their ownership of Goldcorp Shares,
would continue to participate in any increase in the value of
Glamis’ recently acquired Peñasquito Project as well
as the other assets of Glamis and would also benefit from the
current assets of Goldcorp. Glamis Shareholders should hold
approximately 40% of the Goldcorp Shares after completion of the
Arrangement; and
•
There would be continuity at the board and management levels of
the Combined Company. The board of directors of the Combined
Company is to consist of ten persons, of whom four would be
nominees of Glamis. Ian Telfer, the current President and CEO of
Goldcorp, would be Chairman of the board of the Combined
Company, Kevin McArthur, the current President and CEO of
Glamis, would be President and CEO of the Combined Company,
Charles Jeannes, the current Executive Vice President,
Administration of Glamis, would be appointed as an Executive
Vice President of the Combined Company, and Charles Ronkos, the
current Vice President, Exploration of Glamis, would be
appointed Vice President, Exploration of the Combined Company.
The current officers of Goldcorp other than Mr. Telfer are
expected to continue to hold their current positions with
Goldcorp in the Combined Company.
Q:
When is the Arrangement expected to close?
A:
The Arrangement is expected to close by the end of November
2006, assuming that the required shareholder approval and
regulatory approvals have been received by such time and subject
to the other terms and conditions set out in the Arrangement
Agreement. See “The Arrangement — Effective Date
and Conditions of the Arrangement” and “The
Arrangement — Regulatory Matters” in this
Circular.
Q:
Are there risks I should consider in deciding whether to vote
for the Arrangement Resolution?
A:
Yes. Some of these risks include: (i) the Arrangement
Agreement may be terminated in certain circumstances, in which
case the market price for Glamis Shares may be adversely
affected; (ii) as Glamis Shareholders will receive Goldcorp
Shares based on a fixed exchange ratio, Goldcorp Shares received
by Glamis Shareholders under the Arrangement may have a market
value lower than expected; (iii) the closing of the
Arrangement is conditional on, among other things, the receipt
of consents and approvals from governmental bodies that could
delay completion of the Arrangement or impose conditions on the
companies that could adversely affect the business or financial
condition of the Combined Company; (iv) the exchange of
Glamis Shares pursuant to the Arrangement may be a taxable
transaction for Glamis Shareholders in the United States;
(v) potential payments to be made to Glamis Shareholders
who exercise Dissent Rights could have an adverse effect on the
Combined Company’s financial condition; (vi) the issue
of Goldcorp Shares under the Arrangement and their subsequent
sale may cause the market price of Goldcorp Shares to decline;
(vii) the Combined Company may not realize the benefits
currently anticipated from the combination of Glamis and
Goldcorp due to challenges associated with integrating the
operations, technologies and personnel of Glamis and Goldcorp;
(viii) the Combined Company may not realize the benefits of
its growth projects; (ix) the Combined Company may not meet
key production and cost estimates; (x) the Combined Company
will face permitting risks relating to its expanded portfolio of
development projects; (xi) the Combined Company will be
subject to significant capital requirements associated with its
expanded operations and portfolio of development projects; and
(xii) the Combined Company will be subject to a broad range
of environmental laws and regulations in the jurisdictions in
which it operates and will be exposed to potentially significant
environmental costs and liabilities. See “Risk
Factors” in this Circular.
What are the Canadian and U.S. federal income tax
consequences of the Arrangement to Glamis Shareholders?
A:
A Glamis Shareholder who is a Canadian Resident and whose Glamis
Shares constitute “capital property” generally should
be able to exchange Glamis Shares for Goldcorp Shares and cash
under the Arrangement on a tax-deferred basis by making an
appropriate election jointly with Goldcorp under Section 85
of the ITA. Such a Glamis Shareholder who does not make such an
election generally will realize a capital gain (capital loss)
equal to the amount by which the aggregate fair market value of
the Goldcorp Shares and cash that the shareholder receives under
the Arrangement, net of reasonable costs of disposition, exceed
(are less than) the adjusted cost base of the resident’s
Glamis Shares. Non-resident Glamis Shareholders whose Glamis
Shares do not constitute “taxable Canadian property”
generally will not incur any liability for Canadian federal
income tax as a result of the Arrangement.
For U.S. federal income tax purposes, the tax treatment of the
exchange of Glamis Shares for Goldcorp Shares plus Canadian
currency depends on whether the exchange is treated as part of a
reorganization for U.S. federal income tax purposes. If it is so
treated, a Glamis Shareholder who is a U.S. person
generally will recognize gain but only to the extent of the
U.S. dollar value of the Canadian currency on the date of
receipt, subject to the passive foreign investment company rules
of
Sections 1291-1298
of the Code. If the exchange of shares is not treated as part of
a reorganization, the exchange by a U.S. person would be
taxable for U.S. federal income tax purposes.
See “Canadian Federal Income Tax Considerations” and
“United States Federal Income Tax Considerations” in
this Circular. Glamis Shareholders are urged to consult their
tax advisers to determine the tax consequences particular
to them.
Q:
When and where will the Meeting be held?
A:
The Meeting will be held on October 26, 2006 at
9:30 a.m. (Vancouver time) at The Cheakamus Room, The
Fairmont Waterfront Hotel, 900 Canada Place Way, Vancouver,
British Columbia, Canada.
Q:
Who is entitled to vote at the Meeting?
A:
All Glamis Shareholders at the close of business on
September 26, 2006, the Record Date for the Meeting, will
be entitled to vote on matters that come before the Meeting.
Q:
How many votes do I have?
A:
You are entitled to one vote for each Glamis Share that you own.
At the close of business on September 25, 2006, there were
167,240,151 Glamis Shares issued and outstanding.
Q:
What vote is required to approve the Arrangement
Resolution?
A:
At least two thirds of the votes cast on the Arrangement
Resolution at the Meeting must be voted FOR the Arrangement
Resolution in order for it to be approved.
Q:
Are Goldcorp Shareholders required to approve the
Arrangement?
A:
The Arrangement Agreement does not provide for Goldcorp to seek
Goldcorp Shareholder approval.
Q:
What if I return my proxy but do not mark it to show how I
wish to vote?
A:
If your proxy is signed and returned without specifying your
choices, your Glamis Shares will be voted FOR the Arrangement
Resolution in accordance with the recommendation of the Glamis
Board.
Q:
When is the cut-off time for delivery of a proxy?
A:
The proxy must be delivered at least 48 hours (excluding
Saturdays, Sundays and holidays) before the Meeting or any
adjournment thereof at which the proxy is to be used. In this
case, assuming no adjournment, the proxy cut-off time is
9:30 a.m. (Vancouver time) on October 24, 2006.
Q:
Can I change my vote after I have submitted a signed
proxy?
A:
Yes.
If you have submitted a form of proxy, you may revoke it by
(i) executing a proxy bearing a later date or by executing
a valid notice of revocation, either of which must be executed
by you as the Glamis Shareholder or by your authorized attorney
in writing, or, if a corporation, under its corporate seal by an
officer or attorney duly
authorized, and by delivering the proxy bearing a later date or
the notice of revocation to Computershare at the 9th Floor,
100 University Avenue, Toronto, Ontario, M5J 2Y1, or to the
address of the registered office of Glamis at 1500 Royal Centre,
1055 West Georgia Street, P. O. Box 11117, Vancouver,
British Columbia, V6E 4N7, at any time before 9:30 a.m.
(Vancouver time) on October 25, 2006 or, if the Meeting is
adjourned, the last business day before any reconvening thereof,
or to the chair of the Meeting on the day of the Meeting or any
reconvening thereof, or in any other manner provided by law, or
(ii) if you are a Registered Shareholder, personally
attending the Meeting and voting your Glamis Shares.
If you are a Beneficial Shareholder and you have submitted
voting instructions by mail, telephone or through the Internet
using a Voting Instruction Form, you may revoke your voting
instructions by delivering to the relevant intermediary new
voting instructions such that the intermediary receives the new
voting instructions before 9:30 a.m. (Vancouver time) on
October 25, 2006, or if the Meeting is adjourned, the last
business day before any reconvening thereof.
In addition, a proxy may be revoked by any other manner
permitted by law.
Q:
What do I need to do now?
A:
Read and consider the information contained in this Circular
carefully, and then send in your proxy for your Glamis Shares as
soon as possible so that your Glamis Shares may be voted at the
Meeting.
Q:
Who should I call if I have questions about the proxy
materials or voting procedures?
A:
If you have questions about the Arrangement Resolution, need
assistance in submitting your proxy or voting your Glamis
Shares, or need additional copies of the Circular or the
enclosed proxy, you should contact Georgeson, Glamis’ proxy
solicitation agent, by mail at 100 University Avenue,
11th Floor, South Tower, Toronto, Ontario M5J 2Y1, or by
telephone at 1-866-904-8739 (toll-free in North America), and
banks and brokers should call 212-440-9800. If your Glamis
Shares are held in a stock brokerage account or by a bank or
other nominee, you should call your broker, bank or other
nominee for additional information.
In assessing the Arrangement, Glamis Shareholders should
carefully consider the risks described in Glamis’ Annual
Information Form dated March 6, 2006 for the year ended
December 31, 2005 and Goldcorp’s Renewal Annual
Information Form dated March 20, 2006 for the year ended
December 31, 2005, together with the other information
contained in, or incorporated by reference in this Circular,
including the disclosure under “Information Concerning
Goldcorp — Recent Developments — SEC Comment
Letters on 2005 Form 40-F” in this Circular.
Additional risks and uncertainties, including those currently
unknown to or considered immaterial by Glamis, may also
adversely affect the business of the Combined Company. In
particular, the Arrangement and the operations of the Combined
Company are subject to certain risks including the following:
Risks Related to the Arrangement
The Arrangement Agreement may be terminated by Glamis or
Goldcorp in certain circumstances, in which case the market
price for Glamis Shares may be adversely affected.
Each of Glamis and Goldcorp has the right to terminate the
Arrangement Agreement in certain circumstances. Accordingly,
there is no certainty, nor can Glamis provide any assurance,
that the Arrangement Agreement will not be terminated by either
Glamis or Goldcorp before the completion of the Arrangement. For
example, Goldcorp has the right, in certain circumstances, to
terminate the Arrangement Agreement if changes occur that, in
the aggregate, have a Material Adverse Effect on Glamis.
Although a Material Adverse Effect excludes certain events that
are beyond the control of Glamis or Goldcorp (such as general
changes in the global economy or changes that affect the
worldwide mining industry generally and which do not have a
materially disproportionate effect on Glamis or Goldcorp), there
is no assurance that a change having a Material Adverse Effect
on Glamis will not occur before the Effective Date, in which
case Goldcorp could elect to terminate the Arrangement Agreement
and the Arrangement would not proceed.
In addition, the completion of the Arrangement is subject to a
number of conditions precedent, certain of which are outside the
control of Glamis or Goldcorp, including Glamis Shareholders
approving the Arrangement and required regulatory approvals
being obtained by Goldcorp. There is no certainty, nor can
Glamis provide any assurance, that these conditions will be
satisfied. If for any reason the Arrangement is not completed,
the market price of Glamis Shares may be adversely affected.
Moreover, if the Arrangement Agreement is terminated, there is
no assurance that the Glamis Board will be able to find a party
willing to pay an equivalent or a more attractive price for
Glamis Shares than the price to be paid pursuant to the terms of
the Arrangement Agreement.
Under the Arrangement, Glamis Shareholders will receive
Goldcorp Shares based on a fixed exchange ratio that will not be
adjusted to reflect market fluctuations. Consequently, Goldcorp
Shares received by Glamis Shareholders under the Arrangement may
have a lower market value than expected.
Glamis Shareholders will receive a fixed number of Goldcorp
Shares under the Arrangement, rather than Goldcorp Shares with a
fixed market value. Because the Exchange Ratio will not be
adjusted to reflect any change in the market value of the
Goldcorp Shares, the market value of Goldcorp Shares received
under the Arrangement may vary significantly from the market
value at the dates referenced in this Circular.
The closing of the Arrangement is conditional on, among other
things, the receipt of consents and approvals from governmental
bodies that could delay completion of the Arrangement or impose
conditions on the companies that could adversely affect the
business or financial condition of the Combined Company.
Completion of the Arrangement is conditional upon receiving
certain regulatory approvals, and the expiration or termination
of applicable waiting periods under the HSR Act and Mexican
competition legislation. A substantial delay in obtaining
satisfactory approvals or the imposition of unfavourable terms
or conditions in the regulatory approvals could adversely affect
the business, financial condition or results of operations of
the Combined Company.
Certain jurisdictions may claim jurisdiction under their
competition or antitrust laws in respect of acquisitions or
mergers that may potentially affect their domestic marketplace.
Although Glamis does not currently anticipate that there will be
any investigation or proceeding in any jurisdiction that would
have a material impact on the completion of the Arrangement or
the operations of the Combined Company, there is no assurance
that such investigation or proceeding, whether by governmental
authority or private party, will not be initiated nor, if
initiated, will not materially adversely affect the completion
of the Arrangement or the operations of the Combined Company.
The exchange of Glamis Shares pursuant to the Arrangement
may be a taxable transaction for U.S. shareholders.
Although Glamis believes the exchange of Glamis Shares for
Goldcorp Shares plus Canadian currency and the subsequent
amalgamation of Glamis and Goldcorp, or of Glamis and a
wholly-owned subsidiary of Goldcorp, after completion of the
Arrangement should be treated as a single, integrated
transaction for U.S. federal income tax purposes qualifying as a
reorganization under Section 368(a) of the Code, there is
limited authority on the issue and thus substantial uncertainty
with respect to such tax treatment. If the exchange of Glamis
Shares for Goldcorp Shares plus cash were viewed as independent
of the subsequent amalgamation, reorganization treatment would
not apply, and the exchange would be a fully taxable transaction
for U.S. federal income tax purposes. In that case, a U.S.
shareholder would recognize gain or loss in an amount equal to
the difference between (a) the fair market value of the
Goldcorp Shares and the U.S. dollar value of the Canadian
currency on the date of receipt and (b) such U.S.
shareholder’s adjusted tax basis in the Glamis Shares
surrendered. No opinion of legal counsel and no ruling from the
IRS concerning the U.S. federal income tax consequences of the
Arrangement have been obtained by Glamis, and none will be
requested by Glamis. There is no assurance that the IRS will not
challenge the treatment of the exchange and the amalgamation as
a single, integrated transaction qualifying as a reorganization,
or that a U.S. court will not sustain such a challenge.
U.S. shareholders should carefully review the discussion
under “United States Federal Income Tax
Considerations” for a more complete discussion of the
possible U.S. federal income tax consequences of the exchange.
Potential payments to Glamis Shareholders who exercise
Dissent Rights could have an adverse effect on the Combined
Company’s financial condition.
Glamis Shareholders have the right to exercise Dissent Rights
and demand payment of the fair value of their Glamis Shares in
cash. If Dissent Rights are exercised in respect of a
significant number of Glamis Shares, a substantial cash payment
may be required to be made to such Glamis Shareholders that
could have an adverse effect on the Combined Company’s
financial condition and cash resources.
The issue of Goldcorp Shares under the Arrangement and their
subsequent sale may cause the market price of Goldcorp Shares to
decline.
As of September 25, 2006, 418,440,849 Goldcorp Shares were
outstanding and an aggregate of 20,390,876 Goldcorp Shares were
subject to outstanding options and warrants to purchase or
acquire Goldcorp Shares. Goldcorp currently expects that in
connection with the Arrangement it will issue approximately
282,635,855 Goldcorp Shares (calculated based on the issued
Glamis Shares as at September 25, 2006) and reserve
approximately 5,169,605 Goldcorp Shares for issue on exercise of
Converted Goldcorp Options. The issue of these new Goldcorp
Shares and their sale and the sale of additional Goldcorp Shares
that may become eligible for sale in the public market from time
to time could depress the market price for Goldcorp Shares.
Risks Related to the Operations of the Combined Company
The Combined Company may not realize the benefits currently
anticipated due to challenges associated with integrating the
operations, technologies and personnel of Glamis and
Goldcorp.
The success of the Combined Company will depend in large part
on the success of management of the Combined Company in
integrating the operations, technologies and personnel of Glamis
with those of Goldcorp after the Effective Date. The failure of
the Combined Company to achieve such integration could result in
the failure of the Combined Company to realize any of the
anticipated benefits of the Arrangement and could impair the
results of operations, profitability and financial results of
the Combined Company.
In addition, the overall integration of the operations,
technologies and personnel of Glamis into the Combined Company
may result in unanticipated operational problems, expenses,
liabilities and diversion of management’s attention.
The Combined Company may not realize the benefits of its
growth projects.
As part of its strategy, the Combined Company will continue
existing efforts and initiate new efforts to develop new mineral
projects and will have a larger number of such projects as a
result of the Arrangement. A number of risks and uncertainties
are associated with the development of these types of projects,
including political, regulatory, design, construction, labour,
operating, technical, and technological risks, uncertainties
relating to capital and other costs, and financing risks. The
failure to develop one or more of these initiatives successfully
could have an adverse effect on the Combined Company’s
financial position and results of operations.
The Combined Company may not meet key production and cost
estimates.
A decrease in the amount of, or a change in the timing of the
production outlook for, or in the prices realized for, metals of
the Combined Company, particularly in relation to the production
of gold, silver and copper will directly affect the amount and
timing of the Combined Company’s cash flow from operations.
The actual effect of such a decrease on the Combined
Company’s cash flow from operations would depend on the
timing of any changes in production and on actual prices and
costs. Any change in the timing of these projected cash flows
that would occur due to production shortfalls or labour
disruptions would, in turn, result in delays in receipt of such
cash flows and in using such cash to reduce debt levels, and may
require additional borrowings to fund capital expenditures,
including capital for the Combined Company’s development
projects, in the future. Any such financing requirements could
adversely affect the Combined Company’s ability to access
capital markets in the future to meet any external financing
requirements or increase its debt financing costs. In addition,
a number of these and other developments or events, including
changes in product mix, demand for the Combined Company’s
products, and production disruptions, could make historic trends
in Glamis’ and Goldcorp’s cash flows lose their
predictive value.
The level of production and capital and operating cost estimates
relating to development projects, which are used in establishing
ore reserve estimates for determining and obtaining financing
and other purposes, are based on certain assumptions and are
inherently subject to significant uncertainty. It is very likely
that actual results for the Combined Company’s projects
will differ from current estimates and assumptions, and these
differences may be material. In addition, experience from actual
mining or processing operations may identify new or unexpected
conditions which could reduce production below, or increase
capital or operating costs above, current estimates. If actual
results are less favourable than currently estimated, the
Combined Company’s business, results of operations,
financial condition and liquidity could be materially adversely
affected.
The Combined Company will face permitting risks relating to
its expanded portfolio of development projects.
On the Effective Date, the Combined Company will still need to
obtain certain permits and approvals to enable it to proceed
with the construction of the mine, processing plant and related
infrastructure required for each of its development projects.
The development projects are at different stages of development,
and Glamis is not currently in a position to predict with
certainty when all required permits and approvals would be in
place to allow for the Combined Company to move forward with
certain of its development projects.
The Combined Company will be subject to significant capital
requirements associated with its expanded operations and its
expanded portfolio of development projects.
The Combined Company must generate sufficient internal cash flow
or be able to utilize available financing sources to finance its
growth and sustain capital requirements. If the Combined Company
does not realize satisfactory prices for gold, silver and other
metals that it will produce, it could be required to raise
significant additional capital through equity financings in the
capital markets or to incur significant borrowings through debt
financings to meet its capital requirements. If these financings
are required, the Combined Company’s cost of raising
capital in the future may be adversely affected. In addition, if
the Combined Company is required to make significant interest
and principal payments resulting from a debt financing, the
Combined Company’s financial condition and ability to raise
additional funds may be adversely impacted. Any significant
delay in completing its development projects or in achieving
commercial production from them on a consistent basis or the
incurring of capital costs that are significantly higher than
estimated, could have a significant adverse effect on the
Combined Company’s results of operations, cash flow from
operations and financial condition.
The Combined Company will be subject to a broad range of
environmental laws and regulations in the jurisdictions in which
it operates and will be exposed to potentially significant
environmental costs and liabilities.
Glamis and Goldcorp are subject to a broad range of
environmental laws and regulations in each jurisdiction in which
they operate. These laws and regulations, as interpreted by
relevant agencies and the courts, impose increasingly stringent
environmental protection standards regarding, among other
things, air emissions, wastewater storage, treatment and
discharges, the use and handling of hazardous or toxic
materials, waste disposal practices, and the remediation of
environmental contamination. The costs of complying with these
laws and regulations, including participation in assessments and
remediation of sites, could be significant. In addition, these
standards can create the risk of substantial environmental
liabilities, including liabilities associated with divested
assets and past activities. Glamis and Goldcorp have each
established reserves for environmental remediation activities
and liabilities. However, environmental matters cannot be
predicted with certainty, and these amounts may not be adequate.
Glamis management is using this Circular to solicit proxies from
Glamis Shareholders for use at the Meeting to be held on
October 26, 2006.
Solicitation of Proxies
All solicitation costs will be borne by Glamis. Proxies will be
solicited primarily by mail, but proxies may also be solicited
personally, by telephone or through electronic means (including
via the internet,
e-mail or facsimile) by
directors, officers and employees of Glamis. Glamis has arranged
for brokerage houses and other intermediaries, clearing
agencies, custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of the Glamis
Shares held of record by such persons, and Glamis may reimburse
such persons for reasonable fees and disbursements incurred by
them in so doing.
In addition, Glamis has retained Georgeson, 100 University
Avenue, 11th Floor, South Tower, Toronto, Ontario M5J 2Y1
to aid in soliciting proxies from Glamis Shareholders in Canada.
Georgeson will, in turn, coordinate with Georgeson Shareholder
Communications Inc., 17 State Street, 10th Floor, New York,
New York10004 to aid in that process in the United States. You
may contact Georgeson in North America toll-free at
1-866-904-8739, and banks and brokers should call 212-440-9800.
The aggregate fee for these services in Canada and the United
States is expected to be approximately Cdn.$75,000 plus
out-of-pocket expenses.
Appointment of Proxyholders
The individuals named in the accompanying proxy are officers of
Glamis. Each Glamis Shareholder entitled to vote at the
Meeting has the right to appoint an individual or company other
than either person named in the proxy, who need not be a Glamis
Shareholder, to attend and act for the Glamis Shareholder and on
the Glamis Shareholder’s behalf at the Meeting. A Glamis
Shareholder may do so either by inserting the name of that other
person in the blank space provided in the proxy or by completing
and delivering another suitable form of proxy.
The method by which a Glamis Shareholder may appoint a person as
proxy is to submit a proxy in accordance with the provisions
described in this Circular, by mail, hand delivery or fax.
Voting by Proxyholder
The persons named in the proxy will vote the Glamis Shares
represented thereby in accordance with the instructions of the
Glamis Shareholder on any ballot that may be called for. The
Glamis Shares will be voted in accordance with any choice
specified by the Glamis Shareholder in the proxy. The proxy
confers discretionary authority on the nominees named therein
with respect to:
(a)
each matter or group of matters identified therein for which a
choice is not specified;
(b)
any amendment to or variation of any matter identified therein;
and
(c)
any other matter that properly comes before the Meeting.
The officers of Glamis named in the proxy will vote the
Glamis Shares represented by the proxy FOR the approval of any
matter for which a choice is not specified in the proxy and, in
particular, will vote FOR the Arrangement Resolution if no
choice is specified.
Registered Shareholders
Registered Shareholders may wish to vote by proxy whether or not
they attend the Meeting in person. Registered Shareholders who
choose to submit a proxy may do so by any of the following
options:
(a)
completing, dating and signing the enclosed proxy or some other
suitable form of proxy and returning it to Computershare by fax
from within North America at 1-866-249-7775, or from outside
North America at (416) 263-9524, or by mail or hand to the
9th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1;
using a touch-tone phone to transmit voting choices to the toll
free number given in the proxy (Registered Shareholders who
choose this option must follow the instructions of the voice
response system and refer to the enclosed proxy form for the
toll free number, the holder’s account number and the proxy
access number); and
(c)
using Computershare’s website at
www.computershare.com/ca/proxy (Registered Shareholders who
choose this option must follow the instructions that appear on
the screen and refer to the enclosed proxy form for the
holder’s account number and the proxy access number);
in all cases ensuring that the proxy is received by
9:30 a.m. (Vancouver time) on October 24, 2006 or at
least 48 hours (excluding Saturdays, Sundays and holidays)
before the time to which the Meeting is adjourned or postponed.
Failure to complete or deposit a proxy properly may result in
its invalidation. The time limit for the deposit of proxies may
be waived by the Glamis Board at its discretion without notice.
Beneficial Shareholders
The following information is of significant importance to
Beneficial Shareholders. Beneficial Shareholders should note
that the only proxies that can be recognized and acted upon at
the Meeting are those deposited by Registered Shareholders.
Glamis Shares that are listed in an account statement provided
to a Glamis Shareholder by a broker will, in almost all cases,
not be registered in the Glamis Shareholder’s name on the
records of Glamis and are more likely to be registered in the
name of the Glamis Shareholder’s Intermediary Registered
Shareholder. In the United States the vast majority of such
Glamis Shares are registered under the name of Cede &
Co. as nominee for The Depository Trust Company (which acts as
depositary for many U.S. brokerage firms and custodian
banks), and in Canada, under the name of CDS & Co. (the
registration name for The Canadian Depository for Securities
Limited, which acts as nominee for many Canadian brokerage
firms).
Intermediary Registered Shareholders are required to seek voting
instructions from Beneficial Shareholders in advance of the
Meeting. Every Intermediary Registered Shareholder has its own
mailing procedures and provides its own return instructions to
clients.
There are two kinds of Beneficial Shareholders — those
who object to their names being made known to the issuers of
securities which they own (called OBOs for Objecting Beneficial
Owners), and those who do not so object (called NOBOs for
Non-Objecting Beneficial Owners).
Glamis is taking advantage of National Instrument 54-101, which
permits it to deliver proxy-related materials directly to its
NOBOs. As a result, NOBOs should receive a scannable Voting
Instruction Form (“VIF”) from
Computershare. NOBOs should complete and return their VIFs to
Computershare in the envelope provided or by facsimile. In
addition, Computershare will provide instructions for voting by
either telephone or internet on the VIF itself. Computershare
will tabulate the results of the VIFs received from NOBOs and
will provide appropriate instructions at the Meeting with
respect to the Glamis Shares represented by the VIFs it receives.
The Circular is being sent to both Registered Shareholders and
Beneficial Shareholders. If you are a Beneficial Shareholder,
and Glamis or its agent has sent these materials directly to
you, your name and address and information about your Glamis
Shares have been obtained in accordance with applicable
securities regulatory requirements from the Intermediary
Registered Shareholder who holds your Glamis Shares on your
behalf.
By choosing to send these materials to you directly, Glamis (and
not your Intermediary Registered Shareholder) has assumed
responsibility for delivering these materials to you and
executing your proper voting instructions. Please return your
VIF as specified in the request for voting instructions that you
receive.
Beneficial Shareholders who are OBOs should follow the
instructions of their Intermediary Registered Shareholder
carefully to ensure that their Glamis Shares are voted at the
Meeting.
The form of proxy that will be supplied by your Intermediary
Registered Shareholder will be similar to the proxy provided to
Registered Shareholders by Glamis. However, its purpose is
limited to instructing the Intermediary Registered Shareholder
how to vote on your behalf. Most Intermediary Registered
Shareholders now delegate responsibility for obtaining
instructions from clients to ADP Investor Communication Services
(“ADP”) in the United States and in Canada. ADP
will mail a VIF in lieu of the proxy provided by Glamis. The VIF
will name the same persons as Glamis’ proxy to represent
you at the Meeting. You have the right to appoint a person (who
need not be a
Glamis Shareholder) other than the persons designated in the VIF
to represent you at the Meeting. To exercise this right, you
should insert the name of your desired representative in the
blank space provided in the VIF. You must return your completed
VIF to ADP by mail or facsimile, or give your voting
instructions to ADP by phone or over the Internet, in accordance
with ADP’s instructions. ADP will tabulate the results of
all instructions received and provide appropriate instructions
respecting the voting of Glamis Shares at the Meeting. If you
receive a VIF from ADP, you cannot use it to vote your Glamis
Shares directly at the Meeting — you must return the
VIF to ADP, in accordance with its instructions, well in advance
of the Meeting in order to have your Glamis Shares voted.
Although as a Beneficial Shareholder you may not be recognized
directly at the Meeting for the purposes of voting Glamis Shares
registered in the name of your Intermediary Registered
Shareholder, you may attend the Meeting as proxyholder for your
Intermediary Registered Shareholder and vote your Glamis Shares
in that capacity. If you wish to attend the Meeting and
indirectly vote your Glamis Shares as proxyholder for your
Intermediary Registered Shareholder, you should enter your own
name in the blank space on the VIF provided to you and return
the same to your Intermediary Registered Shareholder in
accordance with the instructions provided by your Intermediary
Registered Shareholder, well in advance of the Meeting.
Alternatively, you may request in writing that your Intermediary
Registered Shareholder send to you a legal proxy which would
enable you to attend the Meeting and vote your Glamis Shares.
Revocation of Proxies
In addition to revocation in any other manner permitted by law,
a Glamis Shareholder who has given a proxy may revoke it by
(a)
executing a proxy bearing a later date or by executing a valid
notice of revocation, in either case executed by the Glamis
Shareholder or the Glamis Shareholder’s authorized attorney
in writing or, if the Glamis Shareholder is a corporation, under
its corporate seal by an officer or attorney duly authorized,
and by delivering the proxy bearing a later date or the notice
of revocation to Computershare at the 9th Floor,
100 University Avenue, Toronto, Ontario, M5J 2Y1, or the
registered office of Glamis at 1500 Royal Centre, 1055 West
Georgia Street, P. O. Box 11117, Vancouver, British
Columbia, V6E 4N7, at any time before 9:30 a.m. (Vancouver
time) on October 25, 2006 or, if the Meeting is adjourned,
the last business day before any reconvening thereof, or to the
chair of the Meeting on the day of the Meeting or any
reconvening thereof, or
(b)
in the case of Registered Shareholders only, personally
attending the Meeting and voting the Registered
Shareholder’s Glamis Shares.
A Beneficial Shareholder who has submitted voting instructions
by mail, telephone or through the Internet using a VIF, may
revoke their voting instructions by delivering to the relevant
intermediary new voting instructions such that the intermediary
receives the new voting instructions before 9:30 a.m.
(Vancouver time) on October 25, 2006, or if the Meeting is
adjourned or postponed, the last business day before any
reconvening thereof.
A revocation of a proxy will not affect a matter on which a vote
is taken before the revocation.
INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE
ACTED UPON
No director or executive officer of Glamis, nor any person who
has held such a position since the beginning of Glamis’
last completed financial year, nor any associate or affiliate of
any of the foregoing persons, has any substantial or material
interest, direct or indirect, by way of beneficial ownership of
securities or otherwise, in any matter to be acted on at the
Meeting other than as set out in “The
Arrangement — Interests of Directors and Executive
Officers of Glamis in the Arrangement” and elsewhere in
this Circular.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING
SECURITIES
Record Date
The Record Date for determining persons entitled to receive
notice of and vote at the Meeting is September 26, 2006.
Only persons who were Glamis Shareholders as of the close of
business on September 26, 2006 are entitled to vote at the
Meeting, or any adjournment or postponement thereof, in the
manner and subject to the procedures described in this Circular.
A quorum for the Meeting is not less than two persons being
present in person or being represented by proxy, holding not
less than one twentieth (5%) of the issued Glamis Shares.
At the close of business on September 25, 2006,
167,240,151 Glamis Shares were issued and outstanding. Each
Glamis Shareholder is entitled to one vote per Glamis Share held
on all matters to come before the Meeting, including the
Arrangement Resolution. Glamis Shares are the only securities of
Glamis which will have voting rights at the Meeting.
Principal Holders of Glamis Shares
To the knowledge of the directors and executive officers of
Glamis, only the following corporations beneficially owned,
directly or indirectly, or exercised control or direction over,
Glamis Shares carrying more than 10% of the voting rights
attached to all issued Glamis Shares as at September 25,2006:
Number of
Percentage
Glamis Shares
of Issued
Shareholder Name
Held
Glamis Shares
Fidelity Management & Research Company, Fidelity Management
Trust Company and Fidelity International Limited
18,393,3291
11
%
1
The number of Glamis Shares beneficially owned by Fidelity
Management & Research Company, Fidelity Management
Trust Company and Fidelity International Limited (collectively,
“FMR”) is as of June 30, 2006, as
disclosed in a
Schedule 13F-HR/A
filed by FMR with the SEC on August 22, 2006.
The Arrangement will be carried out pursuant to the
Arrangement Agreement and the Plan of Arrangement. A summary of
the principal terms of the Arrangement Agreement and Plan of
Arrangement is provided in this section. This summary does not
purport to be complete and is qualified in its entirety by
reference to the Arrangement Agreement, which has been filed by
Glamis on SEDAR at www.sedar.com and on EDGAR at www.sec.gov and
to the Plan of Arrangement that is appended hereto as
Appendix C. Capitalized terms have the meanings set out in
the Glossary of Terms, or are otherwise defined herein.
Approval of Arrangement Resolution
At the Meeting, Glamis Shareholders will be asked to approve the
Arrangement Resolution, substantially in the form set out in
Appendix A to this Circular. At least two thirds of the
votes cast in person or by proxy on the Arrangement Resolution
at the Meeting must be voted FOR the Arrangement Resolution in
order for it to be approved.
Background to the Arrangement
The provisions of the Arrangement Agreement are the result of
arm’s length negotiations among representatives of Glamis
and Goldcorp and their respective legal and financial advisers.
The following is a summary of the background to the execution of
the Arrangement Agreement.
During the week of June 12, 2006, Douglas Bell, a Managing
Director of Orion, separately approached Ian Telfer, CEO of
Goldcorp, and Kevin McArthur, CEO of Glamis, about the
willingness of both parties to consider reviewing an analysis of
a combination of the two companies. Both parties agreed to
consider reviewing such an analysis.
On July 10, 2006, Orion provided Goldcorp and Glamis with
an initial analysis of what a combination of Goldcorp and Glamis
would look like based solely on publicly available information.
Between July 10 and August 4, 2006, Orion continued to
prepare and provide to both parties further analyses of what a
combination of Goldcorp and Glamis would look like, based solely
on publicly available information.
On August 4, 2006, Mr. Telfer and Mr. McArthur,
along with Mr. Bell, met in person in Ontario, Canada to
discuss the merits of a transaction involving Goldcorp and
Glamis. At the conclusion of this meeting, Messrs. Telfer
and McArthur agreed, pending execution of a confidentiality
agreement, to exchange certain non-public financial and business
information in order to further assess the merits of a
Goldcorp-Glamis combination. Each of Goldcorp and Glamis
requested that Orion prepare a financial analysis of what a
combination of Goldcorp and Glamis would look like based upon
the confidential information to be provided by each company.
Commencing the week of August 7, 2006, Orion received
confidential information from each of Goldcorp and Glamis and
began preparing the analysis of the potential combination of the
two companies.
At its regularly scheduled meeting on August 10, 2006, the
Goldcorp Board was advised of the preliminary discussions with
Glamis and with Mr. Bell regarding a potential combination
of the two companies.
On August 14, 2006, Goldcorp and Glamis executed the
Confidentiality Agreement and began to exchange confidential
non-public information.
Between August 14 and August 23, 2006, both parties
continued to review and investigate the information provided
under the Confidentiality Agreement. In addition, each party
presented questions and provided responses to the other in order
to refine its analysis of a proposed combination of the two
companies, as well as the analysis provided by Orion of the
potential combination of the two companies utilizing information
provided under the Confidentiality Agreement.
On August 21, 2006, the Glamis Board held a telephone
meeting during which Mr. McArthur advised the Glamis Board
as to the status of the discussions with Goldcorp, particularly
as to his August 4, 2006 meeting in Ontario, Canada and the
financial models prepared by management of Glamis and by Orion.
On August 23, 2006, Messrs. Telfer and McArthur
discussed the preliminary financial and certain other material
terms of a potential transaction. During these discussions,
Messrs. Telfer and McArthur agreed that each company would
send a multi-disciplinary due diligence team to Seattle to
conduct due diligence examinations with the other company’s
management. At this time, Goldcorp and Glamis decided that Orion
would no longer act as an intermediary between the two
companies, and that if, after the review by Goldcorp and Glamis
of their respective confidential non-public information, each of
Goldcorp and Glamis desired to continue to pursue a transaction,
Orion would act solely as financial adviser to Glamis.
From August 25, 2006 to September 25, 2006, each party
and its respective legal and other advisers continued to conduct
a due diligence review of the other party. On August 24,2006, Goldcorp retained Merrill Lynch Canada Inc. to act as its
financial adviser with respect to acquisition discussions with
Glamis.
On August 25 and 26, 2006, the Goldcorp due diligence team,
consisting of Lindsay Hall, Executive Vice President and Chief
Financial Officer, Steve Reid, Executive Vice President, Canada
and USA, Rohan Hazelton, Vice President, Finance, Anna Tudela,
Director, Legal and Assistant Corporate Secretary, Eduardo Luna,
Executive Vice President and Randy Smallwood, Director, Project
Development (for August 26 only), and the Glamis due diligence
team, consisting of Charles Jeannes, Executive Vice President,
Administration, James Voorhees, Executive Vice President and
Chief Operating Officer, Cheryl Sedestrom, Vice President and
Chief Financial Officer, Charles Ronkos, Vice President,
Exploration, and Mike Lalonde, Director of Underground Mining,
met in Seattle to conduct due diligence discussions.
Based on the outcome of the due diligence conducted in Seattle,
representatives of Glamis and Goldcorp agreed to meet in Toronto
to begin discussions on a definitive combination agreement.
On August 25, 2006, Glamis contacted JPMorgan to seek its
financial advisory assistance on the transaction.
On August 25, 2006, the Goldcorp Board met to consider a
possible transaction with Glamis. In addition, on
August 25, 2006, Mr. McArthur met with Douglas Holtby,
the Chairman of the Goldcorp Board, in Vancouver. They discussed
the companies’ respective cultures, strategies and
personnel.
On August 26, 2006, Glamis received a draft Arrangement
Agreement from Goldcorp’s counsel and negotiations between
Osler, Hoskin & Harcourt LLP and Lang Michener LLP,
legal counsel to Glamis, and Cassels Brock & Blackwell
LLP, legal counsel to Goldcorp, in respect of the draft
Arrangement Agreement and related documentation commenced on
August 28, 2006.
On August 28, 2006, the Goldcorp Board met to discuss the
merits of a possible transaction with Glamis and received
presentations from senior management, outside legal advisers and
Merrill Lynch Canada Inc.
On August 28, 2006, the Glamis Board met to discuss the
merits of a possible transaction with Goldcorp. The Glamis Board
considered the due diligence review presented by
Mr. Jeannes and Mr. Voorhees as well as the views
presented by Orion and legal counsel. At the meeting, Orion
discussed its view as to the relative values of Goldcorp and
Glamis, the advisability of Glamis considering a transaction
with Goldcorp, and its preliminary views of the financial
fairness of the contemplated exchange ratios for such a
transaction, assuming varying levels of potential consideration.
Orion also presented its views as to potential alternative
transactions available to Glamis. Legal counsel reviewed with
the Glamis Board its duties in connection with the consideration
of a transaction with Goldcorp. After fully considering the
matter and taking into consideration the views of Orion and
legal counsel, the Glamis Board determined that it would pursue
further merger discussions with Goldcorp.
The Glamis Board considered appointing a special committee
composed solely of “independent”, or non-management,
directors to assist in its assessment of the Arrangement,
however, after receiving advice from legal counsel, the Glamis
Board determined that a special committee was not needed in
these circumstances. The Glamis Board did determine that, as is
its general practice, Kevin McArthur, a director and the
President and CEO of Glamis, would be excused for a portion of
any meeting in order that the remaining members of the Glamis
Board, all of whom are independent, could discuss any matter
more appropriately discussed in the absence of management. The
Glamis Board believes that this arrangement has and will
continue to allow the Glamis Board to utilize the expertise of
Mr. McArthur while ensuring that the Glamis Board’s
decision-making is free from any conflict of interest.
On August 29, 2006, Glamis formally engaged Orion as its
financial adviser with respect to a possible transaction with
Goldcorp, though Orion had begun work before that time.
On August 29, 2006, Mr. Jeannes and Glamis’ legal
counsel met with Goldcorp’s legal counsel to negotiate
various provisions of the Arrangement Agreement. These
negotiations continued throughout the evening.
On August 29, 2006, Messrs. Telfer and McArthur also
met in Toronto to negotiate certain of the financial terms by
which Goldcorp would agree to acquire Glamis. They reached
agreement on preliminary financial terms and continued to
discuss other transaction terms by telephone throughout the
afternoon of August 30, 2006.
On August 29, 2006, Mr. Holtby formally retained CIBC
World Markets Inc. as a financial adviser to the Goldcorp Board
with respect to a possible transaction with Glamis.
On August 30, 2006, Glamis formally engaged JPMorgan as its
financial adviser with respect to a possible transaction with
Goldcorp, though JPMorgan had begun work before that time.
On August 30, 2006, the Glamis Board met in Toronto.
Mr. Jeannes presented in detail to the Glamis Board the
terms of the Arrangement Agreement as negotiated by the parties.
The Glamis Board considered the terms of the transaction
proposed by Goldcorp and discussed, among other things, the
relative values of Goldcorp and Glamis and the risks inherent in
or mitigated by the transaction, and compared the proposed
Goldcorp transaction to alternative transactions available to
Glamis and the continuation by Glamis as an independent entity.
Orion and JPMorgan separately met with the Glamis Board to
review with the Glamis Board their respective analyses of the
financial terms of the Goldcorp proposal. Orion and JPMorgan
delivered to the Glamis Board their opinions, to the effect
that, as of that date and based on and subject to the various
assumptions, limitations and qualifications described in their
respective written opinions attached to this Circular as
Appendix D and Appendix E, respectively, in the case
of Orion, the consideration to be received by Glamis
Shareholders pursuant to the Arrangement, and, in the case of
JPMorgan, the Exchange Ratio, was fair, from a financial point
of view, to Glamis Shareholders. Mr. McArthur reported to
the Glamis Board that he and Mr. Telfer had agreed to the
final unresolved financial terms of the offer under the
Arrangement Agreement by telephone during a break in the
meeting. The Glamis Board then met in an executive session to
consider the transaction without Mr. McArthur and other
members of management. Following the executive session, the
Glamis Board unanimously determined that the consideration to be
received by Glamis Shareholders under the Arrangement was fair
to Glamis Shareholders and that the Arrangement with Goldcorp
was in the best interest of Glamis, and unanimously approved
entering into the Arrangement Agreement.
In the morning of August 30, 2006, the Goldcorp Board met
in Toronto to further consider the possible transaction with
Glamis. Mr. Telfer provided the Goldcorp Board with an
update on the negotiations with Glamis. The Goldcorp Board also
received a presentation from CIBC World Markets Inc. In the
afternoon of August 30, 2006, the Goldcorp Board met again and
received reports from senior management and outside legal
counsel. Merrill Lynch Canada Inc. presented its opinion, a copy
of which had been previously delivered to the Goldcorp Board, to
the effect that, as of that date and based on and subject to the
assumptions, limitations and qualifications described therein,
the Exchange Ratio is fair, from a financial point of view, to
Goldcorp. At this meeting, the Goldcorp Board approved the
entering into of the proposed Arrangement Agreement.
The Arrangement Agreement was then executed by the parties late
in the evening of August 30, 2006 and the terms of the
transaction were announced in a joint press release issued by
Glamis and Goldcorp in the early morning of August 31, 2006.
On September 13, 2006, the parties agreed to amend the
Arrangement Agreement to permit Glamis to continue its
confirmatory review of Goldcorp, as permitted under the
Arrangement Agreement, until September 26, 2006 and to
extend the date by which each party could terminate the
agreement as a result of its confirmatory review from
September 13, 2006 to September 26, 2006.
During the week of September 18, 2006, Goldcorp initiated
discussions with Glamis to amend the Arrangement Agreement and
the Plan of Arrangement to provide for a more tax efficient
structure that would facilitate certain post-Arrangement tax
planning relating to Glamis and its assets without affecting the
economic benefit of the Arrangement to Glamis Shareholders. On
September 20, 2006, the parties orally agreed to amend the
terms of the Arrangement to those described in this Circular.
The parties executed an amending agreement dated as of
September 25, 2006 to which was attached an amended and
restated arrangement agreement and an amended Plan of
Arrangement.
On September 25, 2006, Goldcorp received a letter from
McEwen Capital requesting that it provide Goldcorp Shareholders
with an opportunity to vote on the Arrangement or McEwen Capital
would attempt to compel a Goldcorp Shareholders’ vote
through court proceedings. Goldcorp has confirmed that it is
pursuing the Arrangement in compliance with all applicable
corporate and securities laws as well as the rules of the TSX
and the NYSE. The Arrangement Agreement does not provide for
Goldcorp to seek Goldcorp Shareholder approval of the
Arrangement.
Reasons for the Arrangement and Recommendation of the Glamis
Board
After careful consideration, the Glamis Board has unanimously
determined that the consideration to be received by the Glamis
Shareholders under the Arrangement is fair from a financial
point of view and that the Arrangement is in the best interest
of Glamis. Accordingly, the Glamis Board unanimously recommends
that Glamis Shareholders vote FOR the Arrangement
Resolution.
In the course of its evaluation of the Arrangement, the Glamis
Board consulted with Glamis’ senior management, legal
counsel and financial advisers, reviewed a significant amount of
information, including information derived from Glamis’ due
diligence review of Goldcorp, and considered a number of factors
including, among others, the following:
•
Significant Premium to Glamis Shareholders. Goldcorp has
offered Glamis Shareholders a significant premium to the Glamis
share price, which provides immediate value for Glamis
Shareholders. The Arrangement provides a value of
Cdn.$57.07 per Glamis Share based on the August 30,2006 closing price of Goldcorp Shares on the TSX. This
represents a premium of 35% based on the volume-weighted average
share price of Glamis Shares on the TSX for the 20 trading days
preceding announcement of the Arrangement, or 32.7% based on the
closing TSX price of Glamis Shares on the day preceding the
announcement of the Arrangement, and also represents, based on
the closing price of Glamis Shares on the TSX on the day
preceding the announcement of the Arrangement, a premium to the
52-week trading high
for the Glamis Shares on both the TSX and NYSE.
•
Expected Benefits From Owning Shares of the Combined
Company. The Glamis Board believes that the ownership of
shares in the Combined Company offered by the Arrangement would
result in a number of benefits to Glamis Shareholders, including
the following:
o
Participation in a Company That Would be Well-Positioned to
Compete With the Other Senior North American Gold
Producers. The Combined Company would become the
5th largest gold producer in the world and would hold the
6th largest reported mineral reserves and resources, with
approximately 41.1 million ounces of proven and probable
gold reserves, 14 million ounces of measured and indicated
gold resources and 30.9 million ounces of inferred gold
resources1.
The Combined Company would also have proven and probable silver
reserves of approximately 707.4 million ounces as at
December 31, 2005, taking into account those disclosed in
the Peñasquito Feasibility Study. Glamis believes that the
increased reserves and the projected position of the Combined
Company as a senior North American-based global industry leader
with diverse, high-quality, long-lived assets located in the
Americas and broad growth potential, should lead to long-term
growth and stability and should enable the Combined Company to
effectively compete with the other senior North American gold
producers.
o
Participation in a Company That Would Have One of the Best
Production Growth Profiles Among Senior Gold Producers in the
Industry. The Combined Company would be the world’s
highest-growth senior gold company with total gold production
expected to grow by approximately 50% from 2007 to 2010, the
highest amongst the senior gold producers.
o
Participation in a Company That Would be the Lowest-Cost
Senior Producer of Gold and a Leading Producer of Silver.
Glamis expects the Combined Company to be the lowest-cost senior
gold producer with 2006 total cash costs per ounce of gold
produced expected to be $120, significantly below the industry
average of $321. Additionally, the Combined Company would become
one of the leading silver producers in the world through its 57%
equity holding in Silver Wheaton Corp. and over 600 million
ounces of proven and probable silver reserves contained within
Glamis’ Marlin mine and Peñasquito Project.
o
Participation in a Company That Would Have Revenues and
Financial Strength That Should Enable it to Finance its
Development Projects. On a pro forma basis for the year
ended December 31, 2005, the revenue of the Combined
Company was $1,466 million. On a pro forma basis for the
six months ended June 30, 2006, the revenue of the Combined
Company was $1,084.5 million. These revenues, if continued,
should enable the Combined Company to finance the development
projects of the Combined Company.
o
Increased Geographic Diversification. The Combined
Company would have enhanced geographic diversification, having
revenue generating mining operations in Canada, the United
States, Mexico, Central and South America and Australia. Glamis
expects that the scale and diversity of the Combined
Company’s operations throughout the Americas would position
it as a leading producer in both Canada and Mexico, minimizing
the risks associated with political or economic instability
experienced by other mining companies operating globally.
1
Based on the respective 2005 year-end figures of Glamis and
Goldcorp contained in their respective Annual Information Forms
for the year ended December 31, 2005 and the
Peñasquito Feasibility Study (see “Information
Concerning Glamis — Recent Developments —
Peñasquito Project, Mexico”).
Strong Management Team. The Combined Company would
benefit from the combination of the Goldcorp and Glamis
management teams which have exceptional track records of
shareholder wealth creation and integration success and proven
operating, development and exploration skills. Glamis’
operations and mine development expertise as demonstrated by the
recent commissioning of the El Sauzal and Marlin mines would be
complemented by the financial strength and expertise of Goldcorp.
o
Payment of Dividends. The Combined Company is expected to
continue Goldcorp’s policy of paying regular dividends.
•
Continued Participation by the Glamis Shareholders in the
Assets of Glamis and Participation in the Assets of
Goldcorp. Glamis Shareholders, through their ownership of
Goldcorp Shares, would continue to participate in any increase
in the value of Glamis’ recently acquired Peñasquito
Project as well as the other assets of Glamis and the current
assets of Goldcorp, including the integration of Goldcorp’s
Campbell mine in Ontario, Canada (adjacent to its Red Lake mine)
and other assets recently acquired from Placer Dome Inc., the
completion of construction by Goldcorp at the Los Filos mine in
Mexico, and the continued exploration and development by
Goldcorp of the Éléonore project in Québec and of
Glamis’ Cerro Blanco project in Guatemala. Glamis
Shareholders should own approximately 40% of the Goldcorp Shares
upon completion of the Arrangement.
•
Continuity at the Board and Management Levels of the Combined
Company. Under the Arrangement Agreement, Goldcorp has
agreed to use its reasonable best efforts to ensure that the
board of directors of the Combined Company would consist of ten
directors, of whom four would be nominees of Glamis. Ian Telfer,
the current President and CEO of Goldcorp, would be Chairman of
the board of directors of the Combined Company, Kevin McArthur,
the current President and CEO of Glamis, would be President and
CEO of the Combined Company, Charles Jeannes, the current
Executive Vice President, Administration of Glamis, would be
appointed as an Executive Vice President of the Combined
Company, and Charles Ronkos, the current Vice President,
Exploration of Glamis, would be appointed Vice President,
Exploration of the Combined Company. The current officers of
Goldcorp, other than Mr. Telfer, are expected to continue
to hold their current positions with Goldcorp in the Combined
Company. This would provide continuity at the board and
management levels of the Combined Company. See “The
Arrangement — Directors and Officers of
Goldcorp — Post-Arrangement”.
•
Goldcorp Represents a Complementary Strategic Fit for
Glamis. The Glamis Board believes that the combination with
Goldcorp is the best available strategic move for Glamis and the
Glamis Shareholders for the following reasons:
o
The financial strength of the Combined Company should enable it
to fund the development and construction of the Peñasquito
Project without further share dilution. In order for Glamis to
proceed with the Peñasquito Project alone, it would require
significant capital consisting of both equity and debt,
resulting in significant dilution and costs in raising such
capital, as well as interest expense and financing costs in
connection with a debt financing.
o
The Combined Company would continue with 100% of its gold
reserves and gold production unhedged.
o
The Combined Company would have increased asset diversity and
stability from that currently experienced by either Glamis or
Goldcorp, would have a high-quality asset base anchored by
world-class mines in the Americas and would be positioned for
long-term industry growth and leadership.
•
Terms of the Arrangement Agreement. The Glamis Board
considered the following terms of the Arrangement Agreement to
be advantageous:
o
The Ability to Respond to Acquisition Proposals.
Notwithstanding the limitations contained in the Arrangement
Agreement on Glamis’ ability to solicit additional interest
from third parties, the Arrangement Agreement allows the Glamis
Board, at any time before the approval of the Arrangement by the
Glamis Shareholders, to engage in discussions or negotiations
with respect to an unsolicited written Acquisition Proposal that
may constitute a Superior Proposal and to make a Change in
Glamis Recommendation in respect of a Superior Proposal,
provided that the Acquisition Proposal did not result from a
breach of the Arrangement Agreement by Glamis and the Glamis
Board determines in good faith, after consultation with outside
counsel, that failure to take such action would be inconsistent
with the fiduciary duties of the
Glamis Board. See “The Arrangement — Additional
Terms of the Arrangement Agreement — Superior
Proposal”.
o
Reasonable Termination Fee. The Glamis Board believes
that the $215 million Termination Fee, which was the result
of significant negotiation with Goldcorp, is within the range of
reasonable termination fees provided for in comparable
transactions and that it should not be a significant deterrent
to other Acquisition Proposals.
o
The Limited Ability of Goldcorp to Terminate the Arrangement
Agreement. Goldcorp may only terminate the Arrangement
Agreement in limited circumstances, as discussed in “The
Arrangement — Amendment and Termination of the
Arrangement Agreement”.
•
Advice from the Financial Advisers. The Glamis Board
considered the financial presentations of the Financial
Advisers, as well as their written opinions dated
August 30, 2006, as to the fairness, from a financial point
of view, to Glamis Shareholders of, in the case of Orion, the
consideration to be received by Glamis Shareholders under the
Arrangement, and in the case of JPMorgan, the Exchange Ratio, as
more fully described under “The Arrangement —
Opinions of the Financial Advisers”.
•
The Likelihood of the Arrangement Closing. The Glamis
Board determined that the Arrangement should be consummated, in
light of the experience, reputation and financial capability of
Goldcorp and the absence of significant closing conditions,
other than approval by Glamis Shareholders of the Arrangement
and other customary closing conditions.
•
Required Shareholder and Court Approvals. The Glamis
Board considered the following required approvals to be
protective of the rights of Glamis Shareholders:
o
Shareholder Approval. The Arrangement Resolution must be
approved by not less than two thirds of the votes cast at the
Meeting.
o
Court Approval. The Arrangement must be approved by the
Court which will consider, among other things, the fairness of
the Arrangement to Glamis Shareholders.
•
Review of Possible Alternatives. The Glamis Board
reviewed possible alternatives to the Arrangement (including the
possibility of continuing to operate Glamis as an independent
entity), and the perceived risks thereof, the range of possible
benefits to Glamis Shareholders of such alternatives, and the
timing and uncertainty of successfully accomplishing any of such
alternatives.
In the course of its deliberations, the Glamis Board also
identified and considered a variety of risks (as described under
“Risk Factors”) and potentially negative factors in
connection with the Arrangement, including, but not limited to:
•
In certain circumstances set out under “The
Arrangement — Additional Terms of the Arrangement
Agreement — Termination Fee”, Glamis may be
required to pay the Termination Fee to Goldcorp, which, if an
alternative transaction is not concluded, will materially
adversely affect Glamis’ financial condition.
•
If the Arrangement Agreement is terminated and the Glamis Board
decides to seek another merger or business combination, there is
no assurance that it will be able to find a party willing to pay
an equivalent value or more than the value to be paid pursuant
to the Arrangement.
•
Implementing the Arrangement will require the devotion of
significant management time and attention, which will have to be
diverted from the existing business of Glamis and which could
have an adverse impact on Glamis.
The Glamis Board’s reasons contain forward-looking
information, and are subject to various risks and assumptions.
See “Cautionary Statement Regarding Forward-Looking
Statements” and “Risk Factors”.
The foregoing summary of the information and factors considered
by the Glamis Board is not intended to be exhaustive. In view of
the variety of factors and the amount of information considered
in connection with its evaluation of the Arrangement, the Glamis
Board did not find it practical to, and did not, quantify or
otherwise attempt to assign any relative weight to each specific
factor considered in reaching its conclusion and recommendation.
The Glamis Board’s recommendation was made after
considering all of the above-noted factors and in light of the
Glamis Board’s knowledge of the business, financial
condition and prospects of Glamis, and was also based on the
advice of financial advisers and legal advisers to the Glamis
Board. In addition, individual members of the Glamis Board may
have assigned different weights to different factors.
Each of the seven directors and the six executive officers (one
of whom is also a director) of Glamis have entered into a
Support Agreement with Goldcorp pursuant to which they have
agreed, among other things:
(a)
to support the Arrangement and vote any Glamis Shares held by
them in favour of the Arrangement Resolution;
(b)
to vote any securities of Glamis held by them against and not
vote in favour of any Acquisition Proposal; and
(c)
not to dispose of any securities of Glamis held by them without
Goldcorp’s prior written consent (with the exception of two
directors, Francis Dale Corman and P. Randy Reifel, who are
entitled to dispose of a limited number of the securities of
Glamis held by them subject to certain conditions), nor to grant
any proxy or power of attorney with respect to any securities of
Glamis held by them.
Their obligations under the Support Agreement will terminate on
the earlier of: (i) the date the Arrangement is completed;
(ii) the date Goldcorp and these directors and executive
officers of Glamis agree to terminate the Support Agreement;
(iii) the date Goldcorp terminates the Support Agreement;
or (iv) the date the Arrangement Agreement is terminated in
accordance with its terms. The directors and executive officers
of Glamis who are parties to the Support Agreement as a group
held 3,037,046 Glamis Shares, representing approximately 1.82%
of the issued Glamis Shares as at the date of this Circular.
Opinions of the Financial Advisers
Opinion of Orion
Glamis entered into an engagement letter dated August 29,2006 with Orion pursuant to which, among other things, Orion
agreed to provide the Glamis Board with its opinion of the
fairness of the consideration under the Plan of Arrangement,
from a financial point of view, to Glamis Shareholders.
At the Glamis Board meeting on August 30, 2006, Douglas
Bell of Orion made a financial presentation to the Glamis Board
and delivered Orion’s oral opinion, subsequently confirmed
by delivery of the written Orion Opinion, that as of the date
thereof and based on and subject to various assumptions,
limitations and qualifications, the consideration to be received
by Glamis Shareholders pursuant to the Plan of Arrangement was
fair, from a financial point of view, to Glamis Shareholders.
The full text of the Orion Opinion, which sets forth the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with the
opinion, is attached to this Circular as Appendix D. Orion
provided its opinion for the information and assistance of the
Glamis Board in connection with its consideration of the
Arrangement. The Orion Opinion addresses only the fairness of
the consideration under the Arrangement Agreement, is for the
information of the Glamis Board in connection with its
consideration of the proposed Arrangement only, and is not a
recommendation as to how any Glamis Shareholder should vote with
respect to the Arrangement Resolution. Glamis Shareholders are
urged to read the entire Orion Opinion. This summary of the
Orion Opinion is qualified in its entirety by reference to the
full text of the opinion.
Under its engagement letter with Orion, Glamis has agreed to pay
Orion a fee for rendering financial advisory services, all of
which is contingent on completion of the Arrangement. Glamis has
also agreed to indemnify Orion and certain related persons
against certain liabilities in connection with their engagement,
including certain liabilities under securities legislation. In
the past, Orion and its affiliates have provided financial
advisory and financing services for Glamis and have received
fees for the rendering of those services.
In the ordinary course of its trading, brokerage, investment
management and financing activities, Orion or its affiliates may
at any time hold long or short positions, and may trade or
otherwise effect transactions for its own account or the
accounts of customers in debt or equity securities of Glamis,
Goldcorp or any other company, or in any currency or commodity
that may be involved in the Arrangement.
Opinion of JPMorgan
Glamis entered into an engagement letter dated as of
August 30, 2006 with JPMorgan pursuant to which, among
other things, JPMorgan agreed to provide the Glamis Board with
its opinion as to the fairness of the Exchange Ratio, from a
financial point of view, to Glamis Shareholders.
At the Glamis Board meeting on August 30, 2006, JPMorgan
delivered its oral opinion to the Glamis Board, subsequently
confirmed by delivery of the written JPMorgan Opinion, to the
effect that as of the date thereof and based on and subject to
the various assumptions, limitations and qualifications
contained in its written opinion, the Exchange Ratio was fair,
from a financial point of view, to Glamis Shareholders. Because
JPMorgan delivered its opinion to the Glamis Board on
August 30, 2006, in arriving at its opinion JPMorgan
reviewed a draft of the initial arrangement agreement and not
the arrangement agreement as subsequently amended and restated
in September 2006.
The full text of the JPMorgan Opinion, which sets forth the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with the
opinion, is attached to this Circular as Appendix E.
JPMorgan provided its opinion for the information and assistance
of the Glamis Board in connection with its consideration of the
Arrangement. The JPMorgan Opinion addresses only the fairness of
the Exchange Ratio, is for the information of the Glamis Board
in connection with its consideration of the proposed Arrangement
only, and is not a recommendation as to how any Glamis
Shareholder should vote with respect to the Arrangement
Resolution. JPMorgan was not requested and did not provide
advice concerning the structure, the specific Exchange Ratio, or
any other aspects of the Arrangement, nor did it participate in
negotiations with respect to the terms of the Arrangement.
JPMorgan was not authorized and did not solicit any expressions
of interest from any other parties with respect to the sale of
all or part of Glamis or any alternative to the Arrangement.
Glamis Shareholders are urged to read the entire JPMorgan
Opinion. This summary of the JPMorgan Opinion is qualified in
its entirety by reference to the full text of the opinion.
Glamis has agreed to pay JPMorgan a fee for rendering financial
advisory services, a significant portion of which is contingent
on completion of the Arrangement. Glamis has also agreed to
indemnify JPMorgan and certain related persons against certain
liabilities in connection with their engagement. JPMorgan has
advised Glamis that JPMorgan or its affiliates are participants
in Goldcorp’s credit facility but have no other material
investment banking relationships with Glamis or Goldcorp. In the
ordinary course of their business, JPMorgan or its affiliates
may actively trade the debt and equity securities of Glamis or
Goldcorp for their own account or for the accounts of customers.
Regulatory Matters
The combination of Glamis and Goldcorp is subject to the
following regulatory reviews under applicable competition laws:
United States Competition Law. The combination of Glamis
and Goldcorp is subject to the requirements of the HSR Act,
which prohibit Glamis and Goldcorp from completing the
Arrangement until Glamis and Goldcorp each notify and furnish
required information to the DOJ and the FTC and the applicable
waiting period under the HSR Act terminates or expires. Glamis
and Goldcorp have each furnished the applicable materials to the
DOJ and the FTC and they are now waiting for the statutory
30 day waiting period to expire. The waiting period may be
shortened if Glamis’ and Goldcorp’s request for early
termination of the waiting period is granted, or may be extended
if the DOJ or FTC request additional information on the
Arrangement.
Mexican Competition Law. Under the Federal Law on
Economic Competition of Mexico and the Regulations thereto, the
Federal Competition Commission in Mexico (the
“Commission”) must be notified of certain
transactions. With respect to the Arrangement, notification must
be filed before the acquisition of the Glamis Shares by
Goldcorp. Glamis and Goldcorp have filed a notification with the
Commission. There is a waiting period of ten business days
following filing, during which Glamis and Goldcorp may not
complete the Arrangement and during which the Commission may
instruct the parties to refrain from completing the Arrangement.
Glamis and Goldcorp may complete the Arrangement after the ten
day waiting period expires, on the understanding that they will
assume any risks associated with completing the Arrangement
before the Commission issues its final resolution. The
Commission will issue its final resolution within 35 business
days after filing (or after any additional information
requested by the Commission has been provided). The Commission
may, in some cases, extend the prior term for an additional
40 business days.
The DOJ, the FTC, and the Commission may challenge the
Arrangement on antitrust grounds either before or after the
waiting periods terminate or expire. Accordingly, at any time
before or after the completion of the Arrangement, any of the
DOJ, the FTC, or the Commission could take any action under
antitrust laws as any of them deems necessary or desirable in
the public interest including, without limitation, seeking to
enjoin the completion of the Arrangement or permitting
completion subject to regulatory concessions or conditions.
Although Glamis and Goldcorp believe that no competition or
antitrust filings will be required in any other jurisdiction
(including Canada), and that the Arrangement will not violate
any applicable competition or antitrust laws, there is no
assurance that a challenge to the Arrangement on competition or
antitrust grounds will not be made in one or more jurisdictions
before or after the Effective Date, nor is there any assurance
as to the result of any such challenge.
Stock Exchange Approvals
It is a condition to completing the Arrangement that the
Goldcorp Shares to be issued to Glamis Shareholders pursuant to
the Arrangement and on exercise of Converted Goldcorp Options be
approved for listing on the TSX and the NYSE, subject only to
official notice of issuance and other customary conditions. The
TSX has conditionally approved the listing of Goldcorp Shares to
be issued and reserved pursuant to the Arrangement, subject to
the satisfaction of the customary requirements of the TSX.
Goldcorp expects to obtain, before the Effective Date, NYSE
approval for the listing of Goldcorp Shares to be issued and
reserved under the Arrangement subject to official notice
of issuance.
Fees, Costs and Expenses
All expenses incurred in connection with the Arrangement
Agreement and the transactions contemplated by the Arrangement
Agreement will be paid by the party incurring those expenses.
Glamis estimates that it will incur fees and related expenses in
the aggregate amount of approximately $34 million if the
Arrangement is completed including, without limitation,
financial advisers’ fees, legal and accounting fees,
severance payments, filing fees, proxy solicitation fees and the
costs of preparing, printing and mailing this Circular.
Interests of Directors and Executive Officers of Glamis in
the Arrangement
Members of the Glamis Board and the executive officers of Glamis
have interests in the Arrangement or may receive benefits that
may differ from, or be in addition to, the interests of Glamis
Shareholders generally. These interests and benefits are
described below.
All benefits received, or to be received, by directors or
executive officers of Glamis as a result of the Arrangement are,
and will be, solely in connection with their services as
directors or employees of Glamis or the Combined Company. No
benefit has been, or will be, conferred for the purpose of
increasing the value of consideration payable to any such person
for Glamis Shares, nor is it, or will it be, conditional on the
person’s supporting the Arrangement. No director or
executive officer of Glamis owns 1% or more of the issued Glamis
Shares, other than Randy Reifel who owns, directly or
indirectly, approximately 1.4% of the issued Glamis Shares.
As of September 25, 2006, the members of the Glamis Board
and the executive officers of Glamis held 3,037,046 Glamis
Shares, representing approximately 1.82% of the issued Glamis
Shares on such date.
Executive Employment Agreements
The executive officers of Glamis have entered into written
employment agreements with Glamis. Each agreement provides that,
if the employment of the officer is terminated or, in certain
cases, if the officer resigns his or her employment, within
12 months after a change of control of Glamis, the officer
will be paid any remuneration due to him or her through to the
date of termination. In addition, the relevant officer will also
be paid from two to three times his or her annual salary in
force at the date of termination, and will receive continued
full benefit coverage for the same period after termination (or
the cash value thereof).
In addition, the Chairman of the Glamis Board, Mr. Dan
Rovig, has a contract with Glamis that provides that in the
event of a change of control of Glamis and Mr. Rovig’s
removal as Chairman of the Glamis Board, Mr. Rovig will be
a paid a cash payment equivalent to the current salary of the
President and CEO of Glamis.
The completion of the Arrangement will result in a change of
control for purposes of the above-described employment
agreements and the contract with Mr. Rovig.
New Executive Employment Agreements with the Combined
Company
One of the conditions to the obligation of Goldcorp to complete
the Arrangement is that Messrs. Kevin McArthur, the
President and CEO of Glamis, Charles Jeannes, the Executive Vice
President of Glamis and Charles Ronkos, the Vice President,
Exploration of Glamis (collectively the “Glamis
Executives”), will have entered into employment
contracts with Goldcorp. Mr. McArthur is to become the
President and CEO of the Combined Company, Mr. Jeannes is
to become an Executive Vice President of the Combined Company
and Mr. Ronkos is to become the Vice President, Exploration
of the Combined Company.
These contracts have not been entered into, nor have all
material terms been agreed to, as of the date of this Circular.
Glamis expects that the contracts that the Glamis Executives
will enter into with Goldcorp will be in accordance with
industry norms for the positions that the individuals will be
taking on in the Combined Company and that they will be
consistent with the policy of the Compensation Committee of
Goldcorp which is reported in Goldcorp’s Information
Circular dated March 20, 2006 to be as follows:
“Report
of the Goldcorp Compensation Committee-March 2006
Base Salary
In determining the base salary of an executive officer, the
Compensation Committee places equal weight on the following
factors:
(a)
the particular responsibilities related to the position;
(b)
salaries paid by comparable businesses;
(c)
the experience level of the executive officer; and
(d)
his or her overall performance.
Bonus Payments
Executive officers are eligible for annual cash bonuses, after
taking into account and giving equal weight to, financial
performance, attainment of certain corporate objectives and
individual performance. In taking into account the financial
performance aspect, it is recognized that executive officers
cannot control certain factors, such as interest rates and the
international market for gold, silver, copper and industrial
minerals produced by the Company [which means Goldcorp in this
extract]. When applying the financial performance criteria, the
Compensation Committee considers factors over which the
executive officers can exercise control, such as meeting budget
targets established by the Board at the beginning of each year,
controlling costs, taking successful advantage of business
opportunities and enhancing the competitive and business
prospects of the Company. In determining payout amounts,
significant weight is given to market comparable information and
the advice of the Company’s external compensation advisor.
Long-Term Incentives
It is the compensation philosophy of the Company to provide a
market based blend of base salaries, bonuses and an equity
incentive component in the form of options. Base salaries and
bonuses have been at the relatively low end of the scale
compared to industry peers with a greater emphasis placed on
options. The Company believes that the option component serves
to further align the interests of management with the interests
of the Company’s shareholders.
Chief Executive Officer
Compensation
The Compensation Committee:
(a)
periodically reviews the terms of reference for the
Company’s Chief Executive Officer and recommends any
changes to the Board for approval;
(b)
reviews corporate goals and objectives relevant to the
compensation of the Chief Executive Officer and recommends them
to the Board for approval;
(c)
leads the annual Chief Executive Officer review/evaluation
process and reports the results of the process to the Board;
(d)
based on the results of the Chief Executive Officer’s
evaluation, recommends CEO compensation to the Board for
approval; and
(e)
reviews, and if appropriate recommends to the Board for
approval, any agreements between the Company and the Chief
Executive Officer, including those addressing retirement,
termination of employment or other special circumstances, as
appropriate.
The components of the Chief Executive Officer’s
compensation are the same as those which apply to the other
senior executive officers of the Company, namely base salary,
bonus and long-term incentives in the form of stock options. The
Chairman of the Compensation Committee presents recommendations
of the Compensation Committee to the Board with respect to the
Chief Executive Officer’s compensation. In setting the
Chief Executive Officer’s salary, the Compensation
Committee received recommendations from an independent
compensation consulting firm and reviewed salaries paid to other
senior officers in the Company, salaries paid to other chief
executive officers in the industry and the Chief Executive
Officer’s impact on the achievement of the Company’s
objectives for the previous financial year.”
In addition, it is expected that the contracts that the Glamis
Executives will enter into with Goldcorp will provide for
compensation if there is a change of control of Goldcorp and the
individual’s employment with Goldcorp is terminated.
Under the Arrangement Agreement, Goldcorp has agreed that all
rights to indemnification in favour of the current and former
directors and officers of Glamis and its subsidiaries provided
in the current articles or
by-laws of Glamis or
any of its subsidiaries, or in any agreement, and any
directors’ and officers’ insurance currently existing
in favour of the directors and officers of Glamis and its
subsidiaries, will survive the completion of the Arrangement (or
be replaced with substantially equivalent coverage) and will
continue in effect for at least six years after the Effective
Date.
Appointments to Board of Directors of the Combined
Company
On completion of the Arrangement, it is expected that the board
of directors of the Combined Company will include four
individuals who are members of the current Glamis Board. See
“The Combined Company after the Arrangement”. Those
individuals have not been determined as of the date of this
Circular.
Glamis Restricted Shares and Glamis Options
Pursuant to the Arrangement Agreement, Glamis has agreed to take
such action as is necessary to ensure that the 15,000 Glamis
Restricted Shares that are outstanding as of the date of this
Circular are accelerated to be fully vested at or prior to the
Effective Time. Thereafter, such Glamis Shares will be exchanged
for Goldcorp Shares based on the Exchange Ratio in accordance
with the terms of the Arrangement. 6,000 of these Glamis
Restricted Shares are held by directors of Glamis (1,000 Glamis
Restricted Shares each), and 9,000 of these Glamis Restricted
Shares are held by executive officers of Glamis.
All outstanding Glamis Options will become vested and
exercisable in full upon a change of control of Glamis, such
that they will vest upon completion of the Arrangement. As a
result, unvested Glamis Options in respect of 301,333 Glamis
Shares at exercise prices ranging from Cdn.$17.66 to
Cdn.$43.50 per share that are held by executive officers of
Glamis will be exchanged for fully-vested Converted Goldcorp
Options in respect of 509,252 Goldcorp Shares exercisable at
prices ranging from Cdn.$10.45 to Cdn.$25.74 per share. In
addition, unvested Glamis Options in respect of 30,000 Glamis
Shares at an exercise price of Cdn.$21.16 per share that are
held by directors of Glamis will be exchanged for fully-vested
Converted Goldcorp Options in respect of 50,700 Goldcorp Shares
exercisable at a price of Cdn.$12.52 per share.
Principal Steps of the Arrangement
At the Effective Time (see also “Effective Date and
Conditions of the Arrangement” below):
(a)
each Glamis Share held by a Glamis Shareholder (other than
Glamis Shareholders who exercise Dissent Rights or Goldcorp or
any subsidiary of Goldcorp) will be exchanged for
1.69 Goldcorp Shares and Cdn.$0.0001 in cash; and
(b)
each Glamis Option outstanding immediately before the Effective
Time, whether or not vested, will be exchanged for a Converted
Goldcorp Option to acquire (on the same terms and conditions as
were applicable to the Glamis Option immediately before the
Effective Time under the relevant Glamis Share option plan under
which it was issued and the agreement evidencing the grant
thereof and, in particular but without limitation, if the Glamis
Option is deemed to vest at the Effective Time, then the
Converted Goldcorp Option will be fully vested) the number
(rounded down to the nearest whole number) of Goldcorp Shares
determined by multiplying (A) the number of Glamis Shares
subject to such Glamis Option immediately before the Effective
Time and (B) the Exchange Ratio. The exercise price per
Goldcorp Share subject to any such Converted Goldcorp Option
will be an amount (rounded up to the nearest one hundredth of a
cent) equal to the quotient of: (A) the exercise price per
Glamis Share subject to the Glamis Option immediately before the
Effective Time divided by (B) the Exchange Ratio, provided
that the exercise price otherwise determined will be increased
to the extent, if any, required to ensure that the In the Money
Amount of the Converted Goldcorp Option immediately after the
exchange equals the In the Money Amount of the exchanged Glamis
Option immediately before the exchange.
Glamis Shareholders should hold approximately 40% of the total
issued and outstanding Goldcorp Shares;
(b)
assuming there are 167,240,151 Glamis Shares and
418,440,849 Goldcorp Shares issued and outstanding at the
Effective Time and outstanding Glamis Options in respect of
3,058,938 Glamis Shares (based on September 25, 2006
information), Goldcorp will issue approximately
282,635,855 Goldcorp Shares to acquire the Glamis Shares
and reserve approximately 5,169,605 Goldcorp Shares for
issue upon exercise of Converted Goldcorp Options. On completion
of the Arrangement there will be, using Goldcorp’s issued
share capital as at September 25, 2006, approximately
701,076,704 Goldcorp Shares issued and outstanding; and
(c)
Glamis will be a wholly-owned subsidiary of Goldcorp, the
subsidiaries and related corporations of Glamis will remain as
subsidiaries and related corporations of Glamis and Glamis will
cease to be a publicly traded company.
The full particulars of the Arrangement are contained in the
Plan of Arrangement attached to the Arrangement Agreement. A
copy of the Plan of Arrangement is attached as Appendix C
to this Circular.
Directors and Officers of the Combined Company —
Post-Arrangement
Goldcorp has agreed under the Arrangement Agreement to use its
reasonable best efforts to ensure that, as of the Effective
Time, the board of directors of the Combined Company will
consist of ten directors, of whom six will be nominees of
Goldcorp, and four will be nominees of Glamis. Ian Telfer
(current President and CEO of Goldcorp) will be Chairman of the
board of directors of the Combined Company, Kevin McArthur
(current President and CEO of Glamis) will be President and CEO
of the Combined Company, Charles Jeannes (current Executive Vice
President, Administration of Glamis) will be appointed as an
Executive Vice President of the Combined Company, Charles Ronkos
(current Vice President, Exploration of Glamis) will be
appointed Vice President, Exploration of the Combined Company
and the current officers of Goldcorp, other than
Mr. Telfer, are expected to continue to hold their current
positions with Goldcorp in the Combined Company. See
Goldcorp’s management information circular dated
March 20, 2006 for its most recent annual and special
meeting of shareholders and Goldcorp’s Renewal Annual
Information Form that are incorporated herein by reference for
information concerning the current directors and officers of
Goldcorp.
Treatment of Glamis SARs
As at September 25, 2006, Glamis had 417,000 Glamis SARs
outstanding which are held by non-management employees of Glamis
and its subsidiaries. Pursuant to the Arrangement Agreement,
Glamis has agreed to take such action as is necessary to ensure
all outstanding Glamis SARs are accelerated as to vesting and
exercised at or prior to the Effective Time. On exercise of the
Glamis SARs, the holders will receive, after the Effective Date,
Goldcorp Shares based on the Exchange Ratio in accordance with
the terms of the Arrangement.
Procedure and Terms For Exchange of Glamis Shares
Procedure for Exchange of Glamis Shares
(a)
As soon as practicable after the Effective Date, the Depositary
will forward to each former Registered Shareholder a letter of
transmittal and instructions for obtaining delivery of
certificates representing Goldcorp Shares and a cheque
representing the cash component of the consideration.
(b)
To receive certificates representing Goldcorp Shares and a
cheque representing the cash component of the consideration
pursuant to the Arrangement, Registered Shareholders must return
to the Depositary, on or before the sixth anniversary of the
Effective Date, their certificates representing their Glamis
Shares, a properly completed letter of transmittal, and such
other documents as the Depositary may require.
(c)
Upon a Registered Shareholder’s return of a properly
completed letter of transmittal, together with certificates
representing Glamis Shares and such other documents as the
Depositary may require, certificates for the appropriate number
of Goldcorp Shares and a cheque representing the appropriate
cash payment will be issued to the Registered Shareholder.
(d)
Certificates for the Goldcorp Shares issued to a Registered
Shareholder as described above will be registered in such name
or names and such certificates and the cheque will be sent to
such address or addresses as the Registered Shareholder may
direct in the letter of transmittal as soon as reasonably
possible after the Depositary receives the required documents.
Tax Election Procedure for Glamis Shareholders Subject to
Canadian Taxation
The letter of transmittal that Registered Shareholders will
receive after the Effective Date in respect of the exchange of
their Glamis Shares for Goldcorp Shares and cash will include a
space to allow Eligible Holders to request a tax instruction
letter and related materials to assist them in making a tax
election under Section 85 of the ITA (and any corresponding
election under any applicable provincial tax legislation) (a
“Section 85 Election”) in order to effect
a whole or partial tax deferral. Eligible Holders who
request a tax instruction letter and related materials for a
Section 85 Election and who would like to make a similar
election for Québec income tax purposes may request a tax
instruction letter and related materials concerning such
Québec election by indicating in the space provided in the
letter of transmittal. Beneficial Shareholders will need to deal
with their Intermediary Registered Shareholder to receive the
tax election package and the necessary election forms.
Under the Arrangement Agreement, Goldcorp is obligated to make a
Section 85 Election jointly with Eligible Holders who may
otherwise be subject to taxation under the ITA (and any
applicable provincial tax legislation) and wish to elect to
defer any liability for such tax in whole or in part. Neither
Goldcorp nor Glamis will be responsible for the proper
completion or filing of any Section 85 Election and
Eligible Holders will be solely responsible for the payment of
any late filing penalty. Goldcorp has agreed to execute any
properly completed Section 85 Election form that it receives
within 90 days after the Effective Date and to mail the
election form to the electing Eligible Holder within
90 days after Goldcorp’s receipt of the election form
from the Eligible Holder. With the exception of
Goldcorp’s execution and mailing of the Section 85
Election form, each Eligible Holder will be solely responsible
for complying with all applicable requirements relating to the
making and filing of the Eligible Holder’s Section 85
Election. Accordingly, none of Goldcorp, Glamis or the
Depositary will be responsible or liable for taxes, interest,
penalties, damages or expenses resulting from the failure by
anyone to deliver a Section 85 Election in accordance with
the procedures set out in the tax instruction letter, nor for
the proper completion or filing of any Section 85 Election
within the time and in the form prescribed under the ITA (or the
corresponding provisions of any applicable provincial tax
legislation). See generally “Canadian Federal Income Tax
Considerations” in this Circular.
Cancellation of Rights after Six Years
Any certificate which immediately before the Effective Date
represented Glamis Shares and which has not been surrendered,
with all other documents required by the Depositary, on or
before the sixth anniversary of the Effective Date, will cease
to represent any claim against or interest of any kind or nature
in Glamis, Goldcorp or the Depositary. Accordingly, persons
who tender certificates for Glamis Shares after the sixth
anniversary of the Effective Date will not receive Goldcorp
Shares, will not own any interest in Glamis, and will not be
paid any cash or other compensation.
Treatment of Dividends
No dividends or other distributions declared or made after the
Effective Time with respect to Goldcorp Shares, with a record
date after the Effective Time, will be paid to the holder of any
unsurrendered certificates for Glamis Shares until the holder
surrenders its certificates for Glamis Shares in exchange for
Goldcorp Shares and cash in accordance with the terms of the
Plan of Arrangement. Once such certificates are surrendered, the
holder will be sent, in addition to the holder’s Goldcorp
Shares and cash payment, such dividend or other distribution, if
any, without interest.
Fractional Shares
No fractional Goldcorp Shares will be issued to Glamis
Shareholders. If a Glamis Shareholder is entitled to a
fractional share representing 0.5 or more of a Goldcorp Share,
the number of Goldcorp Shares to be issued to that Glamis
Shareholder will be rounded up to the nearest whole Goldcorp
Share. If a Glamis Shareholder is entitled to a fractional share
representing less than 0.5 of a Goldcorp Share, the number of
Goldcorp Shares to be issued to that Glamis Shareholder will be
rounded down to the nearest whole Goldcorp Share.
Any cash consideration to be received by a Glamis Shareholder
will be rounded up to the nearest whole cent.
The foregoing information is a summary only. For further details
of procedures, see the Plan of Arrangement attached as
Appendix C to this Circular.
On completion of the Arrangement, Glamis Shareholders will
become Goldcorp Shareholders. Since Goldcorp is an Ontario
company, the rights of Goldcorp Shareholders are governed by the
applicable laws of Ontario, including the OBCA, and by
Goldcorp’s articles of incorporation and
by-laws. Since Glamis
is a British Columbia company, the rights of Glamis Shareholders
are governed by the BCBCA and by Glamis’ notice of articles
and articles. Although the rights and privileges of shareholders
under the OBCA are in many instances comparable to those under
the BCBCA, there are several differences. See Appendix H to
this Circular for a comparison of these rights.
Effective Date and Conditions of the Arrangement
If the Arrangement Resolution is passed, the Final Order is
obtained, every other requirement of the BCBCA relating to the
Arrangement is complied with and all other conditions disclosed
below under “Conditions to the Arrangement Becoming
Effective” are satisfied or waived, the Arrangement will
become effective on the Effective Date. Goldcorp and Glamis
currently expect that the Effective Date will be in late
November 2006.
Conditions to the Arrangement Becoming Effective
In order for the Arrangement to become effective, certain
conditions, summarized below, must have been satisfied or waived.
Mutual Conditions
The obligations of Glamis and Goldcorp to complete the
Arrangement are subject to the fulfillment or waiver (where
permitted) of the following mutual conditions:
(a)
the Interim Order must have been granted in form and substance
satisfactory to Glamis and Goldcorp, acting reasonably, and must
not have been set aside or modified in a manner unacceptable to
them, acting reasonably, on appeal or otherwise;
(b)
the Arrangement Resolution must have been passed at the Meeting
in accordance with the provisions of the BCBCA, the Interim
Order and the requirements of any applicable regulatory
authority;
(c)
the Final Order must have been granted in form and substance
satisfactory to Glamis and Goldcorp, acting reasonably, and must
not have been set aside or modified in a manner unacceptable to
them, acting reasonably, on appeal or otherwise;
(d)
there must not be in force any law, ruling, order or decree, and
there must be no action taken under any laws or by any
Governmental Entity (as defined in the Arrangement Agreement) or
other regulatory authority, that:
(i)
makes it illegal or otherwise directly or indirectly restrains,
enjoins or prohibits the consummation of the Arrangement, or
(ii)
results or could reasonably be expected to result in a judgment
or assessment of damages, directly or indirectly, relating to
the Arrangement which would have, or could reasonably be
expected to have, a Material Adverse Effect on Glamis or
Goldcorp;
(e)
the TSX must have conditionally approved the listing thereon,
and the NYSE must have authorized for listing, subject to
official notice of issuance, of the Goldcorp Shares to be issued
pursuant to the Arrangement (including Goldcorp Shares issuable
on exercise of the Converted Goldcorp Options) as of the
Effective Date, or as soon as possible thereafter, and the TSX
will have, if required, accepted notice for filing of all
transactions of Glamis contemplated herein or necessary to
complete the Arrangement, subject only to compliance with the
usual requirements of the TSX and NYSE, as applicable;
(f)
all consents, waivers, permits, exemptions, orders and approvals
of, and any registrations and filings with, any Governmental
Entity and including the expiry of any waiting periods, in
connection with, or required to permit, the completion of the
Arrangement, and all third person and other consents, waivers,
permits, exemptions, orders, approvals, agreements and
amendments and modifications to agreements, indentures or
arrangements, the failure of which to obtain or the non-expiry
of which would, or could reasonably be expected to have, a
Material Adverse Effect on Glamis or Goldcorp or materially
impede the completion of the Arrangement, must have been
obtained or received on terms that are reasonably satisfactory
to each such party;
the Goldcorp Shares to be issued in the United States pursuant
to the Arrangement must be exempt from the registration
requirements under the Section 3(a)(10) Exemption and the
Goldcorp Shares to be distributed in the United States pursuant
to the Arrangement must not be subject to resale restrictions in
the United States under the U.S. Securities Act (other than
as may be prescribed by Rule 144 and Rule 145 under
the U.S. Securities Act); and
(h)
the Arrangement Agreement must not have been terminated.
Additional Conditions in Favour of Goldcorp
The obligation of Goldcorp to complete the Arrangement is
subject to the fulfillment or waiver (where permitted) of the
following additional conditions:
(a)
the representations and warranties made by Glamis in the
Arrangement Agreement that are qualified by the expression
“Material Adverse Change” or “Material Adverse
Effect” must be true and correct as of the Effective Date,
and all other representations and warranties made by Glamis in
the Arrangement Agreement that are not so qualified must be true
and correct in all material respects as of the Effective Date,
in either case, except where any failures or breaches of
representations and warranties would not either, individually or
in the aggregate, in the reasonable judgment of Goldcorp, have a
Material Adverse Effect on Glamis;
(b)
from the date of the Arrangement Agreement to the Effective
Date, there must not have occurred, and neither Glamis nor any
of its subsidiaries must have incurred or suffered, any one or
more changes, effects, events, occurrences or states of facts
that, either individually or in the aggregate, have, or could
reasonably be expected to have, a Material Adverse Effect on
Glamis;
(c)
Glamis must have complied in all material respects with its
covenants in the Arrangement Agreement;
(d)
no more than 3% of the outstanding Glamis Shares will be subject
to the exercise of Dissent Rights;
(e)
C. Kevin McArthur, Charles A. Jeannes, and Charles J.
Ronkos must have entered into employment agreements satisfactory
to Goldcorp, acting reasonably;
(f)
none of the directors or officers of Glamis that are a party to
the Support Agreement will have breached, in any material
respect, any of the representations, warranties and covenants in
the Support Agreement;
(g)
the Glamis Board and the board of directors of each applicable
Glamis subsidiary must have adopted all necessary resolutions
and all other necessary corporate action must have been taken by
Glamis and its subsidiaries to permit the consummation of the
Arrangement; and
(h)
the Glamis Board must not have effected a Change in Glamis
Recommendation.
Additional Conditions in Favour of Glamis
The obligations of Glamis to complete the Arrangement are
subject to the fulfillment or waiver (where permitted) of the
following additional conditions:
(a)
the representations and warranties made by Goldcorp in the
Arrangement Agreement that are qualified by the expression
“Material Adverse Change” or “Material Adverse
Effect” must be true and correct as of the Effective Date,
and all other representations and warranties made by Goldcorp in
the Arrangement Agreement must be true and correct in all
material respects as of the Effective Date, in either case,
except where any failures or breaches of representations and
warranties would not either individually or in the aggregate, in
the reasonable judgment of Glamis, have a Material Adverse
Effect on Goldcorp;
(b)
from the date of the Arrangement Agreement to the Effective
Date, there must not have occurred, and Goldcorp or any of the
material subsidiaries of Goldcorp must not have incurred or
suffered, any one or more changes, effects, events, occurrences
or states of facts that, either individually or in the
aggregate, have, or could reasonably be expected to have, a
Material Adverse Effect on Goldcorp;
(c)
Goldcorp must have complied in all material respects with its
covenants in the Arrangement Agreement; and
(d)
the directors of Goldcorp must have adopted all necessary
resolutions and all other necessary corporate action must have
been taken by Goldcorp to permit the consummation of the
Arrangement.
In addition to the terms and conditions of the Arrangement
Agreement set out elsewhere in this Circular and the
representations and warranties contained therein, the following
additional terms apply:
Covenants of Glamis
Glamis agreed in the Arrangement Agreement to (and in certain
circumstances to cause its subsidiaries and companies in which
it has a significant interest to), among other things:
(a)
file, proceed with and diligently prosecute an application to
the Court for the Interim Order on terms and conditions
acceptable to Goldcorp, acting reasonably;
(b)
with respect to the Meeting,
(i)
carry out the terms of the Interim Order as are required to be
carried out by Glamis;
(ii)
prepare and file this Circular, together with any other
documents required by applicable laws, and mail this Circular as
ordered by the Interim Order, in accordance with all applicable
laws;
(iii)
subject to the terms of the Arrangement Agreement, (x) take
all commercially reasonable lawful action to solicit in favour
of the Arrangement Resolution, including, without limitation,
retaining a proxy solicitation agent; (y) recommend to all
Glamis Shareholders that they vote in favour of the Arrangement;
and (z) not make a Change in Glamis Recommendation, except
as expressly permitted by the Arrangement Agreement;
(iv)
use its commercially reasonable best efforts to convene the
Meeting by no later than October 30, 2006, but in any event
hold the Meeting no later than November 30, 2006, as
provided in the Interim Order;
(v)
provide notice to Goldcorp of the Meeting and allow
representatives of Goldcorp to attend the Meeting;
(vi)
conduct the Meeting in accordance with the Interim Order, the
BCBCA, Glamis’ articles and as otherwise required by
applicable laws; and
(vii)
take all such actions as may be required under the BCBCA in
connection with the transactions contemplated by the Arrangement
Agreement and the Plan of Arrangement;
(c)
not adjourn, postpone or cancel the Meeting (or propose to do
so), except (i) if a quorum is not present at the Meeting;
(ii) if required by applicable laws; (iii) if required
by Glamis Shareholders; or (iv) if otherwise agreed to by
Goldcorp;
(d)
provide Goldcorp with a copy of any purported exercise of
Dissent Rights by a Glamis Shareholder;
(e)
prepare and file any mutually agreed (or as otherwise required
by applicable laws) amendments or supplements to this Circular
with respect to the Meeting and mail such amendments or
supplements, as required by the Interim Order, in accordance
with all applicable laws;
(f)
subject to the approval of the Arrangement at the Meeting in
accordance with the provisions of the Interim Order, file,
proceed with and diligently prosecute an application to the
Court for the Final Order, which application will be in a form
and substance satisfactory to Glamis and Goldcorp, acting
reasonably;
(g)
carry out the terms of the Interim Order and the Final Order;
(h)
conduct its business, and cause its subsidiaries to conduct
their businesses, only in, and not take any action except in,
the ordinary course of business and consistent with past
practice;
(i)
not, without the prior written consent of Goldcorp, directly or
indirectly do or permit to occur any of the following except
where to do so would be in the ordinary course of business and
consistent with past practice:
(i)
issue any Glamis Shares or any securities convertible into
Glamis Shares, other than the issue of Glamis Shares pursuant to
the exercise of Glamis Options and Glamis SARs outstanding
on the date of the Arrangement Agreement;
other than pursuant to obligations or rights under existing
contracts, dispose of any property or assets or enter into any
agreement or commitment to do so;
(iii)
amend or propose to amend the notice of articles, articles or
by-laws (or their equivalent) of Glamis or any of Glamis’
subsidiaries or any of the terms of the Glamis Options;
(iv)
split, combine or reclassify any of the Glamis Shares, or
declare, set aside or pay any dividend or other distribution
payable in cash, securities, property or otherwise with respect
to the Glamis Shares;
(v)
redeem, purchase or offer to purchase any Glamis Shares;
(vi)
reorganize, amalgamate or merge Glamis or any of its
subsidiaries with any other person;
(vii)
acquire or agree to acquire any corporation or other entity (or
material interest therein);
(viii)
except as required by Canadian GAAP, or any applicable law, make
any changes to the existing accounting practices of Glamis or
make any material tax election inconsistent with past
practice; or
(ix)
enter into, or cause any Glamis subsidiary to enter into, new
commitments of a capital expenditure nature or incur any new
contingent liabilities other than (x) ordinary course
expenditures, (y) expenditures required by law, and
(z) expenditures made in connection with transactions
contemplated in the Arrangement Agreement;
(j)
not, without the prior written consent of Goldcorp, directly or
indirectly, enter into or modify any employment, consulting,
severance, collective bargaining or similar agreement, policy or
arrangement with, or grant any bonus, salary increase, option to
purchase shares, pension or supplemental pension benefit, profit
sharing, retirement allowance, deferred compensation, incentive
compensation, severance, change of control or termination pay
to, or make any loan to, any officer, director, employee or
consultant of Glamis or any subsidiary of Glamis;
(k)
use its commercially reasonable best efforts to maintain its
current insurance (or reinsurance);
(l)
subject to certain exceptions, not take any action, or refrain
from taking any action (subject to commercially reasonable best
efforts), or permit any action to be taken or not taken,
inconsistent with the provisions of the Arrangement Agreement or
which would reasonably be expected to materially impede the
completion of the transactions contemplated thereby or would
render, or that could reasonably be expected to render, any
representation or warranty made by Glamis in the Arrangement
Agreement untrue or inaccurate in any material respect at any
time before the Effective Time, or which would or could have a
Material Adverse Effect on Glamis;
(m)
not settle or compromise any claim brought by any present,
former or purported holder of any securities of Glamis in
connection with the transactions contemplated by the Arrangement
Agreement before the Effective Time without the prior written
consent of Goldcorp;
(n)
not enter into, renew or modify any material contract to which
Glamis or any of its subsidiaries is a party or by which any of
them is bound, except insofar as may be necessary to permit or
provide for the completion of the Arrangement or where to do so
would not have a Material Adverse Effect on Glamis;
(o)
use all commercially reasonable best efforts to satisfy, or
cause to be satisfied, all conditions precedent to its
obligations to the extent that the same is within its control
and take, or cause to be taken, all other action and to do, or
cause to be done, all other things necessary, proper or
advisable under all applicable laws to complete the transactions
contemplated by the Arrangement Agreement;
(p)
make, or co-operate as
necessary in the making of, all necessary filings and
applications under all applicable laws required in connection
with the transactions contemplated by the Arrangement Agreement
and take all reasonable action necessary to be in compliance
with such laws;
(q)
subject to applicable laws, continue to assist Goldcorp, until
the earlier of the Effective Time or the termination of the
Arrangement Agreement, to carry out its due diligence review of
Glamis and its subsidiaries;
(r)
execute and deliver, or cause to be executed and delivered, at
the closing of the Arrangement such customary agreements,
certificates, resolutions, opinions and other closing documents
as may be required by the other parties thereto, all in form
satisfactory to the other parties thereto, acting
reasonably; and
take all necessary action before the Effective Date to render
the Glamis Rights Plan inapplicable to the Arrangement and the
other transactions contemplated by the Arrangement Agreement.
Covenants of Goldcorp
Goldcorp agreed in the Arrangement Agreement to (and in certain
circumstances to cause its material subsidiaries and companies
in which it has a significant interest to), among other things:
(a)
file, jointly with Glamis, proceed with and diligently prosecute
an application to the Court for the Interim Order on terms and
conditions acceptable to Goldcorp, acting reasonably;
(b)
take all such actions and do all such acts and things as are
specified in the Interim Order, the Plan of Arrangement
(including issuing the Goldcorp Shares) and the Final Order to
be taken or done by Goldcorp;
(c)
provide to Glamis all information as may be reasonably requested
by Glamis or as required by the Interim Order or applicable laws
with respect to Goldcorp and its business and properties for
inclusion in this Circular or in any amendment or supplement to
this Circular and otherwise
co-operate with Glamis
in the preparation of this Circular;
(d)
subject to the approval of the Arrangement at the Meeting in
accordance with the provisions of the Interim Order, file,
jointly with Glamis, proceed with and diligently prosecute an
application to the Court for the Final Order;
(e)
not, without the prior written consent of Glamis, directly or
indirectly do or permit to occur any change to the Goldcorp
Shares, or acquire any Goldcorp Shares, or amend or propose to
amend the articles or by-laws of Goldcorp or reorganize,
amalgamate or merge Goldcorp or any of its material subsidiaries
with any other person;
(f)
subject to certain exceptions, not take any action, or refrain
from taking any action (subject to commercially reasonable best
efforts), or permit any action to be taken or not taken,
inconsistent with the provisions of the Arrangement Agreement or
that would reasonably be expected to materially impede the
completion of the transactions contemplated thereby or would
render, or that could reasonably be expected to render, any
representation or warranty made by Goldcorp in the Arrangement
Agreement untrue or inaccurate in any material respect at any
time before the Effective Time or that would or could have a
Material Adverse Effect on Goldcorp;
(g)
use all commercially reasonable best efforts to satisfy, or
cause to be satisfied, all of the conditions precedent to its
obligations to the extent the same is within its control and
take, or cause to be taken, all other actions and do, or cause
to be done, all other things necessary, proper or advisable
under all applicable laws to complete the transactions
contemplated by the Arrangement Agreement;
(h)
make, or co-operate as
necessary in the making of, all necessary filings and
applications under all applicable laws required in connection
with the transactions contemplated by the Arrangement Agreement
and take all reasonable action necessary to be in compliance
with such laws;
(i)
subject to applicable laws, make available and cause to be made
available to Glamis information reasonably requested by Glamis
for the purposes of preparing integration and strategic plans of
the Combined Company and confirming the representations and
warranties of Goldcorp in the Arrangement Agreement;
(j)
execute and deliver, or cause to be executed and delivered at
the closing of the Arrangement, such customary agreements,
certificates, opinions, resolutions and other closing documents
as may be required by Glamis, all in form satisfactory to
Glamis, acting reasonably;
(k)
other than in contemplation of or as required to give effect to
the transactions contemplated by the Arrangement Agreement,
conduct business only in, and cause its material subsidiaries to
conduct their businesses only in, and not take any action except
in, the ordinary course of business and consistent with past
practice;
(l)
promptly after the exchange of securities pursuant to the Plan
of Arrangement and, in any event within 30 days of the
Effective Date, take all necessary steps to: (i) continue
Glamis under the OBCA and amalgamate Glamis with Goldcorp; or
(ii) amalgamate Glamis and a wholly-owned subsidiary of
Goldcorp;
upon receipt of a letter of transmittal in which an Eligible
Holder has indicated that the Eligible Holder intends to make an
election under Section 85 of the ITA, promptly deliver a
tax instruction letter (and a tax instruction letter for the
equivalent Québec tax election, if applicable), together
with the relevant tax election forms (including the Québec
tax election forms, if applicable), to the Eligible Holder and
execute joint elections with validly electing Eligible Holders
under Section 85 of the ITA (and corresponding provisions
of provincial law) as contemplated by the Plan of Arrangement;
and
(n)
not take any action which could reasonably be expected to
prevent the exchange of Glamis Shares for Goldcorp Shares under
the Arrangement by the validly electing Eligible Holders who
make and file a valid election under Section 85 of the ITA
(or corresponding provisions of provincial law) from being
treated as a tax deferred exchange for the purposes of the ITA
(or the relevant provincial law) if such Eligible Holders are
otherwise eligible for such treatment.
Mutual Covenants
Each of Glamis and Goldcorp has agreed in the Arrangement
Agreement to (a) file with the FTC and the DOJ Notification
and Report Forms relating to the transactions contemplated
therein as required by the HSR Act, and (b) file comparable
merger notification forms required by the merger notification or
control laws of any other applicable jurisdiction, which
Goldcorp and Glamis reasonably determine to be necessary.
Goldcorp and Glamis will each promptly supply the other with any
information which may be required in order to effect such
filings, and supply any additional information which reasonably
may be required by the FTC, the DOJ, the Canadian Commissioner
of Competition or the competition or merger control authorities
of any other jurisdiction.
Notice and Cure Provisions
Each of the parties is required to give prompt notice to the
others of any event or state of facts occurring up to the
Effective Date that would likely (a) cause any of the
representations or warranties of that party in the Arrangement
Agreement to be untrue or inaccurate in any respect,
(b) result in the failure of that party to comply with or
satisfy any covenant or agreement to be complied with or
satisfied under the Arrangement Agreement by such party before
the Effective Date, or (c) result in the failure of such
party to satisfy any of the conditions precedent in the
Arrangement Agreement in favour of the other parties to the
Arrangement Agreement.
Glamis or Goldcorp may (a) elect not to complete the
transactions contemplated by the Arrangement Agreement by virtue
of the conditions of the Arrangement Agreement not being
satisfied or waived or (b) exercise any termination right
arising therefrom; provided, however, that (i) promptly and
in any event before the Effective Date, if such party has
delivered a written notice to the other parties specifying in
reasonable detail the basis for the exercise of the termination
right, and (ii) if any such notice is delivered, and a
party is proceeding diligently, at its own expense, to cure such
matter, the party that has delivered such notice may not
terminate the Arrangement Agreement until the earlier of the
Completion Deadline and the expiration of a period of
15 days from the date of delivery of such notice. If such
notice has been delivered before the date of the Meeting, the
Meeting will be adjourned or postponed until the expiry of such
period.
Non-Solicitation Covenant of Glamis
Glamis agreed in the Arrangement Agreement that it will not,
except as provided below, directly or indirectly, (a) make,
solicit, initiate, facilitate, entertain, encourage or promote
(including by way of furnishing information, permitting any
visits to Glamis’ facilities or properties, or entering
into any form of agreement, arrangement or understanding) any
inquiries or proposals regarding, or that may reasonably be
expected to lead to, any Acquisition Proposal or potential
Acquisition Proposal, (b) participate in any discussions or
negotiations regarding, or furnish to any person any information
or otherwise co-operate
with, respond to, assist or participate in any Acquisition
Proposal or potential Acquisition Proposal, (c) remain
neutral with respect to, or agree to, approve or recommend, or
propose publicly to agree to, approve or recommend any
Acquisition Proposal or potential Acquisition Proposal (it being
understood that publicly taking no position or a neutral
position with respect to an Acquisition Proposal until
15 calendar days following formal commencement of such
Acquisition Proposal will not be considered a violation of this
covenant), (d) make or propose publicly to make a Change in
Glamis Recommendation, (e) accept, or enter into or propose
publicly to accept or enter into, any agreement, arrangement or
understanding related to any Acquisition Proposal or potential
Acquisition Proposal, or (f) make a public announcement or
take any other action inconsistent
with, or that could reasonably be likely to be regarded as
detracting from, the recommendation of the Glamis Board to
approve the Arrangement.
Glamis also agreed to immediately terminate and cease any
discussions or negotiations with any person with respect to any
proposal that constitutes or could reasonably be expected to
constitute an Acquisition Proposal. Glamis also agreed not to
release any third party from any confidentiality agreement
relating to a potential Acquisition Proposal or any standstill
agreement, and immediately to request the return or the
destruction of all information provided to any such person.
Notwithstanding the foregoing, the Glamis Board may, before the
approval of the Arrangement by Glamis Shareholders, consider or
negotiate any unsolicited Acquisition Proposal that may
constitute a Superior Proposal, and the Glamis Board may make a
Change in Glamis Recommendation in respect of a Superior
Proposal or approve or recommend to Glamis Shareholders or enter
into an agreement in respect of a Superior Proposal in
accordance with the applicable terms of the Arrangement
Agreement, but only if the Acquisition Proposal did not result
from a breach of the Arrangement Agreement by Glamis and if the
Glamis Board determines in good faith after consulting outside
legal counsel that failure to take such action would be
inconsistent with the fiduciary duties of the directors of
Glamis under applicable law. Glamis is required to enter into a
confidentiality agreement in order to provide any such person
making such unsolicited Acquisition Proposal with access to
material non-public information on terms that are not more
favourable to the person than those set out in the
Confidentiality Agreement.
Notice of Acquisition Proposal
Glamis must promptly (and in any event within 24 hours)
notify Goldcorp, at first orally and then promptly in writing,
of the receipt of any Acquisition Proposal, or any amendment to
any Acquisition Proposal, or any request for non-public
information relating to Glamis or any of its subsidiaries in
connection with any potential Acquisition Proposal or for access
to the properties, books or records of it or any of its
subsidiaries by any person that informs Glamis or any of its
subsidiaries that it is considering or has made an Acquisition
Proposal. Such notice must include (a) the identity of the
person making the Acquisition Proposal, (b) a description
of the material terms and conditions of the Acquisition
Proposal, and (c) such other details of the Acquisition
Proposal, inquiry or contact as Goldcorp may reasonably request.
Superior Proposal
Glamis may not make a Change in Glamis Recommendation or accept,
approve, recommend or enter into an agreement in respect of an
Acquisition Proposal on the basis that it would constitute a
Superior Proposal, unless (a) Glamis has complied with its
non-solicitation covenant under the Arrangement Agreement,
(b) such Superior Proposal does not provide for the payment
of any break, termination or other fees or expenses to the other
party if Glamis completes the Arrangement with Goldcorp,
(c) Glamis has provided Goldcorp with information about the
Superior Proposal as required under the Arrangement Agreement,
and (d) five business days have elapsed from the later of
the date Goldcorp received notice of the determination of the
Glamis Board to accept, approve, recommend or enter into an
agreement in respect of the Superior Proposal and the date that
Goldcorp has received the information required to be provided by
Glamis in respect of an Acquisition Proposal under the
Arrangement Agreement.
During this five business day period, Goldcorp will have the
opportunity to offer in writing to amend the terms of the
Arrangement Agreement and the Arrangement. The Glamis Board must
review any such amended offer by Goldcorp and determine in good
faith whether Goldcorp’s amended offer would result in an
Acquisition Proposal not being a Superior Proposal, and if so
determined by the Glamis Board, Glamis must enter into an
amended agreement with Goldcorp reflecting the amended proposal
of Goldcorp and must promptly reaffirm its recommendation to
Glamis Shareholders of the Arrangement, as amended.
If this Circular has been sent to Glamis Shareholders before the
expiry of the five business day period referred to above and,
during this period, Goldcorp requests in writing that the
Meeting proceed, Glamis must continue to take all reasonable
steps necessary to hold the Meeting and to cause the Arrangement
to be voted upon at the Meeting, unless otherwise ordered by the
Court.
In addition, where at any time before the Meeting Glamis has
provided to Goldcorp the required notice relating to an
Acquisition Proposal, an Acquisition Proposal has been publicly
disclosed or announced and the five business day period referred
to above has not elapsed, then, subject to applicable laws, at
Goldcorp’s request, Glamis must postpone or adjourn the
Meeting to a date acceptable to Goldcorp, but not later than
20 days after the scheduled date of the
Meeting. If Goldcorp and Glamis have amended the terms of the
Arrangement Agreement as provided above, Glamis must ensure that
the details of the amended agreement are communicated to the
Glamis Shareholders before the holding of the postponed or
adjourned Meeting.
Termination Fee
The Arrangement Agreement provides that Glamis must pay Goldcorp
the $215 million Termination Fee if:
(a)
the Arrangement Agreement is terminated by Goldcorp if an
Acquisition Proposal in respect of Glamis has been made or
proposed and the Glamis Board has (i) made a Change in
Glamis Recommendation or (ii) has failed, after being
requested by Goldcorp in writing, to reaffirm its approval or
recommendation of the Arrangement as promptly as possible (but
in any event within five business days after receipt of the
request to do so by Goldcorp) or (iii) has accepted,
approved, recommended or entered into an agreement (other than a
confidentiality agreement permitted under the Arrangement
Agreement) in respect of any Acquisition Proposal;
(b)
a Change in Glamis Recommendation has occurred and Goldcorp has
elected to terminate the Arrangement Agreement;
(c)
the Arrangement Agreement is terminated by Goldcorp due to any
applicable condition set out in the Arrangement Agreement not
being satisfied or waived as a result of the breach by Glamis of
its covenants regarding non-solicitation and Superior Proposals
as set out in the Arrangement Agreement;
(d)
the Arrangement Agreement is terminated by Goldcorp as a result
of Glamis failing to submit the Arrangement for approval to
Glamis Shareholders on or before the date that is five business
days before the Completion Deadline or failing to solicit
proxies in accordance with the provisions of the Arrangement
Agreement;
(e)
an Acquisition Proposal has been made to Glamis and made known
to the Glamis Shareholders generally or has been made directly
to Glamis Shareholders generally or any person has publicly
announced an intention to make an Acquisition Proposal (a
“Pending Glamis Acquisition Proposal”), which
is not publicly withdrawn before the Meeting, and after which
the Glamis Shareholders do not approve the Arrangement at the
Meeting or the Arrangement Agreement is terminated by either
Goldcorp or Glamis as a result of Glamis Shareholders not
approving the Arrangement at the Meeting or the Arrangement has
not been completed by the Completion Deadline, and Glamis
completes an Acquisition Proposal within 12 months
following the termination of the Arrangement Agreement;
(f)
the Glamis Board makes a Change in Glamis Recommendation due to
a Pending Glamis Acquisition Proposal as described in
paragraph (e) above, after which Glamis Shareholders
do not approve the Arrangement at the Meeting and the
Arrangement Agreement is terminated by either Glamis or Goldcorp
as a result of the non-approval of the Arrangement by Glamis
Shareholders at the Meeting; or
(g)
Glamis proposes to enter into an agreement with respect to a
Superior Proposal in compliance with the terms of the
Arrangement Agreement.
Glamis must pay the Termination Fee to Goldcorp in the
circumstances set out in paragraphs (a), (b), (c), (d), (f)
and (g) above at the time of the termination of the
Arrangement Agreement or within 30 days of such
termination, and in the circumstances set forth in
paragraph (e) above, within five days following the
completion of such an Acquisition Proposal.
Amendment and Termination of the Arrangement Agreement
The Arrangement Agreement may be amended by mutual written
agreement of the parties without, subject to applicable law,
further notice to or authorization on the part of Glamis
Shareholders and any such amendment may:
(a)
change the time for the performance of any of the obligations or
acts of any of the parties;
(b)
waive any inaccuracies in or modify any representation or
warranty contained in the Arrangement Agreement or in any
document delivered pursuant thereto;
(c)
waive compliance with or modify any of the covenants contained
in the Arrangement Agreement and waive or modify the performance
of any of the obligations of any of the parties; and
(d)
waive compliance with or modify any condition contained in the
Arrangement Agreement;
provided, however, that after the Meeting the Exchange Ratio may
not be amended without the approval of Glamis Shareholders given
in the same manner as required for the approval of the
Arrangement or as may be ordered by the Court. The Arrangement
Agreement and the Plan of Arrangement may be amended in
accordance with the Final Order.
In addition, the Arrangement Agreement provides that at any time
before the Meeting: (i) each of Glamis and Goldcorp are
entitled to propose to the other modifications to the
Arrangement in order to facilitate the tax or other planning
objectives of Glamis, Goldcorp and the Glamis Shareholders; and
(ii) Glamis is entitled to propose to Goldcorp
modifications to the manner in which the Glamis Options, Glamis
Restricted Shares and Glamis SARs are to be dealt with pursuant
to the Arrangement Agreement or under the Arrangement in order
to take into account the tax planning or other objectives of the
holders of such securities, provided, in each case, that:
(A) any such proposal is not likely to materially prejudice
the other party or the Glamis Shareholders, (B) any such
proposal would not impede or materially delay the completion of
the Arrangement, (C) the party making the proposal has
provided notice of such proposal to the other party not less
than 15 business days prior to the date of the Meeting, and
(D) implementation of the proposal would not result in a
transaction that is inconsistent with the fundamental terms of
the Arrangement Agreement, including, without limitation, the
Exchange Ratio.
The Arrangement Agreement may be terminated at any time before
the Effective Date:
(a)
by mutual written consent;
(b)
if any of the conditions of the Arrangement Agreement for the
benefit of the terminating party is not satisfied or waived;
(c)
by Goldcorp if an Acquisition Proposal in respect of Glamis has
been made or proposed and the Glamis Board: (i) makes a
Change in Glamis Recommendation, or (ii) fails, after being
requested by Goldcorp in writing, to reaffirm its approval or
recommendation of the Arrangement as promptly as possible (but
in any event within five business days after receipt of such
written request from Goldcorp), or (iii) accepts, approves,
recommends or enters into an agreement (other than a
confidentiality agreement that complies with the Arrangement
Agreement) in respect of any Acquisition Proposal;
(d)
by Goldcorp or by Glamis if the Meeting is held and completed,
but the approval of Glamis Shareholders has not been obtained;
(e)
by Goldcorp or by Glamis if the Arrangement is not completed by
the Completion Deadline; provided, however, if the Arrangement
has not been completed by such date because the Meeting has not
been held due to the fault of Glamis, then Glamis will not be
entitled to terminate the Arrangement Agreement;
(f)
by Goldcorp if the Glamis Board makes a Change in Glamis
Recommendation; or
(g)
by Glamis if Glamis proposes to enter into a definitive
agreement with respect to a Superior Proposal in compliance with
the Arrangement Agreement, provided that Glamis has paid the
Termination Fee to Goldcorp.
The Plan of Arrangement may be amended, modified and/or
supplemented as follows:
(a)
Goldcorp and Glamis reserve the right to amend, modify or
supplement the Plan of Arrangement at any time, provided that
each such amendment, modification or supplement must be
(i) set out in writing, (ii) agreed to in writing by
Goldcorp and Glamis, (iii) filed with the Court and, if
made after the Meeting, approved by the Court, and
(iv) communicated to former Glamis Shareholders if and as
required by the Court;
(b)
any amendment, modification or supplement to the Plan of
Arrangement may be proposed by Glamis at any time before the
Meeting, provided that Goldcorp will have consented thereto in
writing, if so proposed and accepted by the persons voting at
the Meeting (other than as may be required under the Interim
Order); and
(c)
any amendment, modification or supplement to the Plan of
Arrangement that is approved by the Court following the Meeting
will be effective only if (i) it is consented to in writing
by each of Goldcorp and Glamis, and (ii) if required by the
Court, it is consented to by Glamis Shareholders voting in the
manner directed by the Court.
The Plan of Arrangement will automatically terminate and be of
no further force and effect upon the termination of the
Arrangement Agreement in accordance with its terms.
The BCBCA requires that Glamis Shareholders approve the
Arrangement by passing the Arrangement Resolution by at least
two thirds of the votes cast by Glamis Shareholders, in person
or by proxy, at the Meeting. The complete text of the
Arrangement Resolution to be presented to the Meeting is set
forth in Appendix A to this Circular.
Court Approval of the Arrangement
The BCBCA requires that the Court approve the Arrangement.
On September 25, 2006, Glamis obtained the Interim Order
providing for the calling and holding of the Meeting and other
procedural matters and filed a Notice of Hearing of Petition for
the Final Order to approve the Arrangement. Copies of the
Interim Order and the Notice of Hearing of Petition are attached
as Appendix F and G, respectively, to this Circular.
The Court hearing in respect of the Final Order is scheduled to
take place at 9:45 a.m. (Vancouver time), on October 27,2006, or as soon thereafter as counsel for Glamis may be heard,
at the Courthouse, 800 Smithe Street, Vancouver, British
Columbia, subject to the approval of the Arrangement Resolution
at the Meeting. Glamis Shareholders who wish to participate
in or be represented at the Court hearing should consult their
legal advisers as to the necessary requirements.
At the Court hearing, Glamis Shareholders and creditors of
Glamis who wish to participate or to be represented or to
present evidence or argument may do so, subject to the rules of
the Court, the Interim Order and any further order of the Court.
Although the authority of the Court is very broad under the
BCBCA, Glamis has been advised by counsel that the Court will
consider, among other things, the fairness and reasonableness of
the Arrangement and the rights and interests of every person
affected. The Court may approve the Arrangement as proposed or
as amended in any manner as the Court may direct. The
Court’s approval is required for the Arrangement to become
effective and the Court has been informed that approval, if
obtained, will constitute the basis for the
Section 3(a)(10) Exemption under the U.S. Securities
Act with respect to, among other things, Goldcorp Shares and
Converted Goldcorp Options to be issued pursuant to the
Arrangement as described below under “Securities Laws
Considerations — U.S. Securities Laws”. In
addition, it is a condition of the Arrangement that the Court
determine, before making the Final Order, that the terms and
conditions of the exchange of Glamis Shares and Glamis Options
contemplated by the Arrangement are fair to Glamis Shareholders
and holders of Glamis Options.
Under the terms of the Interim Order, each Glamis Shareholder
will have the right to appear and make submissions at the
application for the Final Order. Any person desiring to appear
at the hearing of the application for the Final Order is
required to file with the Court and serve on Glamis at the
address set out below, on or before 12:00 p.m. (Vancouver
time) on October 20, 2006, a notice of his, her or its
intention to appear (“Appearance Notice”),
including his, her or its address for service, together with all
materials on which he, she or it intends to rely at the
application. The Appearance Notice and supporting materials must
be delivered, within the time specified, to Glamis at the
following address:
Lang Michener LLP
Barristers and Solicitors
Suite 1500, Royal Centre
1055 West Georgia Street, P.O. Box 11117
Vancouver, British Columbia V6E 4N7
Attention: Peter J. Reardon
Glamis Shareholders who wish to dissent should take note that
strict compliance with the Dissent Procedures is required.
Every Registered Shareholder is entitled to be paid the fair
value of the holder’s Glamis Shares, provided that the
holder duly dissents to the Arrangement and the Arrangement
becomes effective. Beneficial Shareholders who exercise Dissent
Rights must do so through their Intermediary Registered
Shareholder. The Dissent Rights are those rights pertaining to
the right to dissent from the Arrangement Resolution that are
contained in Sections 237 to 247 of the BCBCA, as
modified by the Interim Order, the Final Order and the Plan of
Arrangement. A Glamis Shareholder is not entitled to exercise
Dissent Rights if the holder votes any Glamis Shares in favour
of the Arrangement Resolution.
The Plan of Arrangement provides that the Glamis Shares (the
“Dissenting Shares”) of Registered Shareholders
who validly exercise Dissent Rights and who are ultimately
entitled to be paid fair value for those shares will be deemed
to be transferred to Goldcorp, and that Goldcorp will pay the
fair value that the Dissenting Shares had immediately before the
passing of the Arrangement Resolution.
On the Effective Date, Goldcorp will set aside that number of
Goldcorp Shares and cash which is attributable under the
Arrangement to all Glamis Shares for which Dissent Rights have
been exercised. Any dissenting Glamis Shareholder who ultimately
is not entitled to be paid the fair value of his, her or its
Dissenting Shares in accordance with the Plan of Arrangement
will be deemed to have participated in the Arrangement on the
same basis as non-dissenting Glamis Shareholders, and Goldcorp
will distribute to the Glamis Shareholder the Goldcorp Shares
and cash payment that the Glamis Shareholder is entitled to
receive pursuant to the terms of the Arrangement. Goldcorp will
pay the amount to be paid in respect of Dissenting Shares to
each dissenting Glamis Shareholder who is entitled to such
payment under the Arrangement. In no case, however, will Glamis,
Goldcorp or any other person be required to recognize such
persons as holding Glamis Shares at or after the Effective Time.
A brief summary of the Dissent Procedures is set out below.
This summary does not purport to provide a comprehensive
statement of the procedures to be followed by a dissenting
Glamis Shareholder who seeks payment of the fair value of the
Glamis Shares held and is qualified in its entirety by reference
to Sections 237 to 247 of the BCBCA, as modified by
the Interim Order, the Final Order and the Plan of Arrangement.
Sections 237 to 247 of the BCBCA are reproduced in
Appendix I to this Circular. The Dissent Procedures must be
strictly adhered to and any failure by a Glamis Shareholder to
do so may result in the loss of that holder’s Dissent
Rights. Accordingly, each Glamis Shareholder who wishes to
exercise Dissent Rights should carefully consider and comply
with the Dissent Procedures and consult such holder’s legal
advisers.
Written notice of dissent from the Arrangement Resolution must
be sent to Glamis by a dissenting Glamis Shareholder at least
two days before the Meeting or any date to which the
Meeting may be postponed or adjourned. The written notice should
be delivered by registered mail to Glamis at the address for
notice described below. After the Arrangement Resolution is
approved by Glamis Shareholders and within one month after
Glamis notifies the dissenting Glamis Shareholder of
Glamis’ intention to act upon the Arrangement Resolution
pursuant to Section 243 of the BCBCA, the dissenting Glamis
Shareholder must send to Glamis, a written notice that such
holder requires the purchase of all of the Glamis Shares in
respect of which such holder has given notice of dissent,
together with the share certificate or certificates representing
those Glamis Shares (including a written statement prepared in
accordance with Section 244(1)(c) of the BCBCA if the
dissent is being exercised by the Glamis Shareholder on behalf
of a beneficial holder) whereupon the dissenting Glamis
Shareholder is deemed to have sold and Goldcorp is deemed to
have purchased those Glamis Shares.
Any dissenting Glamis Shareholder who has duly complied with
Section 244(1) of the BCBCA, or Glamis, may apply to the
Court, and the Court may determine the fair value of the
Dissenting Shares and make consequential orders and give
directions as the Court considers appropriate. There is no
obligation on Glamis to apply to the Court. The dissenting
Glamis Shareholder will be entitled to receive the fair value
that the Dissenting Shares had immediately before the passing of
the Arrangement Resolution.
All notices of dissent to the Arrangement pursuant to
Section 242 of the BCBCA should be sent to Glamis at:
Glamis Gold Ltd.
Attention: Charles A. Jeannes, Executive Vice President,
Administration
5190 Neil Road, Suite 310 Reno, Nevada89502
In the opinion of Lang Michener LLP, counsel to Glamis, the
following fairly summarizes the principal Canadian federal
income tax considerations relating to the Arrangement, and to
the holding and disposing of Goldcorp Shares acquired on the
Arrangement, generally applicable to a Glamis Shareholder who,
at all material times for the purposes of the ITA,
(a) beneficially owns all Glamis Shares, and will hold all
Goldcorp Shares acquired on the Arrangement, as capital
property, (b) deals at arm’s length with Glamis and
Goldcorp, (c) is not affiliated with Glamis or Goldcorp,
and (d) is not a “financial institution” as
defined in the ITA (each such Glamis Shareholder in this
summary, a “Holder”). A Holder’s Glamis
Shares and Goldcorp Shares acquired in the Arrangement generally
will be considered to be capital property of the Holder, unless
the Holder holds the shares in the course of carrying on a
business or acquired the shares in a transaction considered to
be an adventure in the nature of trade.
This summary is based on the current provisions of the ITA, the
regulations thereunder (the “Regulations”), and
counsel’s understanding of the current published
administrative practices and policies of the Canada Revenue
Agency (“CRA”), and takes into account all
specific proposals to amend the ITA and Regulations (the
“Proposed Amendments”) announced by the
Minister of Finance (Canada) before the date hereof. It is
assumed that all Proposed Amendments will be enacted in their
present form, and that there will be no other material change to
any applicable law or administrative practice, although no
assurances can be given in these respects. Except for the
Proposed Amendments or as otherwise expressly set out below,
this summary does not take into account or anticipate any change
in law, whether by legislative, governmental, regulatory, or
judicial action or decision, nor does it take into account
provincial, territorial or foreign income tax considerations,
which may differ from the Canadian federal income tax
considerations discussed below. An advance income tax ruling
will not be sought from the CRA in respect of the Arrangement.
This summary is of a general nature only, and is not
exhaustive of all possible Canadian federal income tax
considerations. This summary is not, and is not to be construed
as, legal or tax advice to any particular Holder. Accordingly
all Holders, and all other Glamis Shareholders, should consult
their own tax advisers regarding the Canadian federal income tax
consequences of the Arrangement applicable to their particular
circumstances.
Holders Resident in Canada
The following portion of this summary applies to a Holder who,
at all relevant times is or is deemed to be resident in Canada
for purposes of the ITA (a “Resident Holder”).
This portion of this summary further assumes that no Resident
Holder will, on the exchange of the Resident Holder’s
Glamis Shares for Goldcorp Shares and cash pursuant to the
Arrangement, be paid an amount of cash that is greater than the
adjusted cost base (“ACB”), as determined for
the purposes of the ITA, of the Resident Holder’s Glamis
Shares immediately before the exchange.
Exchange of Glamis Shares on the Arrangement —
No Section 85 Election
A Resident Holder whose Glamis Shares are exchanged for cash and
Goldcorp Shares on the Arrangement, and who does not make a
valid election (a “Section 85 Election”)
jointly with Goldcorp with respect to the exchange, will be
considered to have disposed of those Glamis Shares for proceeds
of disposition equal to (a) the cash so received, plus
(b) the fair market value at the Effective Time of the
Goldcorp Shares so acquired, by the Resident Holder. As a
result, the Resident Holder will in general realize a capital
gain (capital loss) to the extent that such proceeds of
disposition, net of any reasonable costs of disposition, exceed
(are less than) the ACB of the Resident Holder’s Glamis
Shares. The cost to the Resident Holder of the Goldcorp Shares
acquired on the exchange will equal the fair market value of
those shares at the Effective Time and will, for the purpose of
determining the ACB of those shares, be averaged with the ACB to
the Resident Holder of any other Goldcorp Shares the holder owns
at the Effective Time. The general tax treatment of capital
gains and losses is discussed below under “Taxation of
Capital Gains and Losses”.
Exchange of Glamis Shares on the Arrangement —
With a Section 85 Election
A Resident Holder whose Glamis Shares are exchanged for cash and
Goldcorp Shares on the Arrangement and who is an Eligible Holder
may make a Section 85 Election jointly with Goldcorp
pursuant to section 85 of the ITA and thereby obtain a full
or partial tax-deferred rollover for Canadian federal income tax
purposes, depending on the Elected Amount (as defined below) and
the ACB of the Eligible Holder’s Glamis Shares at the time
of the exchange. The Eligible Holder will be required to
designate an amount (the “Elected Amount”) in
the Section 85 Election that will be deemed to be the
proceeds of disposition of the Eligible Holder’s Glamis
Shares. The Eligible Holder may, by
designating an appropriate Elected Amount, avoid recognizing a
capital gain for the purposes of the ITA on the exchange.
In general, the Elected Amount may not be
(a)
less than the amount of cash received by the Eligible Holder on
the exchange,
(b)
less than the lesser of the ACB and fair market value of the
Eligible Holder’s Glamis Shares determined immediately
before the exchange, nor
(c)
greater than the fair market value of the Glamis Shares at the
time of the exchange.
The tax treatment to an Eligible Holder who makes a valid
Section 85 Election jointly with Goldcorp generally will be
as follows:
(a)
the Eligible Holder will be deemed to have disposed of the
holder’s Glamis Shares for proceeds of disposition equal to
the Elected Amount;
(b)
the Eligible Holder will not realize any capital gain or loss if
the Elected Amount equals the aggregate of the ACB of the
Eligible Holder’s Glamis Shares determined immediately
before the exchange and any reasonable costs of disposition;
(c)
the Eligible Holder will realize a capital gain (capital loss)
to the extent that the Elected Amount exceeds (is less than) the
aggregate of the ACB of the Eligible Holder’s Glamis Shares
and any reasonable costs of disposition; and
(d)
the aggregate cost to the Eligible Holder of the Goldcorp Shares
acquired on the exchange will equal the amount, if any, by which
the Elected Amount exceeds the cash received by the Eligible
Holder, and for the purpose of determining the ACB of those
shares, will be averaged with the ACB of any other Goldcorp
Shares held by the Eligible Holder at that time.
A tax instruction letter providing instructions on how to
complete the Section 85 Election forms and relevant
election forms may be obtained from the Depositary by checking
the appropriate box on the letter of transmittal that will be
sent to Registered Shareholders after the Effective Date and
submitting the letter of transmittal in accordance with the
procedures set out under “Procedure and Terms for Exchange
of Glamis Shares”.
An Eligible Holder who intends to make a Section 85
Election should indicate that intention by checking the
appropriate box in the letter of transmittal and a tax
instruction letter, together with the relevant tax election
forms, will be sent to the Eligible Holder at or about the time
at which the Eligible Holder is sent the cash and Goldcorp
Shares to which the Eligible Holder is entitled under the
Arrangement.
To make a Section 85 Election, an Eligible Holder must
ensure that two signed copies of the necessary election form are
returned in accordance with the procedures set out in the tax
instruction letter on or before 90 days after the Effective
Date, duly completed with the details of the number of Glamis
Shares exchanged, the cash and number of Goldcorp Shares
received, and the applicable Elected Amount. Subject to the
election forms’ complying with the provisions of the ITA
(and of any applicable provincial income tax law), one copy of
the form will be returned to the Eligible Holder, signed by
Goldcorp, for filing by the Eligible Holder with the CRA (or
applicable provincial tax authority).
Under the Arrangement Agreement, Goldcorp will make a
Section 85 Election (and any corresponding election under
any applicable provincial tax legislation) only with an Eligible
Holder, and only at the Elected Amount selected by the Eligible
Holder (subject to the limitations set out in the ITA and any
applicable provincial tax legislation). Neither Goldcorp nor
Glamis will be responsible for the proper completion or filing
of any Section 85 Election and the Eligible Holder will be
solely responsible for the payment of any late filing penalty.
Goldcorp has agreed only to execute any properly completed
Section 85 Election and to mail the election to the
Eligible Holder within 90 days after Goldcorp’s
receipt thereof. With the exception of Goldcorp’s
execution and mailing of the Section 85 Election, each
Eligible Holder will be solely responsible for complying with
all applicable requirements relating to the making and filing of
the holder’s Section 85 Election. Accordingly,
none of Goldcorp, Glamis, and the Depositary will be responsible
or liable for taxes, interest, penalties, damages or expenses
resulting from the failure by anyone to deliver a
Section 85 Election in accordance with the procedures set
out in the tax instruction letter, nor for the proper
completion or filing of any Section 85 Election within the
time and in the form prescribed under the ITA (or the
corresponding provisions of any applicable provincial tax
legislation).
To avoid late filing penalties, each Eligible Holder who makes a
Section 85 Election must ensure that the holder’s
election is received by the appropriate revenue authorities on
or before the earliest day by which either Goldcorp or the
Eligible Holder is required to file an income tax return for the
taxation year in which the exchange occurs. Goldcorp’s 2006
taxation year is scheduled to end on December 31, 2006, but
may end earlier as a result of an event such as an amalgamation
(for example, if Glamis amalgamates with Goldcorp —
See “Post-Arrangement Amalgamation” below). Each
Eligible Holder is urged to consult the holder’s own
advisers as soon as possible respecting the deadlines applicable
to the holder’s particular circumstances. Regardless of
such deadlines, Goldcorp must receive the tax election forms of
an Eligible Holder in accordance with the procedures set out in
the tax instruction letter no later than 90 days after the
Effective Date. Because Goldcorp has agreed to execute and
return a Section 85 Election to the Eligible Holder making
the election within 90 days after Goldcorp’s receiving
the election in accordance with the procedures set out in the
tax instruction letter, Eligible Holders may be required to
forward their tax election forms to Goldcorp earlier than
90 days after the Effective Date in order to avoid late
filing penalties.
Any Eligible Holder who does not ensure that Goldcorp
receives the holder’s duly completed Section 85
Election in accordance with the procedures set out in the tax
instruction letter within 90 days after the Effective Date
cannot be assured of benefiting from the rollover provisions of
the ITA (or the corresponding provisions of any applicable
provincial tax legislation). Accordingly, all Eligible Holders
who wish to make a Section 85 Election should give their
immediate attention to this matter, and in particular should
consult their own tax advisers without delay. The instructions
for requesting a tax instruction letter will be set out in the
Letter of Transmittal. Eligible Holders are referred to
Information Circular 76-19R3 and Interpretation Bulletin
IT-291R3 issued by the
CRA for further information respecting Section 85
Elections. An Eligible Holder who does not make a valid
Section 85 Election may realize a taxable capital gain. The
comments herein with respect to such elections are provided for
general assistance only. The law in this area is complex and
contains numerous technical requirements.
Taxation of Capital Gains and Losses
Generally, a Resident Holder who realizes a capital gain as a
result of the Arrangement will be required to include one half
of the capital gain (a “taxable capital gain”)
in income for its taxation year in which the Effective Date
occurs. A Resident Holder who realizes a capital loss as a
result of the Arrangement generally will be entitled to deduct
one half of the capital loss (an “allowable capital
loss”) from taxable capital gains realized in the year
and, to the extent not so deductible, from taxable capital gains
in any of the three preceding taxation years or any subsequent
taxation year.
A capital loss so realized on the exchange by a Resident Holder
that is a corporation may, to the extent and under circumstances
specified by the ITA, be reduced by the amount of certain
dividends received or deemed to have been received by the
corporation on its Glamis Shares (or on shares for which its
Glamis Shares are substituted or exchanged). Similar rules may
apply to Goldcorp Shares that are owned by a partnership or
trust of which a corporation, trust or partnership is a member
or beneficiary.
A Resident Holder that is a “Canadian-controlled private
corporation” (as defined in the ITA) may be required to pay
an additional
62/3%
refundable tax in respect of any net taxable capital gain that
it realizes on disposition of its Glamis Shares on the exchange.
The cost to a Resident Holder of the Goldcorp Shares acquired by
the Resident Holder on the exchange will equal the proceeds of
disposition for the Resident Holder’s exchanged Glamis
Shares, minus the amount of cash received on the exchange. The
Resident Holder will be required to average the cost of Goldcorp
Shares so acquired with the ACB of all other Goldcorp Shares, if
any, held by the Resident Holder as capital property immediately
before the exchange.
Dividends on Goldcorp Shares
A Resident Holder who is an individual will be required to
include in income any dividend received or deemed to be received
on the Resident Holder’s Goldcorp Shares, and will be
subject to the gross-up and dividend tax credit rules applicable
to taxable dividends received from taxable Canadian corporations.
A Resident Holder that is a corporation will be required to
include in income any dividend received or deemed to be received
on the Resident Holder’s Goldcorp Shares, and generally
will be entitled to deduct an equivalent amount in
computing its taxable income. A “private corporation”
(as defined in the ITA) or any other corporation controlled or
deemed to be controlled by or for the benefit of an individual
or a related group of individuals, may be liable under
Part IV of the ITA to pay a refundable tax of
331/3%
on any dividend that it receives or is deemed to receive on its
Goldcorp Shares to the extent that the dividend is deductible in
computing the corporation’s taxable income. Any such tax
generally will be refundable to it at the rate of $1 for every
$3 of taxable dividends that it pays on its shares.
Disposition of Goldcorp Shares
A Resident Holder who disposes or is deemed to dispose of a
Goldcorp Share in a taxation year will realize a capital gain
(capital loss) equal to the amount by which the proceeds of
disposition for the Goldcorp Share, net of reasonable costs of
disposition, exceed (are exceeded by) the ACB of the Goldcorp
Share to the Resident Holder, determined immediately before the
disposition. The Resident Holder will be required to include any
resulting taxable gain in income, or be entitled to deduct any
resulting allowable capital loss, in accordance with the usual
rules applicable to capital gains and losses. See “Taxation
of Capital Gains and Losses” above.
Alternative Minimum Tax on Resident Holders who are
Individuals
A capital gain realized, or a dividend received, by a Resident
Holder who is an individual (including certain trusts and
estates) may give rise to liability for alternative minimum tax
under the ITA.
Dissenting Resident Holders
A Resident Holder who validly exercises Dissent Rights (a
“Resident Dissenter”) and consequently is paid
the fair value of the Resident Dissenter’s Glamis Shares by
Goldcorp in accordance with the Arrangement will realize a
capital gain (capital loss) equal to the amount by which the
payment, net of reasonable costs of disposition and (for greater
certainty) any interest awarded by the Court, exceeds (is
exceeded by) the ACB of the Resident Holder’s Glamis Shares
determined immediately before the Effective Time. The Resident
Dissenter will be required to include any resulting taxable
capital gain in income, or be entitled to deduct any resulting
allowable capital loss, in accordance with the usual rules
applicable to capital gains and losses. See “Taxation of
Capital Gains and Losses” above.
The Resident Dissenter must include in income any interest
awarded by the Court to the Resident Dissenter.
Eligibility of Goldcorp Shares for Investment
Goldcorp Shares will be qualified investments under the ITA for
trusts governed by a registered retirement savings plan,
registered retirement income fund, deferred profit sharing plan,
or registered education savings plan at any particular time
provided that, at that time, the Goldcorp Shares are listed on a
prescribed stock exchange (which includes the TSX) or Goldcorp
is a “public corporation” as defined in the ITA.
Holders Not Resident in Canada
The following portion of this summary applies to Holders whose
Glamis Shares are not, and whose Goldcorp Shares acquired on the
Arrangement will not be, deemed to be “taxable Canadian
property” by any provision of the ITA and who, for the
purposes of the ITA, (a) have not been, are not, and will
not be or be deemed to be, resident in Canada, and (b) do
not and will not use or hold, and are not and will not be deemed
to use or hold, Glamis Shares or Goldcorp Shares in connection
with carrying on a business in Canada, (in this portion of this
summary, a “Non-resident Holder”).
This portion of this summary further assumes that (a) no
Non-resident Holder, nor any person or persons with whom the
Non-resident Holder does not deal at arm’s length, will at
any time alone or in any combination hold 25% or more of the
issued shares in any class of shares of either Glamis or
Goldcorp, (b) Glamis Shares will be listed on either or
both the TSX and the NYSE at the Effective Time, and
(c) Goldcorp Shares will at all times after the Effective
Time be listed on one or more stock exchanges that are
prescribed for the purposes of the ITA.
Special rules, which are not discussed in this summary, may
apply to a Non-resident Holder that is an insurer carrying on
business in Canada and elsewhere.
Exchange of Glamis Shares on the Arrangement
A Non-resident Holder whose Glamis Shares are exchanged for cash
and Goldcorp Shares on the Arrangement will not thereby incur
any liability for Canadian income tax.
The reporting and withholding obligations under section 116
of the ITA will not apply to the exchange.
Dividends on Goldcorp Shares
A Non-resident Holder on whose Goldcorp Shares a dividend is, or
is deemed to be, paid or credited will be required to pay
withholding tax equal to 25%, or such lower rate (if any) as may
be available under an applicable tax treaty, of the gross amount
of the dividend. The rate of withholding tax under the
Canada-United States Income Tax Convention (1980) (the
“US Treaty”) applicable to a Non-resident
Holder who is a resident of the United States for the purposes
of the Treaty generally will be, if the Non-resident Holder is a
company that holds 10% or more of outstanding Goldcorp Shares,
5%, and in any other case 15%, of the gross amount of the
dividend. Goldcorp will be required to withhold the required
amount of withholding tax from the dividend, and to remit it to
CRA for the account of the Non-resident Holder.
Disposition of Goldcorp Shares
In general, a Non-resident Holder who disposes of a Goldcorp
Share will not thereby incur any liability for Canadian income
tax.
The reporting and withholding obligations under section 116
of the ITA will not apply to any disposition of Goldcorp Shares
by a Non-resident Holder.
Dissenting Non-resident Holders
A Non-resident Holder who validly exercises Dissent Rights (a
“Non-resident Dissenter”) and consequently is
paid the fair value for the Non-Resident Dissenter’s Glamis
Shares by Goldcorp will be considered to realize a capital gain
or loss as discussed above under “Holders Resident in
Canada — Dissenting Holders”. The Non-resident
Dissenter generally will not be subject to liability for
Canadian income tax in respect of any capital gain so arising.
The Non-resident Holder will be required to pay withholding tax
on any interest awarded by the Court to the Non-resident
Dissenter that is paid or credited to the Non-Resident
Dissenter. The amount of withholding tax will equal 25%, or such
lower rate (if any) as may be available under an applicable tax
treaty, of the gross amount of the interest. The rate of
withholding tax applicable to a Non-resident Dissenter who is a
resident of the United States for the purposes of the US Treaty
generally will be reduced to 10% by the US Treaty. Goldcorp will
be required to withhold the required amount of withholding tax
from the interest, and to remit it to CRA for the account of the
Non-resident Dissenter.
Post-Arrangement Amalgamation
The Arrangement Agreement provides that Goldcorp will, within
30 days after the Effective Date, cause Glamis to
amalgamate with either Goldcorp or a wholly-owned subsidiary of
Goldcorp. Neither Resident Holders nor Non-resident Holders
should incur any liability for Canadian federal income tax as a
result of such amalgamation. The reporting and withholding
obligations under section 116 of the ITA will not apply to
any disposition of Goldcorp Shares by a Non-resident Holder that
may be deemed to occur for the purposes of the ITA on the
amalgamation. Eligible Holders should note that an amalgamation
of Glamis and Goldcorp (but not of Glamis with a wholly-owned
subsidiary of Goldcorp) would trigger a deemed taxation year-end
of Goldcorp immediately before the amalgamation, which may
accelerate filing deadlines for Section 85 Elections.
The following discussion is a summary of the anticipated
material U.S. federal income tax consequences arising from
and relating to the exchange of Glamis Shares for Goldcorp
Shares plus Canadian currency pursuant to the Arrangement (the
“Exchange”) and the consequent ownership and
possible disposition of Goldcorp Shares that are generally
applicable to U.S. Holders (as defined below) of Glamis
Shares. This summary is limited to Glamis Shareholders who are
“United States persons” and hold their Glamis Shares
(and will hold Goldcorp Shares following the Exchange) as
capital assets within the meaning of the Code
(“U.S. Holders”). For purposes of this
summary, a “United States person” is: (a) a
citizen or individual resident of the United States, (b) a
corporation or other entity taxable as a corporation that is
created or organized under the laws of the United States or any
political subdivision thereof, (c) an estate the income of
which is subject to United States federal income tax regardless
of its source, or (d) a trust (i) if a court within
the United States is able to exercise primary supervision over
the administration of the trust, and one or more United States
persons have the authority to control all substantial decisions
of the trust or (ii) which has a valid election in effect
under applicable Treasury Regulations, as defined below, to be
treated as a United States person.
This summary is for general information only and does not
address all aspects of United States federal income taxation
that may be relevant to a U.S. Holder in light of the
U.S. Holder’s particular circumstances, or to
U.S. Holders that may be subject to special treatment under
the Code (including, without limitation, certain financial
institutions, real estate investment trusts, tax-exempt
organizations, qualified retirement plans, individual retirement
accounts, regulated investment companies, insurance companies,
and brokers and dealers or traders in securities or currencies,
persons holding stock as part of a straddle, hedge, conversion
transaction or other integrated investment, persons whose
functional currency is not the United States dollar, and persons
who may have acquired their Glamis Shares (or who will acquire
Goldcorp Shares) through the exercise of employee stock options
or otherwise as compensation). This summary also does not
address the tax treatment of U.S. Holders that hold their
Glamis Shares (or will hold Goldcorp Shares) through a
partnership or other pass-through entity, persons subject to the
alternative minimum tax, persons who own their Glamis Shares (or
will own Goldcorp Shares) other than as a capital asset as
defined in the Code, and U.S. Holders who own, directly,
indirectly or constructively, five percent (5%) or more of the
total voting power or total value of all of the outstanding
stock of Glamis (or who, following the Exchange, will own,
directly, indirectly or constructively, five percent (5%) or
more of the total voting power or total value of all of the
outstanding stock of Goldcorp). This summary does not address
aspects of U.S. taxation other than U.S. federal
income taxation, nor does it address any aspects of state, local
or foreign tax law.
This summary does not address the U.S. federal income tax
consequences of transactions effectuated prior or subsequent to,
or concurrently with, the Exchange (other than the integration
of the Exchange and the amalgamation of Glamis and either
Goldcorp or a wholly-owned subsidiary of Goldcorp
(the “Amalgamation”), whether or not any
such transactions are undertaken in connection with the Exchange
or Amalgamation), including, without limitation, the following:
(a) the exercise of any Glamis Option, warrant or other
right to acquire Glamis Shares (or, post-transaction, Goldcorp
Shares); and (b) the receipt of Converted Goldcorp Options
by a holder of Glamis Options.
This discussion is based on the Code, existing, temporary and
currently proposed regulations promulgated under the Code
(“Treasury Regulations”), and judicial and
administrative interpretations thereof, all as of the date
hereof and all of which are subject to change, possibly with
retroactive effect. Glamis has not requested any ruling from the
IRS with respect to the statements made and the conclusions
reached in this summary. No assurance can be given that the IRS
will agree with such statements and conclusions, or will not
take, or a court will not adopt, a position contrary to any
position taken herein.
EACH U.S. HOLDER IS URGED TO CONSULT WITH ITS TAX
ADVISER REGARDING THE TAX CONSEQUENCES OF THE EXCHANGE, AND THE
CONSEQUENT OWNERSHIP AND POSSIBLE DISPOSITION OF GOLDCORP
SHARES, INCLUDING THE EFFECTS OF FEDERAL, STATE, LOCAL, FOREIGN,
AND OTHER TAX LAWS.
TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE IRS
UNDER U.S. TREASURY DEPARTMENT CIRCULAR 230, WE INFORM YOU
THAT (a) ANY DISCUSSION OF U.S. FEDERAL INCOME TAX
ISSUES CONTAINED IN THIS INFORMATION CIRCULAR (INCLUDING ANY
ATTACHMENTS), UNLESS OTHERWISE SPECIFICALLY STATED, WAS NOT
INTENDED OR
WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF
AVOIDING PENALTIES UNDER THE UNITED STATES INTERNAL REVENUE
CODE, (b) SUCH DISCUSSION WAS WRITTEN TO SUPPORT THE
PROMOTION OR MARKETING OF THE ARRANGEMENT OR MATTERS ADDRESSED
BY THIS INFORMATION CIRCULAR AND (c) EACH U.S. HOLDER
SHOULD SEEK ADVICE BASED UPON ITS PARTICULAR CIRCUMSTANCES FROM
AN INDEPENDENT TAX ADVISER.
Assumptions Regarding Glamis and Goldcorp
This summary is based upon certain understandings and
assumptions with respect to the business, assets and
shareholders of Glamis and Goldcorp, including that neither
Goldcorp nor Glamis is, nor at any time has been, and Goldcorp
will not be immediately after the Exchange, a “controlled
foreign corporation” as defined in Section 957 of the
Code (“CFC”). Each of Goldcorp and Glamis
believes that it is not and has never been a CFC and Goldcorp
does not expect to become a CFC in the future.
Each of Glamis and Goldcorp believes it did not qualify as a
“passive foreign investment company,” as defined in
Section 1297 of the Code (“PFIC”), for its
most recent fiscal year ended on or prior to the date of the
Exchange, will not qualify as a PFIC for its current fiscal year
and will not qualify as a PFIC for its taxable year that
includes the day after the Effective Date. In addition, Glamis
believes that it has never qualified as a PFIC. However, there
can be no assurances that unanticipated events will not cause
Glamis or Goldcorp to qualify or fail to qualify as a PFIC or
that any determination concerning Glamis’ and/or
Goldcorp’s past, current or expected PFIC status will not
be challenged by the IRS.
In the event that one or more of such understandings or
assumptions proves to be inaccurate, the following summary may
not apply and material adverse U.S. federal income tax
consequences may result to U.S. Holders.
Particular Circumstance of any Particular U.S. Holder
Not Addressed
This summary does not take into account the particular facts and
circumstances, with respect to U.S. federal income tax
issues, of any particular U.S. Holder. Each
U.S. Holder should consult its own tax adviser regarding
the U.S. federal income tax consequences of the Exchange to
them in light of their particular circumstances.
Exchange of Glamis Shares for Goldcorp Shares
Reorganization Treatment
Although there is limited authority on the issue, and thus
substantial uncertainty, subject to the following requirements
and assumptions, Glamis believes the Exchange and the subsequent
Amalgamation should qualify as a reorganization under
Section 368(a) of the Code (a
“Reorganization”) only if the Exchange and the
Amalgamation are treated as interdependent steps of a single,
integrated transaction for U.S. federal income tax purposes
and all other general rules applicable to reorganizations under
the Code are satisfied. If the Exchange were viewed as
independent of the Amalgamation for U.S. federal income tax
purposes, the Exchange would be a taxable transaction. Although
Goldcorp has covenanted that it will cause the Amalgamation to
be carried out within thirty days of the Effective Date, there
can be no assurance that the IRS would not challenge the
treatment of the Exchange and Amalgamation as a single
transaction. No opinion of legal counsel and no ruling from the
IRS concerning the U.S. federal income tax consequence of
the Exchange has been obtained by Glamis and none will be
requested by Glamis. There can be no assurance that the IRS will
not challenge the status of the Exchange and Amalgamation as a
Reorganization or that the U.S. courts will uphold the
status of the Exchange and Amalgamation as a Reorganization in
the event of an IRS challenge. Each U.S. Holder should
consult its own tax adviser regarding the qualification of the
Exchange and Amalgamation as a Reorganization.
Regardless of whether the Exchange and the Amalgamation qualify
as a Reorganization, the Exchange may be treated as a fully
taxable exchange under the PFIC rules of Sections 1291-1298
of the Code for U.S. Holders whose Glamis Shares
surrendered in the Exchange were held by them in any period that
Glamis was a PFIC. See “Impact of PFIC Rules on Certain
U.S. Holders” below.
If the Exchange and the Amalgamation qualify as a
Reorganization, and subject to (a) the assumptions,
limitations and qualifications referred to herein and
(b) the PFIC rules discussed below, the Exchange and
Amalgamation will result in the following U.S. federal
income tax consequences to U.S. Holders:
1.
a U.S. Holder who receives Goldcorp Shares and Canadian
currency in the Exchange will recognize gain to the extent of
the lesser of (a) the excess of the fair market value of
the Goldcorp Shares and the U.S. dollar
value of the Canadian currency on the date of receipt over the
adjusted tax basis of the Glamis Shares surrendered, or
(b) the U.S. dollar value of the Canadian currency on
the date of receipt, but will not recognize loss as a result of
the Exchange;
2.
the aggregate basis of the Goldcorp Shares received by a
U.S. Holder in the Exchange will be equal to the aggregate
basis of the Glamis Shares exchanged therefor increased by the
amount of gain recognized and decreased by the U.S. dollar
value of the Canadian currency on the date of receipt; and
3.
the holding period of the Goldcorp Shares received by a
U.S. Holder will include the holding period of the Glamis
Shares exchanged therefor.
The amount of gain recognized by a U.S. Holder may be
considered to have the effect of the distribution of a dividend
and therefore treated as dividend income to the extent of such
U.S. Holder’s ratable share of the undistributed
accumulated earnings and profits of Glamis as of the date of the
Exchange, with any excess gain treated as gain from the exchange
of property. Assuming that neither Glamis nor Goldcorp is
classified as a PFIC in 2005 or 2006, the amount of gain treated
as dividend income may be “qualified dividend income”
subject to a maximum rate of U.S. federal income tax of
15 percent to U.S. Holders that are not corporations
if certain holding period and other requirements are met. Gain
that is not treated as dividend income will be capital gain
which will be treated as long-term capital gain if such
U.S. Holder’s holding period for such Glamis Shares is
more than one year at the time of the Exchange.
Taxable Exchange Treatment
Subject to the PFIC rules discussed below, if the Exchange and
the Amalgamation fail to qualify as a Reorganization, the
Exchange would constitute a taxable disposition of Glamis Shares
by U.S. Holders and would result in the following
U.S. federal income tax consequences to U.S. Holders:
1.
a U.S. Holder would recognize gain or loss equal to the
difference between (i) the fair market value of Goldcorp
Shares and the U.S. dollar value of the Canadian currency
upon receipt by such U.S. Holder in the Exchange, and
(ii) the adjusted tax basis of such U.S. Holder in
such Glamis Shares exchanged therefor in the Exchange;
2.
the aggregate basis of Goldcorp Shares received by a
U.S. Holder in the Exchange would be equal to the aggregate
fair market value of such Goldcorp Shares at the time of
receipt; and
3.
the holding period of Goldcorp Shares received by a
U.S. Holder in the Exchange would begin on the day after
receipt.
Such gain or loss recognized in the Exchange generally will be
capital gain or loss if such Glamis Shares were held as capital
assets at the time of the Exchange and will be long-term capital
gain or loss if the U.S. Holder’s holding period for
such Glamis Shares is more than one year at the time of the
Exchange. Gains and losses are netted and combined according to
special rules in arriving at the overall capital gain or loss
for a particular tax year. Preferential tax rates for long-term
capital gains are generally applicable to a U.S. Holder
which is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a
U.S. Holder which is a corporation. Deductions for capital
losses are subject to significant limitations. For
U.S. Holders which are not corporations, any unused portion
of a net capital loss may be carried over to be used in later
tax years, subject to applicable deduction limitations, until
such net capital loss is thereby exhausted. For
U.S. Holders that are corporations (other than
S corporations), an unused net capital loss may generally
be carried back three years from the loss year and carried
forward five years from the loss year to be offset against
capital gains until such net capital loss is thereby exhausted.
Impact of PFIC Rules on Certain U.S. Holders
If a foreign corporation is a PFIC at any time during a period
in which a U.S. Holder holds stock in the corporation, and
the foreign corporation was not a “qualified electing
fund,” as described below, the U.S. Holder will
generally continue to be subject to the rules regarding excess
distributions and dispositions of PFIC stock, even if the
foreign corporation ceases to be a PFIC, unless certain gain
recognition elections are made to “purge” the PFIC
taint. However, special rules will apply to a U.S. Holder
who has made a mark-to-market election under Section 1296
of the Code with respect to the PFIC stock. For a general
discussion of the rules regarding excess distributions and
dispositions of PFIC stock, see “Material U.S. Federal
Income Tax Considerations Relating to the Ownership and
Disposition of Goldcorp Shares — Passive Foreign
Investment Company” below.
If the U.S. Holder has not made or been deemed to have made
a timely election to treat the PFIC as a qualified electing fund
for the tax year that is the first year in the
U.S. Holder’s holding period for the foreign
corporation’s stock, gain (but not loss) will be recognized
under Section 1291(f) on an exchange otherwise qualifying
for nonrecognition of gain as a Reorganization, to the extent
provided in regulations. For a general discussion of the rules
regarding excess distributions and dispositions of PFIC stock,
see “Material U.S. Federal Income Tax Considerations
Relating to the Ownership and Disposition of Goldcorp
Shares — Passive Foreign Investment Company”
below. Holders of Glamis Shares should consult with their own
tax advisers on the possible recognition of gain under the PFIC
rules in the event Glamis qualified as a PFIC in any year in
which the Glamis shares surrendered in the Exchange were held by
the U.S. Holder.
Dissenting U.S. Holders
A U.S. Holder who exercises Dissent Rights will recognize
gain or loss on the exchange of such U.S. Holder’s
Glamis Shares for cash in an amount equal to the difference
between (i) the U.S. dollar value on the date of receipt of
the Canadian currency received and (ii) such holder’s
adjusted tax basis in its Glamis Shares. Subject to the PFIC
rules, such gain or loss generally will be capital gain or loss
if such shares were held as capital assets at the time of the
Arrangement and will be long-term capital gain or loss if the
U.S. Holder’s holding period for such shares is more
than one year at such time. Gains and losses are netted and
combined according to special rules in arriving at the overall
capital gain or loss for a particular tax year.
Preferential tax rates for long-term capital gains are generally
applicable to a U.S. Holder which is an individual, estate
or trust. There are currently no preferential tax rates for
long-term capital gains for a U.S. Holder which is a
corporation. Deductions for capital losses are subject to
significant limitations. For U.S. Holders that are not
corporations, any unused portion of such capital loss may be
carried over to be used in later tax years, subject to
applicable deduction limitations, until such net capital loss is
thereby exhausted. For U.S. Holders that are corporations
(other than S corporations), an unused net capital loss may
generally be carried back three years from the loss year and
carried forward five years from the loss year to be offset
against capital gains until such net capital loss is thereby
exhausted.
Currency Gains
The U.S. dollar value of any Canadian currency received by
a U.S. Holder in the Arrangement generally will be based on
the rate of exchange on the date of receipt. A subsequent
disposition of any Canadian currency received (including its
conversion into U.S. currency) generally will give rise to
income or loss, treated as ordinary income or loss.
U.S. Holders should consult their own tax advisers
concerning the U.S. federal income tax consequences of
acquiring, holding and disposing of Canadian dollars.
Material U.S. Federal Income Tax Considerations Relating
to the Ownership and Disposition of Goldcorp Shares
The following is a summary of certain material U.S. federal
income tax consequences to a U.S. Holder arising from and
relating to the ownership and disposition of Goldcorp Shares.
Distributions on Goldcorp Shares
General
Taxation of Distributions
Subject to the PFIC rules discussed below, a U.S. Holder
that receives a distribution, including a constructive
distribution, with respect to the Goldcorp Shares will be
required to include the amount of such distribution in gross
income as a dividend (without reduction for any Canadian income
tax withheld from such distribution) to the extent of the
current or accumulated “earnings and profits” of
Goldcorp. To the extent that a distribution exceeds the current
and accumulated “earnings and profits” of Goldcorp,
such distribution will be treated (a) first, as a tax-free
return of capital to the extent of a U.S. Holder’s tax
basis in the Goldcorp Shares and, (b) thereafter, as gain
from the sale or exchange of such Goldcorp Shares. (See
“Disposition of Goldcorp Shares” below).
Reduced
Tax Rates for Certain Dividends
For taxable years beginning after December 31, 2002 and
before January 1, 2011, a dividend paid by Goldcorp
generally will be taxed at the preferential tax rates applicable
to long-term capital gains if (a) Goldcorp is a
“qualified foreign corporation” (as defined below),
(b) the U.S. Holder receiving such dividend is an
individual, estate, or trust,
and (c) such dividend is paid on Goldcorp Shares that have
been held by such U.S. Holder for at least 61 days
during the 121-day period beginning 60 days before the
“ex-dividend date.”
Goldcorp generally will be a “qualified foreign
corporation” under Section 1(h)(11) of the Code (a
“QFC”) if (a) Goldcorp is incorporated in
a possession of the U.S., (b) Goldcorp is eligible for the
benefits of the US Treaty, or (c) the Goldcorp Shares are
readily tradable on an established securities market in the
U.S. However, even if Goldcorp satisfies one or more of
such requirements, Goldcorp will not be treated as a QFC if
Goldcorp is a PFIC for the taxable year during which Goldcorp
pays a dividend or for the preceding taxable year, or if it is
otherwise a PFIC as to the shareholder receiving the
distribution. In 2003, the U.S. Department of the Treasury
(the “Treasury”) and the IRS announced that
they intended to issue Treasury Regulations providing procedures
for a foreign corporation to certify that it is a QFC. Although
these Treasury Regulations have not yet been issued, the
Treasury and the IRS have confirmed their intention to issue
these Treasury Regulations. It is expected that these Treasury
Regulations will obligate persons required to file information
returns to report a dividend paid by a foreign corporation as a
dividend from a QFC if the foreign corporation has, among other
things, certified under penalties of perjury that the foreign
corporation was not a PFIC for the taxable year during which the
foreign corporation paid the dividend or for the preceding
taxable year.
As discussed below, Goldcorp does not believe that it was a PFIC
for the previous taxable year, and does not expect that it will
be a PFIC for the current taxable year. (See “Additional
Rules that May Apply to U.S. Holders — Passive
Foreign Investment Company” below). However, there can be
no assurance that the IRS will not challenge the determination
made by Goldcorp concerning its PFIC status or that Goldcorp
will not be a PFIC for the current taxable year or any
subsequent taxable year. Accordingly, although Goldcorp expects
that it may be a QFC for the current taxable year, there can be
no assurances that the IRS will not challenge the determination
made by Goldcorp concerning its QFC status, that Goldcorp will
be a QFC for the current taxable year or for any subsequent
taxable year, or that Goldcorp will be able to certify that it
is a QFC in accordance with the certification procedures issued
by the Treasury and the IRS.
If Goldcorp is not a QFC, a dividend paid by Goldcorp to a
U.S. Holder, including a U.S. Holder that is an
individual, estate, or trust, generally will be taxed at
ordinary income tax rates (and not at the preferential tax rates
applicable to long-term capital gains). The dividend rules are
complex, and each U.S. Holder should consult its own tax
adviser regarding the dividend rules.
Distributions
Paid in Foreign Currency
The amount of a distribution received on the Goldcorp Shares in
foreign currency generally will be equal to the U.S. dollar
value of such distribution based on the exchange rate applicable
on the date of receipt. A U.S. Holder that does not convert
foreign currency received as a distribution into
U.S. dollars on the date of receipt generally will have a
tax basis in such foreign currency equal to the U.S. dollar
value of such foreign currency on the date of receipt. Such a
U.S. Holder generally will recognize ordinary income or
loss on the subsequent sale or other taxable disposition of such
foreign currency (including an exchange for U.S. dollars).
Dividends
Received Deduction
Dividends received on the Goldcorp Shares generally will not be
eligible for the “dividends received deduction.” The
availability of the dividends received deduction is subject to
complex limitations that are beyond the scope of this summary,
and a U.S. Holder that is a corporation should consult its
own tax adviser regarding the dividends received deduction.
Disposition of Goldcorp Shares
A U.S. Holder will recognize gain or loss on the sale or
other taxable disposition of Goldcorp Shares in an amount equal
to the difference, if any, between (a) the amount of cash
plus the fair market value of any property received and
(b) such U.S. Holder’s adjusted tax basis in the
Goldcorp Shares sold or otherwise disposed of. Subject to the
PFIC rules discussed below, any such gain or loss generally will
be capital gain or loss, which will be long-term capital gain or
loss if the Goldcorp Shares are held for more than one year.
Preferential tax rates apply to long-term capital gains of a
U.S. Holder that is an individual, estate, or trust. There
are currently no preferential tax rates for long-term capital
gains of a U.S. Holder that is a corporation. Deductions
for capital losses are subject to significant limitations under
the Code.
A U.S. Holder that pays (whether directly or through
withholding) Canadian income tax with respect to dividends
received on the Goldcorp Shares generally will be entitled, at
the election of such U.S. Holder, to receive either a
deduction or a credit for such Canadian income tax paid.
Generally, a credit will reduce a U.S. Holder’s
U.S. federal income tax liability on a dollar-for-dollar
basis, whereas a deduction will reduce a U.S. Holder’s
income subject to U.S. federal income tax. This election is
made on a year-by-year basis and applies to all foreign taxes
paid (whether directly or through withholding) by a
U.S. Holder during a taxable year.
Complex limitations apply to the foreign tax credit, including
the general limitation that the credit cannot exceed the
proportionate share of a U.S. Holder’s
U.S. federal income tax liability that such
U.S. Holder’s “foreign source” taxable
income bears to such U.S. Holder’s worldwide taxable
income. In applying this limitation, a U.S. Holder’s
various items of income and deduction must be classified, under
complex rules, as either “foreign source” or
“U.S. source.” In addition, this limitation is
calculated separately with respect to specific categories of
income (including “passive income,”“high
withholding tax interest,”“financial services
income,”“general income,” and certain other
categories of income). Gain or loss recognized by a
U.S. Holder on the sale or other taxable disposition of
Goldcorp Shares generally will be treated as
“U.S. source” for purposes of applying the
foreign tax credit rules. Dividends received on the Goldcorp
Shares generally will be treated as “foreign source”
and generally will be categorized as “passive income”
or, in the case of certain U.S. Holders, “financial
services income” for purposes of applying the foreign tax
credit rules. However, for taxable years beginning after
December 31, 2006, the foreign tax credit limitation
categories are reduced to “passive category income”
and “general category income” (and the other
categories of income are eliminated). The foreign tax credit
rules are complex, and each U.S. Holder should consult its
own tax adviser regarding the foreign tax credit rules.
Additional Rules that May Apply to
U.S. Holders
If Goldcorp is a CFC or a PFIC, the preceding sections of this
summary may not describe the U.S. federal income tax
consequences to a U.S. Holder of the ownership and
disposition of Goldcorp Shares.
Controlled
Foreign Corporation
Goldcorp generally will be a CFC if more than 50% of the total
voting power or the total value of the outstanding shares of
Goldcorp is owned, directly or indirectly, by citizens or
residents of the U.S., domestic partnerships, domestic
corporations, domestic estates, or domestic trusts (each as
defined in Section 7701(a)(30) of the Code), each of which
own, directly or indirectly, 10% or more of the total voting
power of the outstanding shares of Goldcorp (a “10%
Shareholder”).
If Goldcorp is a CFC, a 10% Shareholder generally will be
subject to current U.S. federal income tax with respect to
(a) such 10% Shareholder’s pro rata share of the
“subpart F income” (as defined in
Section 952 of the Code) of Goldcorp and (b) such 10%
Shareholder’s pro rata share of the earnings of Goldcorp
invested in “United States property” (as defined in
Section 956 of the Code). In addition, under
Section 1248 of the Code, any gain recognized on the sale
or other taxable disposition of Goldcorp Shares by a
U.S. Holder that was a 10% Shareholder at any time during
the five-year period ending with such sale or other taxable
disposition generally will be treated as a dividend to the
extent of the “earnings and profits” of Goldcorp that
are attributable to such Goldcorp Shares. If Goldcorp is both a
CFC and a PFIC, Goldcorp generally will be treated as a CFC (and
not as a PFIC) with respect to any 10% Shareholder.
Goldcorp does not believe that it has previously been, or
currently is, a CFC. However, there can be no assurance that
Goldcorp will not be a CFC for the current or any subsequent
taxable year.
Passive
Foreign Investment Company
Goldcorp generally will be a PFIC if, for a taxable year,
(a) 75% or more of the gross income of Goldcorp for such
taxable year is passive income or (b) on average, 50% or
more of the assets held by Goldcorp either produce passive
income or are held for the production of passive income, based
on the fair market value of such assets (or on the adjusted tax
basis of such assets, if Goldcorp is not publicly traded and
either is a CFC or makes an election). “Passive
income” includes, for example, dividends, interest, certain
rents and royalties, certain gains from the sale of stock and
securities, and certain gains from commodities transactions.
For purposes of the PFIC income test and asset test described
above, if Goldcorp owns, directly or indirectly, 25% or more of
the total value of the outstanding shares of another foreign
corporation, Goldcorp will be treated as if it (a) held a
proportionate share of the assets of such other foreign
corporation and (b) received directly a proportionate share
of the income of such other foreign corporation. In addition,
for purposes of the PFIC income test and asset test described
above, “passive income” does not include any interest,
dividends, rents, or royalties that are received or accrued by
Goldcorp from a “related person” (as defined in
Section 954(d)(3) of the Code), to the extent such items
are properly allocable to the income of such related person that
is not passive income.
Goldcorp does not believe that it was a PFIC for the previous
taxable year and does not expect that it will be a PFIC for the
current taxable year. The determination of whether Goldcorp was,
or will be, a PFIC for a taxable year depends, in part, on the
application of complex U.S. federal income tax rules, which
are subject to various interpretations. In addition, whether
Goldcorp will be a PFIC for the current taxable year and each
subsequent taxable year depends on the assets and income of
Goldcorp over the course of each such taxable year and, as a
result, cannot be predicted with certainty as of the date of
this Circular. Accordingly, there can be no assurance that the
IRS will not challenge the determination made by Goldcorp
concerning its PFIC status or that Goldcorp was not, or will not
be, a PFIC for any taxable year.
Default
PFIC Rules Under Section 1291 of the Code
If Goldcorp is a PFIC, the U.S. federal income tax
consequences to a U.S. Holder of the ownership and
disposition of Goldcorp Shares will depend on whether such
U.S. Holder makes an election to treat Goldcorp as a
“qualified electing fund” or “QEF” under
Section 1295 of the Code or a mark-to-market election under
Section 1296 of the Code (a “Mark-to-Market
Election”). See “Impact of PFIC Rules on Certain
U.S. Holders.” A U.S. Holder that does not make
either a QEF Election or a Mark-to-Market Election will be
referred to in this summary as a “Non-Electing
U.S. Holder.”
A Non-Electing U.S. Holder will be subject to the rules of
Section 1291 of the Code with respect to (a) any gain
recognized on the sale or other taxable disposition of Goldcorp
Shares and (b) any excess distribution received on the
Goldcorp Shares. A distribution generally will be an
“excess distribution” to the extent that such
distribution (together with all other distributions received in
the current taxable year) exceeds 125% of the average
distributions received during the three preceding taxable years
(or during a U.S. Holder’s holding period for the
Goldcorp Shares, if shorter).
Under Section 1291 of the Code, any gain recognized on the
sale or other taxable disposition of Goldcorp Shares, and any
excess distribution received on the Goldcorp Shares, must be
ratably allocated to each day in a Non-Electing
U.S. Holder’s holding period for the Goldcorp Shares.
The amount of any such gain or excess distribution allocated to
prior years of such Non-Electing U.S. Holder’s holding
period for the Goldcorp Shares (other than years prior to the
first taxable year of Goldcorp beginning after December 31,
1986 for which Goldcorp was a PFIC) will be subject to
U.S. federal income tax at the highest tax rate applicable
to ordinary income in each such prior year. A Non-Electing
U.S. Holder will be required to pay interest on the
resulting tax liability for each such prior year, calculated as
if such tax liability had been due in each such prior year. Such
a Non-Electing U.S. Holder that is not a corporation must
treat any such interest paid as “personal interest,”
which is not deductible. The amount of any such gain or excess
distribution allocated to the current year of such Non-Electing
U.S. Holder’s holding period for the Goldcorp Shares
will be treated as ordinary income in the current year, and no
interest charge will be incurred with respect to the resulting
tax liability for the current year.
If Goldcorp is a PFIC for any taxable year during which a
Non-Electing U.S. Holder holds Goldcorp Shares, Goldcorp
will continue to be treated as a PFIC with respect to such
Non-Electing U.S. Holder, regardless of whether Goldcorp
ceases to be a PFIC in one or more subsequent taxable years. A
Non-Electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under
the rules of Section 1291 of the Code discussed above) as
if such Goldcorp Shares were sold on the last day of the last
taxable year for which Goldcorp was a PFIC.
In addition, if Goldcorp is a PFIC and owns shares of another
foreign corporation that also is a PFIC, under certain indirect
ownership rules, a disposition by Goldcorp of the shares of such
other foreign corporation or a distribution received by Goldcorp
from such other foreign corporation generally will be treated as
an indirect disposition by a U.S. Holder or an indirect
distribution received by a U.S. Holder, subject to the
rules of Section 1291 of the Code discussed above. To the
extent that gain recognized on the actual disposition by a
U.S. Holder of Goldcorp Shares or income recognized by a
U.S. Holder on an actual distribution received on the
Goldcorp Shares was previously subject
to U.S. federal income tax under these indirect ownership
rules, such amount generally should not be subject to
U.S. federal income tax.
The PFIC rules are complex, and each U.S. Holder should
consult its own tax adviser regarding the PFIC rules and how the
PFIC rules may affect the U.S. federal income tax
consequences of the ownership and disposition of Goldcorp Shares.
QEF
Election
The procedure for making a QEF Election, and the
U.S. federal income tax consequences of making a QEF
Election, will depend on whether such QEF Election is timely. A
QEF Election generally will be “timely” if it is made
for the first year in a U.S. Holder’s holding period
for the Goldcorp Shares in which Goldcorp is a PFIC. In this
case, a U.S. Holder may make a timely QEF Election by
filing the appropriate QEF Election documents with such
U.S. Holder’s U.S. federal income tax return for
such first year. However, if Goldcorp was a PFIC in a prior year
in a U.S. Holder’s holding period for the Goldcorp
Shares, then in order to be treated as making a
“timely” QEF Election, such U.S. Holder must
elect to recognize gain (which will be taxed under the rules of
Section 1291 of the Code discussed above) as if the
Goldcorp Shares were sold on the qualification date for an
amount equal to the fair market value of the Goldcorp Shares on
the qualification date. The “qualification date” is
the first day of the first taxable year in which Goldcorp was a
QEF with respect to such U.S. Holder. In addition, under
very limited circumstances, a U.S. Holder may make a
retroactive QEF Election if such U.S. Holder failed to file
the QEF Election documents in a timely manner.
A QEF Election will apply to the taxable year for which such QEF
Election is made and to all subsequent taxable years, unless
such QEF Election is invalidated or terminated or the IRS
consents to revocation of such QEF Election. If a
U.S. Holder makes a QEF Election and, in a subsequent
taxable year, Goldcorp ceases to be a PFIC, the QEF Election
will remain in effect (although it will not be applicable)
during those taxable years in which Goldcorp is not a PFIC.
Accordingly, if Goldcorp becomes a PFIC in another subsequent
taxable year, the QEF Election will be effective and the
U.S. Holder will be subject to the QEF rules described
above during any such subsequent taxable year in which Goldcorp
qualifies as a PFIC. In addition, the QEF Election will remain
in effect (although it will not be applicable) with respect to a
U.S. Holder even after such U.S. Holder disposes of
all of such U.S. Holder’s direct and indirect interest
in the Goldcorp Shares. Accordingly, if such U.S. Holder
reacquires an interest in Goldcorp, such U.S. Holder will
be subject to the QEF rules described above for each taxable
year in which Goldcorp is a PFIC.
A U.S. Holder that makes a timely QEF Election generally
will not be subject to the rules of Section 1291 of the
Code discussed above. For example, a U.S. Holder that makes
a timely QEF Election generally will recognize capital gain or
loss on the sale or other taxable disposition of Goldcorp Shares.
However, for each taxable year in which Goldcorp is a PFIC, a
U.S. Holder that makes a QEF Election will be subject to
U.S. federal income tax on such U.S. Holder’s pro
rata share of (a) the net capital gain of Goldcorp, which
will be taxed as long-term capital gain to such
U.S. Holder, and (b) the ordinary earnings of
Goldcorp, which will be taxed as ordinary income to such
U.S. Holder. Generally, “net capital gain” is the
excess of (a) net long-term capital gain over (b) net
short-term capital loss, and “ordinary earnings” are
the excess of (a) “earnings and profits” over
(b) net capital gain. A U.S. Holder that makes a QEF
Election will be subject to U.S. federal income tax on such
amounts for each taxable year in which Goldcorp is a PFIC,
regardless of whether such amounts are actually distributed to
such U.S. Holder by Goldcorp. However, a U.S. Holder
that makes a QEF Election may, subject to certain limitations,
elect to defer payment of current U.S. federal income tax
on such undistributed amounts, subject to an interest charge. If
such U.S. Holder is not a corporation, any such interest
paid will be treated as “personal interest,” which is
not deductible.
A U.S. Holder that makes a QEF Election generally
(a) may receive a tax-free distribution from Goldcorp to
the extent that such distribution represents “earnings and
profits” of Goldcorp that were previously included in
income by the U.S. Holder because of such QEF Election and
(b) will adjust such U.S. Holder’s tax basis in
the Goldcorp Shares to reflect the amount included in income or
allowed as a tax-free distribution because of such QEF Election.
U.S. Holders should be aware that there can be no assurance
that Goldcorp will satisfy record keeping requirements that
apply to a QEF, or that Goldcorp will supply U.S. Holders
with information that such U.S. Holders are required to
report under the QEF rules, in the event that Goldcorp is a PFIC
and a U.S. Holder wishes to make a QEF Election. Each
U.S. Holder should consult its own tax adviser regarding
the availability of, and procedure for making, a QEF Election.
A U.S. Holder may make a Mark-to-Market Election only if
the Goldcorp Shares are marketable stock. The Goldcorp Shares
generally will be “marketable stock” if the Goldcorp
Shares are regularly traded on a qualified exchange or other
market. For this purpose, a “qualified exchange or other
market” includes (a) a national securities exchange
that is registered with the Securities and Exchange Commission,
(b) the national market system established pursuant to
section 11A of the Securities and Exchange Act of 1934, or
(c) a foreign securities exchange that is regulated or
supervised by a governmental authority of the country in which
the market is located, provided that (i) such foreign
exchange has trading volume, listing, financial disclosure,
surveillance, and other requirements designed to prevent
fraudulent and manipulative acts and practices, remove
impediments to and perfect the mechanism of a free, open, fair,
and orderly market, and protect investors (and the laws of the
country in which the foreign exchange is located and the rules
of the foreign exchange ensure that such requirements are
actually enforced) and (ii) the rules of such foreign
exchange effectively promote active trading of listed stocks. If
the Goldcorp Shares are traded on such a qualified exchange or
other market, the Goldcorp Shares generally will be
“regularly traded” for any calendar year during which
the Goldcorp Shares are traded, other than in de minimis
quantities, on at least 15 days during each calendar
quarter.
A Mark-to-Market Election applies to the taxable year in which
such Mark-to-Market Election is made and to each subsequent
taxable year, unless the Goldcorp Shares cease to be
“marketable stock” or the IRS consents to revocation
of such election. Each U.S. Holder should consult its own
tax adviser regarding the availability of, and procedure for
making, a Mark-to-Market Election.
A U.S. Holder that makes a Mark-to-Market Election
generally will not be subject to the rules of Section 1291
of the Code discussed above. However, if a U.S. Holder
makes a Mark-to-Market Election after the beginning of such
U.S. Holder’s holding period for the Goldcorp Shares
and such U.S. Holder has not made a timely QEF Election,
the rules of Section 1291 of the Code discussed above will
apply to certain dispositions of, and distributions on, the
Goldcorp Shares as well as to certain amounts that would be
subject to the mark-to-market rules but for Section 1291.
A U.S. Holder that makes a Mark-to-Market Election will
include in ordinary income, for each taxable year in which
Goldcorp is a PFIC, an amount equal to the excess, if any, of
(a) the fair market value of the Goldcorp Shares as of the
close of such taxable year over (b) such
U.S. Holder’s adjusted tax basis in such Goldcorp
Shares. A U.S. Holder that makes a Mark-to-Market Election
will be allowed a deduction in an amount equal to the lesser of
(a) the excess, if any, of (i) such
U.S. Holder’s adjusted tax basis in the Goldcorp
Shares over (ii) the fair market value of such Goldcorp
Shares as of the close of such taxable year or (b) the
excess, if any, of (i) the amount included in ordinary
income because of such Mark-to-Market Election for prior taxable
years over (ii) the amount allowed as a deduction because
of such Mark-to-Market Election for prior taxable years.
A U.S. Holder that makes a Mark-to-Market Election
generally will adjust such U.S. Holder’s tax basis in
the Goldcorp Shares to reflect the amount included in gross
income or allowed as a deduction because of such Mark-to-Market
Election. In addition, upon a sale or other taxable disposition
of Goldcorp Shares, a U.S. Holder that makes a
Mark-to-Market Election will recognize ordinary income or loss
(not to exceed the excess, if any, of (a) the amount
included in ordinary income because of such Mark-to-Market
Election for prior taxable years over (b) the amount
allowed as a deduction because of such Mark-to-Market Election
for prior taxable years).
Other
PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued
proposed Treasury Regulations that, subject to certain
exceptions, would cause a U.S. Holder that had not made a
timely QEF Election to recognize gain (but not loss) upon
certain transfers of Goldcorp Shares that would otherwise be
tax-deferred (such as gifts and exchanges pursuant to
tax-deferred reorganizations under Section 368 of the
Code). However, the specific U.S. federal income tax
consequences to a U.S. Holder may vary based on the manner
in which Goldcorp Shares are transferred.
Certain additional adverse rules may apply with respect to a
U.S. Holder if Goldcorp is a PFIC. For example under
Section 1298(b)(6) of the Code, a U.S. Holder that
uses Goldcorp Shares as security for a loan will, except as may
be provided in Treasury Regulations, be treated as having made a
taxable disposition of such Goldcorp Shares.
The PFIC rules are complex, and each U.S. Holder should
consult its own tax adviser regarding the PFIC rules and how the
PFIC rules may affect the U.S. federal income tax
consequences of the ownership and disposition of Goldcorp Shares.
United States backup withholding tax and information reporting
requirements generally apply to certain payments to certain
non-corporate U.S. Holders. Information reporting generally
will apply to payments of distributions on, and to proceeds from
the sale or disposition of, the Goldcorp Shares or Glamis
Shares, by a payor within the United States to a
U.S. Holder, unless such U.S. Holder is an exempt
recipient, including a corporation, or provides an appropriate
certification.
A payor within the United States will be required to withhold
tax (currently at a rate of 28%) from any payments of
distributions on, or proceeds from the sale or disposition of
Goldcorp Shares or Glamis Shares, within the United States to a
U.S. Holder (unless such U.S. Holder is an exempt
recipient) that fails to furnish a correct taxpayer
identification number on IRS Form W-9 or otherwise fails to
comply with, or establish an exemption from, such backup
withholding tax requirements. A U.S. Holder will be allowed
a refund or a credit equal to any amounts withheld under the
United States backup withholding tax against such
U.S. Holder’s United States federal income tax
liability, provided the U.S. Holder furnishes the required
information to the IRS.
No Ruling or Legal Opinion
No opinion of legal counsel and no ruling from the IRS
concerning the U.S. federal income tax consequences of the
Exchange and Amalgamation or any other matter discussed herein
has been obtained by Glamis and none will be requested by
Glamis. This summary is not binding on the IRS and the IRS is
not precluded from taking a different position or positions.
U.S. Holders should be aware that some of the
U.S. federal income tax consequences of the Exchange and
Amalgamation are governed by provisions of the Code as to which
there are no final Treasury Regulations and little or no
judicial or administrative guidance.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED
TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX
ADVICE TO ANY PARTICULAR SHAREHOLDER. SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISERS AS TO THE TAX CONSEQUENCES OF THE
DESCRIBED TRANSACTIONS IN THEIR PARTICULAR CIRCUMSTANCES.
SECURITIES LAWS CONSIDERATIONS
The following is a brief summary of the securities law
considerations applicable to the Arrangement and transactions
contemplated thereby.
Canadian Securities Laws
Each Glamis Shareholder is urged to consult the holder’s
professional advisers to determine the Canadian conditions and
restrictions applicable to trades in Goldcorp Shares.
Status under Canadian Securities Laws
Glamis is a reporting issuer (or the equivalent) in each
province of Canada. Glamis Shares currently trade on the TSX and
the NYSE. After the Arrangement, Glamis Shares will be delisted
from the TSX and the NYSE, and Goldcorp will apply to the
applicable Canadian securities regulators to have Glamis
classified as a non-reporting issuer. Goldcorp is a reporting
issuer (or the equivalent) in each province and territory of
Canada. Goldcorp Shares are listed on the TSX and the NYSE. It
is a condition of the Arrangement that the Goldcorp Shares
issued pursuant to the Arrangement and which are reserved for
issue upon exercise of the Converted Goldcorp Options be listed
on the TSX and the NYSE.
Issue and Resale of Goldcorp Shares Under Canadian
Securities Acts
The issue of Goldcorp Shares and Converted Goldcorp Options
pursuant to the Arrangement and the issue of Goldcorp Shares on
exercise of Converted Goldcorp Options will constitute
distributions of securities, which are exempt from the
registration and prospectus requirements of the Canadian
Securities Acts. Goldcorp Shares may be resold in each province
and territory of Canada, provided (i) the trade is not a
“control distribution” as defined National Instrument
45-102, (ii) no unusual effort is made to prepare the
market or create a demand for those securities, (iii) no
extraordinary commission or consideration is paid in respect of
that sale, and (iv) if the selling security holder is an
insider or officer of Goldcorp, the insider or officer has no
reasonable grounds to believe that Goldcorp is in default of
securities legislation.
Each of Goldcorp and Glamis is a “foreign private
issuer” as defined under the U.S. Exchange Act. Glamis
Shares are listed for trading on the NYSE and as such Glamis is
subject to the periodic reporting requirements under
Section 13(a) of the U.S. Exchange Act. Goldcorp
Shares are listed for trading on the NYSE and as such Goldcorp
is subject to the periodic reporting requirements under
Section 13(a) of the U.S. Exchange Act.
Issue and Resale of Goldcorp Shares Under
U.S. Securities Laws
The following discussion is a general overview of certain
requirements of U.S. federal securities laws applicable to
Glamis Shareholders in the United States
(“U.S. Shareholders”). All U.S. Shareholders
are urged to consult with their own legal advisers to ensure
that the resale of Goldcorp Shares issued to them under the
Arrangement complies with applicable securities legislation.
Further information applicable to U.S. Shareholders is
disclosed under “Note to United States
Shareholders”.
The issue of Goldcorp Shares, and the subsequent resale of these
shares held by U.S. Shareholders, will be subject to
U.S. securities laws, including the U.S. Securities
Act.
The following discussion does not address the Canadian
Securities Acts that will apply to the issue of the Goldcorp
Shares to U.S. Shareholders within Canada.
U.S. Shareholders who resell Goldcorp Shares in Canada must
comply with Canadian Securities Acts, as outlined above.
Exemption from the Registration Requirements of the
U.S. Securities Act
The Goldcorp Shares and Converted Goldcorp Options to be issued
by Goldcorp pursuant to the Arrangement will not be registered
under the U.S. Securities Act or the securities laws of any
state of the United States and such issue will be effected in
reliance on the Section 3(a)(10) Exemption and exemptions
provided under the securities laws of each state of the United
States in which U.S. Shareholders reside, subject to
certain notice requirements. Section 3(a)(10) of the
U.S. Securities Act exempts from registration a security
which is issued in exchange for outstanding securities where the
terms and conditions of such issue and exchange are approved,
after a hearing upon the fairness of such terms and conditions
at which all persons to whom it is proposed to issue securities
in such exchange have the right to appear, by a court or
governmental authority expressly authorized by law to grant such
approval. Accordingly, the Final Order, if granted, constitutes
a basis for the exemption from the registration requirements of
the U.S. Securities Act with respect to the Goldcorp Shares
and Converted Goldcorp Options issued in connection with the
Arrangement.
Resales of Goldcorp Shares within the United States after
the Completion of the Arrangement
The following discussion is limited to the resale of Goldcorp
Shares within the United States. U.S. Shareholders may also
resell their shares in limited circumstances outside of the
United States in accordance with Regulation S. The
availability of Regulation S for non-United States resales
is discussed below under “Resales of Securities Pursuant to
Regulation S”.
The manner in which a U.S. Shareholder may resell Goldcorp
Shares issued to the shareholder on completion of the
Arrangement within the United States will depend on whether the
U.S. Shareholder is an “affiliate” of Goldcorp or
Glamis before the completion of the Arrangement and whether the
U.S. Shareholder is an “affiliate” of Goldcorp
after completion of the Arrangement. As defined in Rule 144
under the U.S. Securities Act, an “affiliate” of
an issuer is a person that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, the issuer. Typically, persons who are
executive officers, directors or 10% or greater shareholders of
an issuer are considered to be its “affiliates”. The
resale rules applicable to U.S. Shareholders are summarized
below.
Non-Affiliates Before and After the Arrangement
U.S. Shareholders who are not affiliates of Glamis or
Goldcorp before the Arrangement and who will not be affiliates
of Goldcorp after the Arrangement may resell the Goldcorp Shares
issued to them upon closing of the Arrangement in the United
States without restriction under the U.S. Securities Act.
Affiliates Before the Arrangement and Non-Affiliates After
the Arrangement
U.S. Shareholders who are affiliates of Glamis or Goldcorp
before the Arrangement but will not be affiliates of Goldcorp
after the Arrangement, and who hold their Goldcorp Shares for
one year after the Effective Date, may resell their Goldcorp
Shares without regard to the volume and manner of sale
limitations set forth in Rule 144 of the
U.S. Securities Act, subject to the availability of certain
public information about Goldcorp. U.S. Shareholders who
are affiliates of Goldcorp before the Effective Date who hold
their Goldcorp Shares for a period of two years after the
Effective Date may resell such shares freely, provided that such
persons have not been an affiliate of Goldcorp during the
three-month period preceding the resale.
Affiliates Before the Arrangement and Affiliates After the
Arrangement
U.S. Shareholders who are affiliates of Glamis or Goldcorp
before the Arrangement and who will be affiliates of Goldcorp
after the Arrangement will be subject to restrictions on resale
imposed by the U.S. Securities Act with respect to Goldcorp
Shares issued under the Arrangement. These affiliates may not
resell their Goldcorp Shares within the United States unless
such shares are registered under the U.S. Securities Act,
or an exemption from registration is available, such as the
exemption contained in Rule 145(d) promulgated under the
U.S. Securities Act. In general, under Rule 145(d),
these affiliates will be entitled to resell in the United
States, during any three-month period, that number of Goldcorp
Shares that does not exceed the greater of one percent of the
then outstanding securities of such class and the average weekly
trading volume of such securities on the NYSE during the four
weeks preceding the date of sale, subject to certain
restrictions contained in Rule 144 under the
U.S. Securities Act as to manner of sale, notice
requirements, aggregation rules and the availability of certain
public information about Goldcorp.
Resales of Securities Pursuant to Regulation S
U.S. Shareholders who receive Goldcorp Shares under the
Arrangement may, under the U.S. Securities Act, resell
their Goldcorp Shares in an “offshore transaction” in
accordance with Regulation S, provided the conditions
imposed thereunder for offshore resales are satisfied. An
“offshore transaction” includes a transaction executed
using the facilities of a designated offshore securities
exchange, such as the TSX, provided the offer of the securities
is not made to a person in the United States and neither the
seller nor any person acting on the seller’s behalf knows
the transaction has been pre-arranged with a buyer in the United
States.
The availability of the Regulation S “offshore
resale” exemption depends in part on whether the
U.S. Shareholder is an “affiliate” of Goldcorp
upon completion of the Arrangement. See the discussion above of
“affiliate” under “Resale of Goldcorp Shares
within the United States after the Completion of the
Arrangement”. The resale rules applicable to the
U.S. Shareholders of Goldcorp are summarized below.
A U.S. Shareholder who is not an affiliate, or who is an
affiliate solely by virtue of being an officer or director, of
Goldcorp after completion of the Arrangement may resell his or
her Goldcorp Shares in “offshore transactions”
provided (a) neither the U.S. Shareholder, an
affiliate nor any person acting on their behalf engages in
“directed selling efforts” in the United States, and
(b) in the case of an officer or director of Goldcorp, no
selling concession, fee or other remuneration is paid in
connection with such offer or sale other than the usual and
customary broker’s commission that would be received by a
person executing such transaction as agent. Under
Regulation S, “directed selling efforts” are
defined as “any activity undertaken for the purpose of, or
that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the
securities being offered” in the resale transaction.
Additional restrictions apply to a U.S. Shareholder who
will be an affiliate of Goldcorp other than by virtue of his or
her status as an officer or director of Goldcorp.
Exercise of Converted Goldcorp Options to be Issued in
Exchange for the Glamis Options
Under and as provided in the Arrangement Agreement, Goldcorp
will issue Converted Goldcorp Options on the basis set forth in
the Arrangement Agreement. Goldcorp Shares issuable on exercise
of Converted Goldcorp Options have not been registered under the
U.S. Securities Act. As a result, the Converted Goldcorp
Options may not be exercised by or on behalf of a person in the
United States, and the Goldcorp Shares issuable upon exercise
thereof may not be offered or sold in the United States, unless
such Goldcorp Shares have been registered under the
U.S. Securities Act and the securities laws of all
applicable states of the United States or an exemption from such
registration requirements is available. Pursuant to the
Arrangement Agreement, Goldcorp has agreed to file a
registration statement
on Form S-8
promptly following the Effective Date for the purpose of
registering under the U.S. Securities Act such Goldcorp
Shares issuable upon exercise of the Converted Goldcorp Options.
INFORMATION CONCERNING GOLDCORP
The following information is presented on a pre-Arrangement
basis and reflects the current business, financial and share
capital position of Goldcorp. See “Information Concerning
Glamis” and “The Combined Company After the
Arrangement” in this Circular for current and pro forma,
business, financial and share capital information relating to
Glamis and the Combined Company, respectively.
Incorporation
Goldcorp is a corporation governed by the OBCA.
Goldcorp’s head office is located at 666 Burrard Street,
Suite 3400, Park Place, Vancouver, British Columbia,
V6C 2X8 and its registered office is located at Suite 2100,
40 King Street West, Toronto, Ontario, M5H 3C2.
The following chart illustrates the principal subsidiaries of
Goldcorp, together with the jurisdiction of incorporation of
each company and the percentage of voting securities
beneficially owned or over which control or direction is
exercised by Goldcorp, as well as the mineral properties held by
Goldcorp directly or indirectly through such subsidiaries:
Goldcorp is engaged in the acquisition, exploration, development
and operation of precious metal properties. The principal
products and sources of cash flow for Goldcorp are derived from
the sale of gold, silver and copper. Goldcorp’s primary
properties consist of a 100% interest in the Red Lake gold mine
comprised of the “Red Lake Complex” and the
“Campbell Complex”, in Ontario, Canada (the
“Red Lake Mines”), one of the highest-grade
gold deposits in the world, a 37.5% interest in the Alumbrera
gold-copper mine (the “Alumbrera Mine”) in
Argentina, a 100% interest in the San Dimas, San Martin and
Nukay gold-silver mines (each, the “San Dimas
Mines”, the “San Martin Mine” and
the “Nukay Mine”, respectively) in Mexico, a
100% interest in the Peak gold mine (the “Peak
Mine”) in Australia, a 51% interest in the Porcupine
gold mine (the “Porcupine Mine”) in Ontario,
Canada, a 68% interest in the Musselwhite gold mine (the
“Musselwhite Mine”) in Ontario, Canada, a 50%
interest in the La Coipa gold-silver mine (the
“La Coipa Mine”) in Chile, a 100% interest
in the Amapari gold mine (the “Amapari Mine”)
in Brazil, a 100% interest in the Éléonore gold
project in Québec, Canada, a 100% interest in the
Los Filos gold development-stage project (the
“Los Filos Project”) in Mexico and a 40%
interest in the Pueblo Viejo gold development project (the
“Pueblo Viejo Project”) in the Dominican
Republic. Goldcorp also produces gold at the Wharf mine (the
“Wharf Mine”) in South Dakota, United States.
Goldcorp also owns approximately 57% of TSX-listed Silver
Wheaton Corp. (“Silver Wheaton”), a mining
company that derives 100% of its revenue from silver production.
Summary of Mineral Reserve and Resource Estimates
Mineral Reserve Estimates
The following table sets forth the estimated Ore Reserves/
Mineral Reserves for the Red Lake Mines, the Alumbrera Mine, the
San Dimas Mines, the San Martin Mine, the Nukay Mine, the
Los Filos Project, the Peak Mine, the Wharf Mine, the
Amapari Mine, the Musselwhite Mine, the Porcupine Mine, the
La Coipa Mine and the Pueblo Viejo Project, as of
December 31, 2005, except for the Alumbrera Mine, which is
reported as of June 30, 2006:
Proved/ Proven and Probable Ore/ Mineral
Reserves(1)(15)
Pueblo Viejo
Project(14)
(Goldcorp’s 40% interest)
Probable
13,520
3.04
—
—
1,320
—
—
Proven + Probable
51,880
3.22
—
—
5,370
—
—
Proved/Proven
12,010
34,900
1,428,000
Total
Probable
13,030
34,800
101,000
Proved/Proven + Probable
25,040
69,700
1,529,000
(1)
All Mineral Reserves have been calculated in accordance with the
CIM Standards or the JORC Code. The JORC Code has been accepted
for current disclosure rules in Canada under NI 43-101.
(2)
The Mineral Reserves for the Red Lake Complex have been
estimated by Stephen McGibbon, P. Geo., Red Lake Exploration
Manager of Goldcorp, who is a qualified person under NI 43-101
and audited by Watts, Griffis and McOuat Limited
(“WGM”). The Mineral Reserves are classified as
proven and probable, and are based on the CIM Standards. See
“Description of the Business — Red Lake Mine,
Ontario — Mineral Reserve and Mineral Resource
Estimates” in the Goldcorp Renewal Annual Information Form
for the year ended December 31, 2005 (in these Notes
“Goldcorp AIF”) for further details.
(3)
The Mineral Reserves for the Campbell Complex have been
estimated by Stephane Blais, Chief Engineer, who is a qualified
person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards.
(4)
The Ore Reserves for the Alumbrera Mine have been estimated by
Luis Rivera, MAusIMM at Minera Alumbrera Limited who is a
qualified person under NI 43-101 and a competent person under
the JORC Code. The Mineral Reserves are classified as proved and
probable, and are based on the JORC Code. See “Description
of the Business — Alumbrera Mine,
Argentina — Ore Reserve and Mineral Resource
Estimates” in the Goldcorp AIF for further details.
(5)
The Mineral Reserves for the San Dimas Mines and the San Martin
Mine have been estimated by Reynaldo Rivera, MAusIMM at Luismin
who is a qualified person under NI 43-101. The Mineral Reserves
are classified as proven and probable, and are based on the CIM
Standards. See “Description of the Business —
Luismin Mines, Mexico — Mineral Reserve and Mineral
Resource Estimates” in the Goldcorp AIF for further details.
(6)
The Mineral Reserves for the Nukay Mine have been estimated by
Reynaldo Rivera, MAusIMM at Luismin and Gary Giroux, P.Eng., at
Micon International Limited (“Micon”) who are
each qualified persons under
NI 43-101. The
Mineral Reserves are classified as proven and probable, and are
based on the CIM Standards. See “Description of the
Business — Luismin Mines, Mexico — Mineral
Reserve and Mineral Resource Estimates” in the Goldcorp AIF
for further details.
(7)
The Mineral Reserves for the Los Filos Project have been
estimated by Michael G. Hester, FAusIMM of Independent Mining
Consultants, Inc. (“IMC”) who is a qualified
person under NI 43-101. The Mineral Reserves are classified as
proven and probable, and are based on the CIM Standards. See
Snowden Mining Industry Consultants’
(“Snowden”) “Technical Report NI 43-101F1
Los Filos Project, Mexico” dated March 31, 2006
available on www.sedar.com for further details.
(8)
The Ore Reserves for the Peak Mine have been estimated by Joe
Ranford, MAusIMM at Peak Gold Mines Pty Ltd. who is a qualified
person under
NI 43-101 and a
competent person under the JORC Code. The Mineral Reserves are
classified as proved and probable, and are based on the JORC
Code. See “Description of the Business — Peak
Mine, Australia — Ore Reserve and Mineral Resource
Estimates” in the Goldcorp AIF for further details.
The Mineral Reserves for the Wharf Mine have been estimated by
Ken Nelson, Wharf Geological Engineer of Goldcorp, and audited
by Randy V.J. Smallwood, P.Eng., of Goldcorp, who is a qualified
person under
NI 43-101. The
Mineral Reserves are classified as proven and probable, and are
based on the CIM Standards. See “Description of the
Business — Wharf Mine, South Dakota —
Mineral Reserve and Mineral Resource Estimates” in the
Goldcorp AIF for further details.
(10)
The Ore Reserves for the Amapari Mine have been estimated by
Rodrigo Mello, MAusIMM at Mineração Pedra Branca do
Amapari Ltda. who is a qualified person under
NI 43-101 and a
competent person under the JORC Code. The Mineral Reserves are
classified as proved and probable, and are based on the JORC
Code. See “Description of the Business — Amapari
Project, Brazil — Ore Reserve and Mineral Resource
Estimates” in the Goldcorp AIF for further details.
(11)
The Mineral Reserves for the Musselwhite Mine have been
estimated by Robert MacDonald, Chief Mine Engineer, who is a
qualified person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards.
(12)
The Mineral Reserves for the Porcupine Mine have been estimated
by Stephen Taylor, Senior Mine Engineer, Peter Andrews, Senior
Project Engineer, Jason Floyd, Senior Mine Engineer, and Imola
Gotz, Senior Project Engineer, who are each qualified persons
under NI 43-101.
The Mineral Reserves are classified as proven and probable and
are based on the CIM Standards.
(13)
The Mineral Reserves for the La Coipa Mine have been estimated
by Andres Guaringa Vasquez, Mine Engineer, who is a qualified
person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards.
(14)
The Mineral Reserves for the Pueblo Viejo Project have been
estimated by Peter Nahan, Senior Evaluation Engineer, who is a
qualified person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards.
(15)
Numbers may not add up due to rounding.
Mineral Resource Estimates
Cautionary Note to United States Investors Concerning
Estimates of Measured, Indicated and Inferred Resources
This section uses the terms “Measured”,
“Indicated” and “Inferred” Resources. United
States investors are advised that while such terms are
recognized and required by Canadian regulations, the SEC does
not recognize them. “Inferred Mineral Resources” have
a great amount of uncertainty as to their existence, and as to
their economic and legal feasibility. It cannot be assumed that
all or any part of an Inferred Mineral Resource will ever be
upgraded to a higher category. Under Canadian rules, estimates
of Inferred Mineral Resources may not form the basis of
feasibility or other economic studies. United States
investors are cautioned not to assume that all or any part of
Measured or Indicated Mineral Resources will ever be converted
into Mineral Reserves. United States investors are also
cautioned not to assume that all or any part of an Inferred
Mineral Resource exists, or is economically or legally
mineable.
The following table sets forth the estimated Mineral Resources
for the Red Lake Mines, the Alumbrera Mine, the San Dimas Mines,
the San Martin Mine, the Nukay Mine, the Los Filos Project, the
Peak Mine, the Amapari Mine, the El Limón Project, the
Musselwhite Mine, the Porcupine Mine, the La Coipa Mine and the
Pueblo Viejo Project, as of December 31, 2005, except for
the Alumbrera Mine, which is reported as of June 30, 2006:
Measured, Indicated and Inferred
Resources(1)(15)(16)
(excluding Proved/ Proven and Probable Mineral Reserves)
Pueblo Viejo Project
(14) —
Silver (Goldcorp’s 40% interest)
Measured
51,640
—
18
—
—
29,200
—
Indicated Measured + Indicated
13,990
65,630
—
—
13
17
— —
—
—
5,900
35,100
— —
Inferred
900
—
13
—
—
400
—
Measured
2,360
37,600
79,000
Total
Indicated
4,400
11,000
39,000
Measured + Indicated
6,750
48,600
118,000
Inferred
12,060
189,400
20,000
(1)
All Mineral Resources have been calculated in accordance with
the CIM Standards or the JORC Code.
(2)
The Mineral Resources for the Red Lake Complex have been
estimated by Stephen McGibbon, P.Geo., Red Lake Exploration
Manager of Goldcorp, who is a qualified person under
NI 43-101 and
audited by WGM. The Mineral Resources are classified as
measured, indicated and inferred, and are based on the CIM
Standards. See “Description of the Business — Red
Lake Mine, Ontario — Mineral Reserve and Mineral
Resource Estimates” in the Goldcorp Renewal Annual
Information Form for the year ended December 31, 2005 (in
these Notes “Goldcorp AIF”) for further details.
(3)
The Mineral Resources for the Campbell Complex have been
estimated by Anthony Stechishen, Senior Resource Geologist, who
is a qualified person under
NI 43-101. The
Mineral Reserves are classified as measured, indicated and
inferred and are based on the CIM Standards.
(4)
The Mineral Resources for the Alumbrera Mine have been estimated
by Luis Rivera, MAusIMM at Minera Alumbrera Limited who is a
qualified person under
NI 43-101 and a
competent person under the JORC Code. The Mineral Resources are
classified as measured and indicated, and are based on the JORC
Code. See “Description of the Business —
Alumbrera Mine, Argentina — Ore Reserve and Mineral
Resource Estimates” in the Goldcorp AIF for further details.
(5)
The Mineral Resources for the San Dimas Mines and the San Martin
Mine set have been estimated by Reynaldo Rivera, MAusIMM at
Luismin who is a qualified person under
NI 43-101. The
Mineral Resources are classified as inferred, and are based on
the CIM Standards. See “Description of the
Business — Luismin Mines, Mexico — Mineral
Reserve and Mineral Resource Estimates” in the Goldcorp AIF
for further details.
(6)
The Mineral Resources for the Nukay Mine have been estimated by
Reynaldo Rivera, MAusIMM at Luismin and Gary Giroux, P.Eng., at
Micon who are each qualified persons under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred, and are based on the CIM Standards. See
“Description of the Business — Luismin Mines,
Mexico — Mineral Reserve and Mineral Resource
Estimates” in the Goldcorp AIF for further details.
(7)
The Mineral Resources for the Los Filos Project have been
estimated by Andrew F. Ross, M.Sc, P.Geo. of Snowden who is
a qualified person under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred, and are based on the CIM Standards. See Snowden’s
“Technical Report
NI 43-101F1 Los
Filos Project, Mexico” dated March 31, 2006 available
on www.sedar.com for further details.
(8)
The Mineral Resources for the Peak Mine have been estimated by
Rex Berthelsen, MAusIMM at Peak Gold Mines Pty Ltd. who is a
qualified person under
NI 43-101 and a
competent person under the JORC Code. The Mineral Resources are
classified as measured, indicated and inferred, and are based on
the JORC Code. See “Description of the Business —
Peak Mine, Australia — Ore Reserve and Mineral
Resource Estimates” in the Goldcorp AIF for further details.
(9)
The Mineral Resources for the Amapari Mine have been estimated
by Rodrigo Mello, MAusIMM at Mineração Pedra Branca do
Amapari Ltda. who is a qualified person under
NI 43-101 and a
competent person under the JORC Code. The Mineral Resources are
classified as measured, indicated and inferred, and are based on
the JORC Code. See “Description of the Business —
Amapari Project, Brazil — Ore Reserve and Mineral
Resource Estimates” in the Goldcorp AIF for further details.
(10)
The Mineral Resources for the El Limón deposits have
been estimated by James N. Grey, P.Geo. and Al N. Samis, P.Geo.,
both at Teck Cominco Ltd. who are each qualified persons under
NI 43-101. The
Mineral Resources are classified as inferred, and are based on
the CIM Standards.
(11)
The Mineral Resources for the Musselwhite Mine have been
estimated by Andrew Cheatle, Chief Geologist, who is a qualified
person under
NI 43-101. The
Mineral Reserves are classified as measured, indicated and
inferred and are based on the CIM Standards.
(12)
The Mineral Resources for the Porcupine Mine have been estimated
by Alastair Still, Technical Services Manager, and Stephen
Price, Chief Geologist, who are each qualified persons under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred and are based on the CIM Standards.
(13)
The Mineral Resources for the La Coipa Mine have been estimated
by Andres Guaringa Vasquez, Mine Engineer, who is a qualified
person under NI 43-101. The Mineral Resources are classified as
measured, indicated and inferred and are based on the CIM
Standards.
(14)
The Mineral Resources for the Pueblo Viejo Project have been
estimated by Chris Keech, Senior Geologist/ Geostatistician, who
is a qualified person under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred and are based on the CIM Standards.
(15)
Mineral Resources are not known with the same degree of
certainty as Mineral Reserves and do not have demonstrated
economic viability.
On June 16, 2006, Goldcorp received a comment letter from
the SEC concerning the Form 40-F of Goldcorp for the year
ended December 31, 2005. On August 4, 2006, Goldcorp
filed a response to the initial comment letter of the SEC. On
August 24, 2006, Goldcorp received a second comment letter
from the SEC and is in the process of responding to the comments
in the second comment letter. At this time, Goldcorp is unable
to determine whether the SEC comments will cause Goldcorp to
amend or restate its historical consolidated financial
statements.
Appointment of New Directors and Officers
Bev Briscoe was elected as a new director to the Goldcorp Board
at the annual and special meeting of Goldcorp’s
shareholders held on April 19, 2006. In June 2006, Goldcorp
announced the appointment of Peter Dey to the Goldcorp Board.
Ms. Briscoe has extensive industry experience and was,
until recently, President of her own transportation services
company, Hiway Refrigeration Ltd. Mr. Dey is an experienced
corporate director and is Chairman of Paradigm Capital Inc., an
independent investment dealer, and Chairman of Addax Petroleum
Corporation. He has significant directorship experience.
Effective April 19, 2006, Lindsay Hall was appointed as
Chief Financial Officer of Goldcorp to replace Peter Barnes, and
effective May 12, 2006 in connection with the acquisition
of Placer Dome (CLA) Limited (“Placer CLA”),
Steve Reid was appointed as Executive Vice President, Canada and
USA of Goldcorp.
Warrant Transaction
In June 2006, Goldcorp received proceeds of more than
$450 million upon the early exercise of five series of
listed common share purchase warrants. These proceeds were
subsequently used to repay credit facilities drawn down to fund
the acquisition of Placer CLA.
Barrick-Placer Dome Transaction
On May 12, 2006, Goldcorp acquired all of the issued and
outstanding shares of Placer CLA from Barrick Gold Corporation
(“Barrick”) for a purchase price of
approximately $1.6 billion. The assets acquired by Goldcorp
included a 100% interest in the Campbell Complex, a 50% interest
in the La Coipa Mine, a 40% interest in the Pueblo Viejo
Project, a 51% interest in the Porcupine Mine and a 68% interest
in the Musselwhite Mine. Goldcorp used a portion of its current
cash balances and existing credit facilities to fund the
acquisition.
Goldcorp is in the process of integrating the Campbell Complex
and the Red Lake Complex, which are adjacent operations in
northern Ontario, Canada, into a single operation.
See “Pueblo Viejo Project” below for further details
on the Pueblo Viejo Project and “Red Lake Mines” below
for further details on the Red Lake Complex and the Campbell
Complex.
The Musselwhite Mine, located in northwestern Ontario, is
principally an underground gold mine and associated processing
plant. Goldcorp is the operator of the mine. Kinross Gold
Corporation (“Kinross”) holds a 32% interest in
Musselwhite. In 2005, Placer Dome’s share of production at
Musselwhite totaled approximately 170,436 ounces of gold.
The Porcupine joint venture was formed in 2002 to combine the
assets of Placer Dome and Kinross in Timmins in northeastern
Ontario. Goldcorp holds a 51% interest in the Porcupine Mine
with Kinross holding the remaining 49% interest. The Porcupine
Mine assets include the Dome open pit mine and mill, the Hoyle
Pond mine, Bell Creek mill, Pamour open pit mine and a large
land package in the Timmins camp. In 2005, all ore was processed
through the Dome mill for total gold production of 374,355
ounces. Ore production from the Porcupine Mine came from the
Dome open pit and stockpile, the Pamour open pit and stockpiles
and the Hoyle Pond underground operation.
The La Coipa Mine is located in northern Chile, approximately
1,000 kilometres north of Santiago. Compañia Minera Mantos
de Oro, a Chilean company, operates the mine which consists of a
series of open pits containing low grade gold and silver ore and
a processing facility. Goldcorp and Kinross each hold a 50%
interest in the La Coipa Mine. In 2005, mine production at
La Coipa was 168,293 ounces of gold and 5,094,583 ounces of
silver.
On March 31, 2006, Goldcorp acquired the Éléonore
gold project in the James Bay region of Québec from
Virginia Gold Mines Inc. pursuant to a plan of arrangement.
Goldcorp is continuing aggressive exploration and development on
the Éléonore property, with resource and scoping
studies being initiated throughout 2006. Since its discovery in
2004, 212 drill holes were completed on the property. More than
70% of these holes reported assays greater than 10 grams of gold
per tonne and the principal Roberto deposit remains open both
along strike and depth.
Amendment to the Silver Purchase Agreement
On February 13, 2006, Goldcorp and Silver Wheaton announced
that they had agreed to amend their existing silver purchase
agreement in connection with an increase in Goldcorp’s
investment in exploration and development at its San Dimas mine
in Mexico in order to increase ore production (gold and silver)
at the mine by approximately 35% by 2009.
Under the existing silver purchase agreement dated
October 15, 2004, Silver Wheaton is entitled to purchase
all of the silver produced by Goldcorp’s Mexican
operations, Luismin, for a per ounce cash payment of the lesser
of $3.90 and the prevailing market price (subject to an
inflationary adjustment commencing in 2007). Further, Luismin is
required to deliver a minimum of 120 million ounces of
silver over the 25 year contract period and Silver Wheaton
is obligated to pay 50% of any capital expenditures made by
Luismin at its mining operations in excess of 110% of the
projected capital expenditures outlined in the agreement.
On March 30, 2006, Goldcorp and Silver Wheaton amended the
existing agreement, increasing the minimum number of ounces of
silver to be delivered over the 25 year contract period by
100 million ounces, to 220 million ounces, and waiving
any capital expenditure contributions previously required to be
paid by Silver Wheaton. In consideration for these amendments,
Silver Wheaton issued to Goldcorp 18 million common shares,
representing approximately 9.8% of the then outstanding shares
of Silver Wheaton, and a $20 million one year non-interest
bearing promissory note, increasing Goldcorp’s ownership to
approximately 62% (subsequently reduced to 57% as a result of
Silver Wheaton’s equity financing completed on
April 20, 2006), or 126 million common shares of
Silver Wheaton.
Silver Wheaton-Glencore Transaction
On March 24, 2006, Silver Wheaton completed an agreement to
purchase 4.75 million ounces of silver per year, for a
period of 20 years, from Glencore International AG
(“Glencore”), equivalent to the production from
Glencore’s Yauliyacu mining operations in Peru. Silver
Wheaton paid an upfront payment of $285 million, comprised
of $245 million in cash and $40 million of debt to
Glencore (the debt has since been repaid), and $3.90 per ounce
of silver delivered under the contract (subject to an
inflationary adjustment after three years).
Yauliyacu is a silver-lead-zinc mine located in central Peru
which has been in continuous operation for more than
100 years and is expected to produce an average of
6 million ounces of silver per year during the term of the
contract. If that silver produced at Yauliyacu in any year
totals less than 4.75 million ounces, the amount sold to
Silver Wheaton in subsequent years will be increased to make up
for the shortfall, so long as production allows.
During the term of the contract, Silver Wheaton has a right of
first refusal on any future sales of silver streams from the
Yauliyacu mine and a right of first offer on future sales of
silver streams from any other mine currently owned by Glencore.
In addition, Silver Wheaton also has an option to extend the
20 year term of the silver purchase agreement in five year
increments, on substantially the same terms as the existing
agreement, subject to an adjustment related to silver price
expectations at the time and other factors.
Los Filos Feasibility Study
On April 20, 2006, Goldcorp announced the completion of an
updated feasibility study on the Los Filos Project. A technical
report for the Los Filos Project was originally completed in
2005. A revised technical report based on a new feasibility
report dated March 31, 2006 was prepared by Snowden. The
updated study expands the original feasibility study to include
the adjacent and subsequently acquired Bermejal deposit.
Construction of the Los Filos Project is well-advanced and
expected to be completed by the end of 2006 with commercial
production planned to start in the second quarter of 2007.
Commercial production for 2007 is expected to be 200,000 ounces
of gold, increasing to 350,000 ounces in 2008.
The Los Filos Project will be developed as a twin open pit-heap
leach operation, with two different methods of ore processing.
Higher-grade ore from within the Los Filos deposit will be
crushed to 19 millimetres and agglomerated
before being conveyor stacked and heap leached. Lower-grade ore
from Los Filos and El Bermejal deposits will be hauled from the
open pit directly to the leach pad to be bulk heap leached. The
recovered solution will be treated to produce a final gold
doré product on site.
Extensive metallurgical testing has been completed indicating
average recovery of 72% with crush/leach ore and 59% for direct
dumped ore. Over 37% or 1.05 million ounces of recovered
gold will come from the crush/leach ore.
Exploration drilling is continuing on pit extensions and in
particular high grade ore areas. The skarn peripherals have
returned encouraging drill intersections that can be
economically serviced from underground and possibly open pit.
The strategic aim of the project is to continue developing
further ore volume and higher grade ore from Los Filos, El
Bermejal, and the neighbouring Nukay district that will justify
a new conventional milling operation in parallel with the heap
leaching operation.
Production and economic statistics for the life of mine are
summarized as follows:
•
Life of Mine Ore Production
203 million tonnes
•
Crushing Plant Throughput
4 million tonnes/year
•
Run of Mine Leach Rate
20 million tonnes/year
•
Mining Strip Ratio
1.5 to 1
•
Crush/ Leach Ore Grade
1.50 grams gold/tonne
•
Run of Mine Leach Ore Grade
0.55 grams gold/tonne
•
Total Mine Grade
0.69 grams gold/tonne
•
Average Heap Leach Recoveries
• Crush Leach
72%
• Run of Mine Leach
59%
•
Average Annual Gold Production
315,000 ounces/year
•
Total Gold Production
2.84 million ounces
•
Capital Cost
$187 million
•
Pre-Production Capital
$45 million
•
Cash Operating Cost
$250/ounce of gold
Pueblo Viejo Project
The following description of the Pueblo Viejo Project has
largely been summarized from the Pueblo Viejo technical report
(the “Pueblo Viejo Technical Report”)
entitled “Pueblo Viejo Project, Province of Sanchez
Ramirez, Dominican Republic,
43-101 Technical Report
and Qualified Person’s Review” dated October 26,2005, which was prepared for Placer Dome by the following
qualified persons at AMEC: Susan F. Lomas, P.Geo.,
Lynton S. Gormely, Ph.D, P.Eng., Ted Eggleston, Ph.D.,
P.Geo., and Tracy E. Barnes, P.E. which has since been
re-addressed to
Goldcorp. Readers should consult the Pueblo Viejo Technical
Report to obtain further particulars regarding the Pueblo Viejo
Project which is available for review on the SEDAR website
located at www.sedar.com under Goldcorp’s profile.
Property Description and Location
Pueblo Viejo is located in the central part of the Dominican
Republic on the Caribbean island of Hispanola in the province of
Sanchez Ramirez and covers an area of 3,200 hectares. The
project is 15 kilometres west of the provincial capital of
Cotui and approximately 95 kilometres northwest of the
national capital of Santo Domingo. The main port facility in the
Dominican Republic is Haina in Santo Domingo. Other port
facilities are located at Puerto Plata, Boca Chica, and San
Pedro de Macoris. Access to Pueblo Viejo from Santo Domingo is
by a four-lane paved highway, which is the main access road
between Santo Domingo and the second largest city, Santiago.
This highway connects to a single-lane secondary highway, which
passes through Piedra Blanca. Pueblo Viejo is 22 kilometres
from Piedra Blanca.
In 2000, the Dominican Republic invited international bids for
the leasing and mineral exploitation of the Pueblo Viejo
sulphide deposits. On July 2, 2001, Placer Dome Dominicana
Corporation (“PDDC”) won the bid, and the
parties signed a Letter of Intent on August 4, 2001. The
effective date of the Special Lease Agreement (the
“SLA”) for Pueblo Viejo is July 29, 2003.
The SLA contains the following terms:
•
The SLA will extend for 25 years following notice by PDDC
to the Dominican Republic that PDDC has determined to develop a
mine at Pueblo Viejo, with one extension at the mutual agreement
of the parties, allowing a possible term of 75 years;
PDDC may exploit the Los Quernados Limestone Deposit and all
other limestone deposits within Pueblo Viejo at no additional
charge;
•
The Dominican Republic will acquire and lease to PDDC the lands
and mineral rights necessary for permanent disposal of tailings
and waste;
•
The Dominican Republic will mitigate all historical
environmental matters, except those conditions within areas
designated for development by PDDC;
•
The Dominican Republic will relocate at its sole cost and in
accordance with World Bank standards those persons dwelling in
the Los Cacaos area;
•
The Dominican Republic State will provide a permanent reliable
water source necessary to conduct the operations at no extra
charge to PDDC; and
•
PDDC will make net royalty payments to the Dominican State of
3.2% of net receipts of sales, make a net profits interest
payment (with a rate that varies with the price of gold) after
PDDC has recaptured its initial and ongoing investments and pay
income tax under a stabilized tax regime.
PDDC commissioned a number of consultants to collect background
baseline information on the existing biophysical and human
environments from 2002 through 2004. Key findings indicated
significant historical environmental impact, particularly with
respect to acid rock drainage and metals leaching, which has
degraded water quality in the Arroyo Margajita in particular and
in the Rio Maguaca to a lesser extent. Water management
infrastructure was found to be in poor condition and
contributing to aquatic impacts. There were large amounts of
hazardous wastes on the mine site which remain. Pit walls, waste
rock dumps, and stockpiles continue to erode, depositing
sediments behind dams and water control structures. Stability of
the Mejita and Las Lagunas dams was identified as a key issue.
Under the concession agreement signed between PDDC and the
Dominican Republic government, existing liabilities are the
responsibility of the Dominican Republic government. AMEC
considers PDDC’s assessment of risks, liabilities, and
costs associated with construction and operation of the Pueblo
Viejo mine to have been conducted thoroughly. While more work
remains, the information assembled to date represents a sound
basis for further study. Environmental risks and liabilities
centre on possible dam failure of the two existing dams which
are government responsibilities.
History
Pueblo Viejo has a long history of exploration, development and
production. Pueblo Viejo was discovered by the Dominican
Republic government in 1950 during a regional geological mapping
program. Small-scale production was unsuccessfully attempted in
subsequent years. Rosario Resources Corporation
(“Rosario”) optioned the property in 1969 and
produced oxide ore from open pits from 1975 until 1991. Starting
in 1986, Rosario examined options for treating refractory
mineralization as oxide reserves diminished. Rosario rejected
the available options as not being environmentally feasible and
instead built a CIL plant and new tailings facilities to process
transitional oxide-sulphide ores. Production continued at
reduced rates until 1999.
In its 24 years in production, Pueblo Viejo produced a
total of 5.3 million ounces of gold and 24.4 million
ounces of silver. Starting in 1996, Rosario and the Dominican
Republic invited bidders to participate in development of
sulphide mineralization. GENEL JV (“GENEL”),
Mount Isa Mines (“MIM”) and Newmont Mining
Corporation each carried out technical work, including drilling,
resource estimation metallurgy and economic assessments, in
preparation of bids, but none concluded an agreement with the
government.
Placer Dome carried out additional studies beginning in 2002
which resulted in an internal feasibility study in 2005. Work
included 3,039 metres of core drilling in 18 holes during
2002 and 15,424 metres of core drilling in 111 holes during
2004, revision of resource estimates, new mine designs and
reserve estimates, metallurgy and process studies, capital and
operating costs estimates and financial analyses. Placer Dome
announced in September 2005 that it would develop the Pueblo
Viejo project.
Geological Setting and Mineralization
Mineralization at Pueblo Viejo occurs within the Lower
Cretaceous Los Ranches Formation, a series of volcanic and
volcaniclastic rocks that extend across the eastern half of the
Dominican Republic. The Pueblo Viejo portion of the Los Ranches
Formation, the most important ore host, fills a restricted
sedimentary basin measuring approximately three
kilometres north-south by two kilometres east-west. Formation of
the basin is interpreted to be either rift derived or a
maar-diatreme complex that cut through lower members of the Los
Ranchos Formation.
The Moore deposit is located at the eastern margin of the Pueblo
Viejo Member sedimentary basin. Stratigraphy consists of finely
bedded carbonaceous siltstone and mudstone overlying horizons of
spilite (basaltic-andesite flows), volcanic sandstone, and
fragmental volcaniclastic rocks.
The Monte Negro deposit is located at the northwestern margin of
the sedimentary basin. Stratigraphy consists of interbedded
carbonaceous sediments ranging from siltstone to conglomerate
that are interlayered with volcaniclastic flows.
The Moore and Monte Negro deposits are the largest of several
high sulphidation gold deposits in the district. Mineralized
structures at Pueblo Viejo are both sub-horizontal and
sub-vertical. The deposits occupy funnel-shaped envelopes of
advanced argillic alteration characterized by the presence of
silica, pyrophyllite, pyrite, kaolinite, and alunite. Gold
primarily occurs as solid solution and colloidal-sized
microinclusions within the crystal structure of pyrite and less
commonly as micron-sized grains of native gold, electrum,
sylvanite, and aurostibite.
Drilling and Verification of Data
Drilling campaigns have been conducted by most of the
participating companies in the project over the years, including
Rosario, GENEL, MIM, and PDDC. Resource estimates are supported
with results from 573 reverse circulation and core drill holes
(349 drill holes for Moore deposit, 224 drill holes for Monte
Negro deposit) totalling 80,261 metres.
Approximately 65% of the drill holes used in the 2005 PDDC
resource estimate were drilled vertically, with the remainder
being inclined to intercept both vertical and subhorizontal
structures.
Rosario employed core, reverse circulation, and rotary
percussion drilling methods during its exploration and
development phases. Logged information was recorded on paper and
later manually entered into an electronic database. AMEC
verified 2.5% of the data generated by this program against
original documents that could be recovered. Remaining holes were
validated using nearest-pair comparisons with PDDC drill holes.
PDDC paired assays from PDDC and GENEL drilling with assays from
Rosario drilling using different search radii and then prepared
QQ plots to show assay grade distributions for each. A
nearest-pair analysis was necessary because most Rosario holes
are vertical and nearly all GENEL, MIM and PDDC holes are
inclined. Rosario drilling is generally reliable but represents
a risk to the project where projected high-grade material may be
lower than anticipated. Core recovery for Rosario drilling was
poor, being about 50% in areas of mineralization and
silicification. This resulted in globally offsetting positive
and negative biases but these biases may vary significantly by
recovery class. Loss of fines in sampling negatively affected
zinc values.
In 1996, GENEL drilled 20 holes at the Pueblo Viejo project
site, 11 in the Moore deposit and nine in the Monte Negro
deposit. All holes were drilled at an angle. AMEC verified the
data generated by this program against original documents.
In late 1996 and into 1997, MIM drilled 31 holes, 15 at the
Moore deposit and 16 at the Monte Negro deposit. Five holes were
vertical and 26 were drilled at an angle. Original records are
not available for this drilling campaign, therefore these holes
were demonstrated to be reliable by comparing them to PDDC and
GENEL holes in a nearest-pair analysis and inspections of
sections with PDDC and GENEL drill holes.
PDDC completed 3,039 metres of diamond drilling in 18 holes
during the months of October and November 2002 and
15,424 metres in 111 drill holes in 2004. All but one of
these holes were angle holes. This drill program largely
confirmed the location and tenor of mineralization at Pueblo
Viejo. Fluor Corporation undertook a study of twinned drill
holes as part of its 1986 feasibility study. The results showed
some differences between some of the drill holes. Fluor
Corporation’s comments about the twin holes results state
that the analysis of gold, silver, zinc, carbon and sulphur
assays showed no significant overall bias except for carbon and
zinc. Carbon assays were consistently lower by 7% and zinc
assays lower on average by 36% than in the original hole. PDDC
reviewed 20 twinned and closely spaced drill holes and compared
the gold grades. The results of this analysis show good
agreement between different drilling methods — rotary,
reverse circulation, and core — when the holes are
closely spaced.
Sampling Method and Approach
Information about sampling strategies used by the Rosario,
GENEL, and MIM companies is not available. Rosario samples were
prepared and assayed by Rosario personnel at the mine site
laboratory. AMEC does not know where the
GENEL and MIM samples were processed and assayed, but previous
reviewers for this project have stated that the samples were
processed at the mine site lab.
PDDC core logging and splitting met industry standard practices
for this type of deposit and was performed by PDDC personnel.
Sample splits were sent to a commercial laboratory with the
remaining half retained for reference.
Sample Preparation, Analyses and Security
Minimal assay QA/QC procedures were practiced in Rosario
drilling, which was common for this period. PDDC validated
historical drilling by Rosario by performing nearest-pair twin
analyses with PDDC core holes, by comparing resource estimates
with and without PDDC holes and by performing conditional
simulation studies.
QA/QC procedures have varied significantly during the history of
work at Pueblo Viejo. The Rosario work consisted of two batches
of check assays sent to a second laboratory, which AMEC
considers substandard. GENEL QA/QC involved insertion of
standard samples and analysis of pulp duplicate samples and is
considered by AMEC to be adequate. MIM sample data lack any
QA/QC validation. MIM holes were validated by comparing these to
nearby PDDC and GENEL holes.
QA/QC by PDDC relied on two standards and check assaying and is
substandard relative to current industry practices, but is
generally acceptable to AMEC. No duplicate samples were
analyzed, and the check analysis program included no certified
reference materials or blank samples. AMEC recommends that, in
addition to check assaying, future QA/QC programs include field
duplicate samples, crusher duplicate samples, pulp duplicate
samples, blind duplicate samples, standard samples, and blank
samples.
Mineral Processing and Metallurgical Testing
Gold recoveries predicted from testing prior to PDDC’s
involvement were in the range of 80% to 84%. Each of the
concepts that were capable of yielding gold recovery in this
range involved expensive destruction of the sulphide minerals,
either by roasting or oxidative leaching, while rejecting 16% to
20% of the gold.
After investigating a number of alternatives, PDDC has selected
a fairly straightforward process based on pressure oxidation of
the whole ore followed by carbon-in-leach cyanidation for
recovery of the gold and silver. Autoclaving of the whole ore
entails greater capital and operating costs than treating a
concentrate, but the increment in operating cost is limited
because of its dependence more on sulphur throughput rather than
tonnage throughput. The increment in gold recovery with whole
ore pressure oxidation is significant: gold recoveries are
projected to vary with ore type from 88.7% to 94%. These
projections are supported by an extensive test program completed
at SGS Lakefield Research Limited in Peterborough, including a
10-day continuous autoclave and cyanidation pilot-plant
campaign, which reported 93.7% overall extraction.
The extent of testing and pilot plant operation that underpins
the feasibility study is appropriate for this level of project
evaluation. The extent of investigation into metallurgical
variability and the level of testing undertaken give AMEC a high
level of confidence that the predicted recoveries for the
various ore types will be very close to what would be
experienced if the selected flowsheet were constructed.
Mineral Reserve and Resource Estimates
The following tables set forth the estimated Mineral Reserves
and Mineral Resources for Goldcorp’s 40% interest in the
Pueblo Viejo Project, as of December 31, 2005:
Proven and Probable Mineral
Reserves(1)(2)
Category
Tonnes
Gold Grade
Contained Gold
(000s)
(grams per tonne)
(000s ounces)
Proven
38,360
3.28
4,050
Probable
13,520
3.04
1,320
Proven and Probable
51,880
3.22
5,370
(1)
The Mineral Reserves for the Pueblo Viejo Project have been
estimated by Peter Nahan, Senior Evaluation Engineer, who is a
qualified person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards. Mineral Reserves are contained
within an open pit design using a life-of-mine average cut-off
grade of 1.7 grams per tonne and a gold price of $375 per
ounce. Mineral Reserves within this pit are tabulated as blocks
with a positive value at a $400 per ounce gold price.
Measured, Indicated and Inferred Mineral
Resources(1)(2)(3)
(excluding Proven and Probable Mineral Reserves)
Gold
Contained
Category
Tonnes
Grade
Gold
(grams per
(000s
Gold
(000s)
tonne)
ounces)
Measured
8,720
2.20
620
Indicated
5,030
2.38
390
Measured and Indicated
13,750
2.27
1,000
Inferred
900
2.72
80
Silver
Contained
Tonnes
Grade
Silver
(grams per
(000s
Silver
(000s)
tonne)
ounces)
Measured
51,640
18
29,200
Indicated
13,990
13
5,900
Measured and Indicated
65,630
17
35,100
Inferred
900
13
400
(1)
The Mineral Resources for the Pueblo Viejo Project have been
estimated by Chris Keech, Senior Geologist /
Geostatistician, who is a qualified person under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred and are based on the CIM Standards. Mineral
Resources are contained within a pit design using an average
cut-off grade of 1.5 grams per tonne and a gold price of
$450 per ounce.
(2)
Mineral Resources are not known with the same degree of
certainty as Mineral Reserves and do not have demonstrated
economic viability.
(3)
Numbers may not add up due to rounding.
Mining Operations
Gold ore will be mined by conventional open pit methods from two
pits. Total mine life is anticipated to be 20 years. In the
initial six years of operation, the mine is expected to produce
an average of 800,000 ounces of gold per year. The ore is
refractory and will be treated at a rate of 15,000 tonnes
per day by whole ore pressure oxidation, followed by CIL cyanide
leach.
Placer Dome Technical Services (“PDTS”) has
completed a number of studies investigating the Pueblo Viejo
Project, including a feasibility study concluded in July 2005.
These investigations have evaluated various throughput options
and mining cutoff grade strategies. PDTS has shown that modestly
positive economics can be achieved for the project. PDTS has
shown that for a positive outcome for the project to achieved,
the following are necessary:
•
A minimum throughput rate of 15,000 tonnes per day must be
achieved.
•
An aggressive cutoff grade strategy must be implemented to
process the highest grade ore early in the mine life with lower
grade ore stockpiled for processing later in the mine life. PDTS
has demonstrated that this should be achievable.
•
Proper blending of the ore will be necessary to maximize the
utilization of the process facility and achieve required gold
production. PDTS has demonstrated that the blending should be
achievable.
The envisioned mining operations consists of mining from two
open pits: Moore and Monte Negro; and from three limestone
quarries: Plant, Las Lagunas, and Los Quemados. The mines will
follow a conventional drill-blast-load-haul mining sequence.
Mining operations (equipment and manpower) will be
interchangeable between the mines and quarries. The ore from the
mines will be hauled to a crusher near the plant site or to the
low-grade stockpile. The waste from the mines will be hauled to
the El Llagal tailings facility. It is anticipated that all of
the waste mined will be acid generating. Therefore, all of the
potential acid drainage will be contained within the tailings
facility. The limestone will be mined and used as road
construction material, rock for the construction of the El
Llagal tailings dam, and for processing and water management
operations. The process will require high quality limestone for
the production of lime.
The ore reserve was developed using only the measured and
indicated portion of the resource model. Mining limits, mine and
quarry production schedules, mine operating costs, mining
equipment requirements, mining capital, and mine sustaining
costs were developed by PDTS based on first principles and
experience with their other operating
properties. The mine production schedule uses a staged mine
development. The high-grade ore will be processed immediately as
it is mined while the low-grade ore will be stockpiled and
processed after the mine is exhausted. Gold cutoff grades vary
by mining stage and were selected to optimize gold production
given the ore tonnage and sulphur constraints in the plant. AMEC
has reviewed the mine designs and mine plans. AMEC believes that
the designs and plans are suitable and generally achievable as
planned.
Red Lake Mines
Overview
In May 2006, Goldcorp acquired Placer Dome’s Canadian
operations, which included the Campbell Complex. The Red Lake
Mines now consist of two operating complexes: the Red Lake
Complex and the Campbell Complex, both located in the
Municipality of Red Lake in northwestern Ontario, 175 kilometres
north of the Trans Canada Highway. The Red Lake Complex is
Canada’s largest gold mine, producing more than 600,000
ounces a year. It is also one of the world’s highest grade
and lowest cost gold mines. The Campbell Complex has been in
continuous operations since 1949, producing over 11 million
ounces of gold and produces approximately 200,000 ounces per
year.
Following the discovery of a high grade ore zone and subsequent
expansion of mine facilities, the Red Lake Complex was
revitalized and achieved full production in January 2001. Mining
is carried out using underground cut and fill techniques
allowing maximum ore extraction and minimal dilution. The high
grade, narrow vein system is being mined at the rate of 635
tonnes per day with an average grade of over 68 grams per tonne.
The high grade mineralization and complex geometry of the ore
body require operating under unique circumstances. Various
mining cut and fill methods are currently in use.
The implementation of innovative mining techniques, as well as
improvements and refinements to other areas of the operation,
has been key to the success of the Red Lake Complex over the
last four years. Goldcorp has implemented the use of new virtual
reality technology for mine design and planning purposes, and
has recently built a state-of-the-art virtual reality studio
on-site. Goldcorp is also building a new 1,950 metre deep shaft,
expected to be ready in 2007, which will increase hoisting
capacity, reduce time to access the workplaces and provide
significant cost savings.
In December 2005, Placer Dome announced that exploration
drilling confirmed the extension of Goldcorp’s Red Lake
property High Grade Zone (“HGZ”) onto the
Campbell Complex property. Targeted drilling intersected the HGZ
and a secondary wedge hole targeting the Hanging Wall 5 zone,
the most prolific mineralized zone within the HGZ, is in
progress.
Mineral Reserve and Mineral Resource Estimates
The following tables set forth the estimated Mineral Reserves
and Mineral Resources for the Red Lake Mines, as of
December 31, 2005:
Proven and Probable Mineral
Reserves(1)(2)(3)
Category
Tonnes
Gold Grade
Contained Gold
(000s)
(grams per tonne)
(000s ounces)
Proven
2,150
34.13
2,360
Probable
6,190
20.15
4,010
Proven + Probable
8,340
23.75
6,370
(1)
The Mineral Reserves for the Red Lake Complex have been
estimated by Stephen McGibbon, P. Geo., Red Lake Exploration
Manager of Goldcorp, who is a qualified person under NI 43-101,
and audited by WGM. The Mineral Reserves are classified as
proven and probable and are based on the CIM Standards. Cut-off
grade of 0.4 ounces of gold per ton (12.88 grams of gold per
tonne) over a minimum mining width of 4 to 6 feet; values are
calculated at a price of $400 per ounce of gold.
(2)
The Mineral Reserves for the Campbell Complex have been
estimated by Stephane Blais, Chief Engineer, who is a qualified
person under
NI 43-101. The
Mineral Reserves are classified as proven and probable and are
based on the CIM Standards. Cut-off grade of 0.25 ounces of gold
per ton (8.05 grams of gold per tonne) over a minimum mining
width of 10 feet; calculated at a price of $400 per ounce
of gold.
Measured, Indicated and Inferred Mineral
Resources(1)(2)(3)(4)
(excluding Proven and Probable Mineral Reserves)
Category
Tonnes
Gold Grade
Contained Gold
(grams per
(000s ounces)
(000s)
tonne)
Measured
2,370
11.60
880
Indicated
6,300
9.26
1,880
Measured + Indicated
8,670
9.90
2,760
Inferred
10,140
14.28
4,650
(1)
The Mineral Resources for the Red Lake Complex have been
estimated by Stephen McGibbon, P. Geo., Red Lake Exploration
Manager of Goldcorp, who is a qualified person under NI 43-101,
and audited by WGM. The Mineral Resources are classified as
measured, indicated and inferred and are based on the CIM
Standards. Cut-off grade of 0.4 ounces of gold per ton (12.88
grams of gold per tonne), and are based on a gold price of $450
per ounce.
(2)
The Mineral Resources for the Campbell Complex have been
estimated by Anthony Stechishen, Senior Resource Geologist, a
qualified person under
NI 43-101. The
Mineral Resources are classified as measured, indicated and
inferred and are based on the CIM Standards. Cut-off grade of
0.1 ounces of gold per ton (3.22 grams of gold per tonne),
and are based on a gold price of $450 per ounce.
(3)
Mineral Resources are not known with the same degree of
certainty as Mineral Reserves and do not have demonstrated
economic viability.
(4)
Numbers may not add up due to rounding.
Mineral Reserves and Mineral Resources at the Red Lake Complex
are calculated with cut-off grades by geologists using polygonal
long sections and spreadsheet based mine schedule simulation,
whereas, at the Campbell Complex they are calculated by an
engineering group that builds a physical 3-D mine plan around
the block model using a planning scheduler in space and time.
Production Figures, Cash Costs and Production Costs
The following table sets forth the production figures, cash
costs and total production costs for each of the Red Lake
Complex and the Campbell Complex for each of the years ended
2005, 2004 and 2003:
Year Ended
Production
Cash Cost(1)
Production Cost(1)
Complex
December 31
(ounces)
($)
($)
Red Lake
2005
616,414
93
131
2004
551,866
92
128
2003
532,038
80
111
Campbell
2005
209,200
312
357
2004
209,045
276
344
2003
197,114
202
264
(1)
Goldcorp reports total cash costs and production costs on a
sales basis. In the gold mining industry, this is a common
performance measure but does not have any standardized meaning,
and is a non-Canadian GAAP financial measure. Goldcorp follows
the recommendations of the Gold Institute Standard. Goldcorp
believes that, in addition to conventional measures prepared in
accordance with Canadian GAAP, certain investors use this
information to evaluate Goldcorp’s performance and ability
to generate cash flow. Accordingly, it is intended to provide
additional information and should not be considered in isolation
or as a substitute for measures of performance prepared in
accordance with Canadian GAAP. Placer Dome reported total cash
costs and production costs on a production basis consistent with
the Gold Institute Standard.
Mining Operations
The Campbell Complex uses 70% to 80% longhole stoping mining
methods, resulting in dilution ranging from 100% to 200%. Mining
costs at the Campbell Complex are approximately $50 per ton
($55.10 per tonne), but extensive capital development is
required to set-up the longhole mining complex.
On the other hand, the Red Lake Complex uses predominantly
underhand cut and fill mining methods. Mining costs at the Red
Lake Complex are $65 to $70 per ton ($71.63 to $77.14 per tonne)
with a tighter control on the dilution, estimated at an average
of 43%.
Completion of the No. 3 Shaft at the Red Lake Complex and
the mill upgrade project is expected to be completed by the end
of 2007 at a total capital cost of approximately
Cdn.$247 million, providing incremental hoisting capacity
of 6,000 tons per day and milling upgrade to approximately 1,250
tons per day.
The inter-mine connection between the Red Lake Complex’s 34
level and the Campbell Complex’s 36 level was
completed in the summer of 2006, allowing the transfer of the
Red Lake Complex’s upper mine longhole ore across to
Campbell’s Reid Shaft loading pocket to be hoisted to
surface. Campbell’s Reid Shaft has spare hoisting capacity,
and the moderately lower grade Red Lake muck at 0.5 to
0.8 ounces of gold per ton would not displace the higher
grade ore hoisted up the Red Lake system which currently
operates at full capacity at a much higher head grade.
Processing
The Campbell Complex processing costs are roughly $23 per ton
($25.35 per tonne), including gravity recovered gold in Knelson
Concentrators and cyanide leach CIP, electro-winning and
pressure oxidation autoclave recovery techniques for
sulfide-rich slurries at a permitted capacity of 1,850 tons
per day, but currently operating well under this capacity at
approximately 1,450 tons per day, with head grade of
approximately 0.35 ounces of gold per ton and recoveries of
96%.
The Red Lake Complex is operating at 775 tons per day at a
processing cost of $35 per ton ($38.57 per tonne), head grade of
about 2 ounces of gold per ton, and recoveries of 95% to 96%,
with a permitted capacity of 850 tons per day with conventional
gravity recoverable gold and cyanide leach CIP methods.
Environmental
The Red Lake Mines are in compliance in all material respects
with applicable provincial and federal environmental
requirements. The Red Lake Complex has tailings management
facilities consisting of a primary treatment pond, a secondary
treatment pond and Balmer Lake, which, since the 1940s, has been
used as a tertiary polishing pond by the Red Lake Complex as
well as the Campbell Complex. Both the Red Lake Complex and the
Campbell Complex have shared a common effluent discharge point,
known as “L2”, to Balmer Creek which is downstream
from Balmer Lake. The discharge point has been regulated under a
Ministry of the Environment (Ontario) Certificate of Approval.
With the mine production expansion plans in the near future,
planning has begun for an additional water treatment area which
will incorporate sound mine waste management practices, as well
as a new effluent treatment facility.
The current tailings management system utilises two separate
tailings management areas, the Red Lake Complex facility
currently has capacity until 2010 (including allowance for the
process expansion), while the Campbell Complex facility
currently has capacity until 2015. These capacities have been
achieved through numerous incremental raises in the past. For an
expenditure of approximately $5 million, it is expected
that capacity for the combined operation for 20 years can
be achieved.
Integration of Red Lake and Campbell Complexes
Goldcorp believes that the integration of the Red Lake and
Campbell Complexes will significantly increase the life of mine
(see (a) below) based on the blending of footwall sulphide ores
with the HGZ, the improved economies of scale achieved through
continued optimization of current and planned infrastructure,
and the combined exploration potential of the two operations.
The integration of the Red Lake and Campbell Complexes has
progressed and is showing positive results. Under one combined
management team comprised of employees of both operations, the
two operations have been joined by road, telecommunication and
computer links. Operating systems have been standardized and
policies and procedures are being integrated using best
practices from each operation. Any costs associated with these
activities have not been significant and are already accounted
for within regularly reported operating costs.
Some synergies have already been recognized with a reduction of
approximately $10 million per year through a reduction of
about 100 personnel following the integration. The first
underground connection between the two mining operations has
been established with the Red Lake Complex ore being transferred
across to the Campbell Complex to take advantage of the spare
capacity which was available in Campbell’s Reid Shaft and
in the Campbell Complex processing facility. This is expected to
add up to 450 tons per day in output while allowing additional
focus on the development activities surrounding the new
No. 3 Shaft which is nearing its target depth.
Numerous new exploration targets have become available as a
result of the integration of the geologic models from the two
mines and from the abolition of the internal property boundary.
The connection of the underground workings at an early stage has
provided staging points for early exploration of these areas.
Advanced interpretation of the overall ore body situation is
being pursued aggressively to generate more exploration targets.
Current high priority exploration targets include the following:
(i) the HGZ and associated footwall sulphides,
(ii) the Deep Campbell zone,
(iii) the numerous ‘Party Wall’
(or internal property boundary) opportunities,
(iv) the Upper Red Lake Sulphides, and (v) surface,
bulk mining opportunities.
It is expected that numerous on-going operating synergies will
continue to be recognized as operating practices continue to be
optimized, items purchased are made common and the integrated
skills of the combined workforce are applied. In the primary
areas of the operation, the following effects are anticipated:
(a)
Mineral Reserves and Mineral Resources: From a current Mineral
Reserves and Mineral Resources position of 6.37 million
ounces of gold and 2.76 million ounces of gold,
respectively, these numbers are expected to grow as the new
target areas are investigated and exploration development is
established to provide drilling platforms to target those areas.
Note that no drilling has been carried out on the HGZ since the
Wheaton merger in April 2005 when focus was placed on supporting
the new shaft development.
The HGZ is currently being developed at a depth of 5,960 feet
(41 level), Mineral Reserves on the zone are calculated to 6,800
feet (47 level) and the zone was intersected (in December 2005)
at a depth of 8,300 feet (57 level).
(b)
Production: It is expected that annual gold production will be
increased to around one million ounces of gold over the next few
years as the benefits of increased capacities (hoisting and
processing) are recognized and the added flexibility of the
priority on development is realized.
(c)
Cash and Operating Costs: Cash
costs(1) should
range between $140 and $170 per ounce. Milling costs of
approximately $27 per ton ($29.75 per tonne) and mining costs
less than $65 per ton ($71.63 per tonne) are anticipated.
(d)
Capital Expenditure: A one-off expenditure of approximately
$60 million is expected during 2007 to complete the
expansion project. In addition, over the next several years,
approximately $20 million per year is expected to provide
an increase in the amount of mining development work, ahead of
mining and exploration activities. Routine sustaining capital is
projected at approximately $10 million annually and the
exploration budget is expected to remain at approximately
$20 million per year.
Integration Costs
Extraordinary costs associated with the integration have not
been significant and are not expected to be in the future. Costs
in this area primarily relate to items such as training,
software integration, computer networking, standardization and
alignment of personnel benefits and an internal road to connect
the two complexes.
For further information on the Red Lake Complex, see
“Description of the Business — Red Lake Mine,
Ontario” in the Goldcorp Annual Information Form for the
year ended December 31, 2005 which can be accessed on SEDAR
under Goldcorp’s profile. For further information on the
Campbell Complex, see Placer Dome’s press release dated
February 20, 2006 announcing Placer Dome’s 2005 fourth
quarter results which can be accessed on SEDAR under Placer
Dome’s profile. Goldcorp and Glamis are obtaining
appropriate exemptive relief from the relevant securities
regulatory authorities with respect to the requirement to file a
current technical report for the Red Lake Mines, provided that
Goldcorp files a report within 45 days after the date this
Circular is filed on SEDAR.
Description of Share Capital
The authorized share capital of Goldcorp consists of an
unlimited number of common shares. As at September 25,2006, 418,440,849 Goldcorp Shares were issued and
outstanding. Holders of Goldcorp Shares are entitled to receive
notice of any meetings of shareholders of Goldcorp, to attend
and to cast one vote per Goldcorp Share at all such meetings.
Holders of Goldcorp Shares do not have cumulative voting rights
with respect to the election of directors and, accordingly,
holders of a majority of the Goldcorp Shares entitled to vote in
any election of directors may elect all directors standing for
election. Holders of Goldcorp Shares are entitled to receive on
a pro-rata basis such dividends, if any, as and when declared by
Goldcorp’s board of directors at its discretion from funds
legally available therefor and upon the liquidation, dissolution
or wind up of Goldcorp are entitled to receive on a pro-rata
basis the net assets of Goldcorp after payments of debts and
other liabilities, in each case subject to the rights,
privileges, restrictions and conditions attaching to any other
series or class of shares ranking senior in priority to or on a
pro-rata basis with the holders of the Goldcorp Shares with
respect to dividends or liquidation. The Goldcorp Shares do not
carry any pre-emptive,
subscription, redemption or conversion rights, nor do they
contain any sinking or purchase fund provisions.
Goldcorp reports total cash costs on a sales basis. In the gold
mining industry, this is a common performance measure but does
not have any standardized meaning, and is a non-Canadian GAAP
financial measure. Goldcorp follows the recommendations of the
Gold Institute standard. Goldcorp believes that, in addition to
conventional measures prepared in accordance with Canadian GAAP,
certain investors use this information to evaluate
Goldcorp’s performance and ability to generate cash flow.
Accordingly, it is intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with Canadian
GAAP.
Consolidated Capitalization
The following table sets forth Goldcorp’s consolidated
capitalization as of the dates indicated, adjusted to give
effect to the material changes in the share and loan capital of
Goldcorp since June 30, 2006, the date of Goldcorp’s
most recently filed financial statements, including reflecting
consolidated capitalization on an adjusted basis to give effect
to the Arrangement. The table should be read in conjunction with
the unaudited consolidated financial statements of Goldcorp for
the six months ended June 30, 2006, including the notes
thereto, contained in Appendix J to this Circular and the
Goldcorp management’s discussion and analysis for the six
months ended June 30, 2006incorporated by reference in
this Circular, as well as the unaudited pro forma condensed
consolidated financial statements of Goldcorp as at
June 30, 2006 contained in Appendix B to this Circular.
The transfer agent and registrar for the Goldcorp Shares in
Canada is CIBC Mellon Trust Company at its principal
offices in Vancouver, British Columbia and Toronto, Ontario. The
co-transfer agent and
registrar for the Goldcorp Shares in the United States is Mellon
Investor Services LLC at its principal offices in Jersey
City, New Jersey.
Available Information
Goldcorp files reports and other information with Canadian
provincial securities commissions. These reports and information
are available to the public free of charge on SEDAR at
www.sedar.com.
Goldcorp is subject to the reporting requirements of the U.S.
Exchange Act, and in accordance therewith files periodic reports
and other information with the SEC. Under a multi-jurisdictional
disclosure system adopted by United States and Canadian
securities regulators, such reports and other information may be
prepared in accordance with the disclosure requirements of
Canada, which requirements differ from those of the United
States. Goldcorp is exempt from the rules under the U.S.
Exchange Act prescribing the furnishing and content of proxy
statements, and its officers, directors and principal
shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the
U.S. Exchange Act. Reports and other information filed by
Goldcorp with the SEC may be inspected and copied (at prescribed
rates) at the public reference facilities maintained by the
SEC’s Public Reference Room located at 1580, 100 F. Street
NE, Washington, D.C. 20549 and are available for viewing at the
SEC website at www.sec.gov. Prospective investors may call the
SEC at 1-800-SEC-0330 for further information regarding the
public reference facilities or visit the SEC’s website at
www.sec.gov. Such reports and other information concerning
Goldcorp may also be inspected at the offices of The New York
Stock Exchange, 20 Broad Street, New York, N.Y.10005.
Trading Price and Volume
The Goldcorp Shares are listed and posted for trading on the TSX
under the symbol “G” and on the NYSE under the symbol
“GG”. The following tables sets forth information
relating to the trading of the Goldcorp Shares on the TSX and on
the NYSE for the months indicated.
The price of the Goldcorp Shares as reported by the TSX at the
close of business on August 30, 2006, the last trading day
immediately before the announcement of the Arrangement, was
Cdn.$33.77.
The price of the Goldcorp Shares as reported by the TSX at the
close of business on September 25, 2006 was Cdn.$24.61.
The price of the Goldcorp Shares as reported by the NYSE at the
close of business on August 30, 2006, the last trading day
immediately before the announcement of the Arrangement, was
$30.47.
The price of the Goldcorp Shares as reported by the NYSE at the
close of business on September 25, 2006 was $21.98.
Interest of Experts
The following individuals are the qualified persons as defined
by NI 43-101 in connection with the Mineral Reserve and Mineral
Resource estimates contained in the Renewal Annual Information
of Goldcorp Form for the year ended December 31, 2005,
which is incorporated by reference in this Circular:
1.
Stephen McGibbon, P.Geo., at the Red Lake Complex is the
qualified person responsible for the Mineral Reserve and Mineral
Resource estimates for the Red Lake Complex.
2.
Reynaldo Rivera MAusIMM, at Luismin, S.A. de C.V. is the
qualified person responsible for the Mineral Reserve and Mineral
Resource estimates for the San Dimas Mines and the San Martin
Mine.
3.
Reynaldo Rivera, MAusIMM, at Luismin, S.A. de C.V. and Gary
Giroux, P.Eng., at Micon International Limited
(“Micon”) are the qualified persons responsible
for the Mineral Reserve and Mineral Resource estimates for the
Nukay Mine.
4.
James N. Grey, P. Geo., and Al Samis, P.Geo., at Teck Cominco
Ltd. are the qualified persons responsible for the Mineral
Resource estimate for the El Limón Project.
5.
Luis Rivera, MAusIMM, at Minera Alumbrera Ltd. is the qualified
person responsible for the Mineral Reserve and Mineral Resource
estimates for the Alumbrera Mine.
6.
Joe Ranford, MAusIMM, at Peak Gold Mines Pty Ltd. is the
qualified person responsible for the Mineral Reserve estimate
for the Peak Mine.
7.
Rex Berthelsen, MAusIMM, at Peak Gold Mines Pty Ltd. is the
qualified person responsible for the Mineral Resource estimate
for the Peak Mine.
8.
Rodrigo Mello, MAusIMM, at Mineração Pedra Branca do
Amapari Ltda. is the qualified person responsible for the
Mineral Reserve and Mineral Resource estimates for the Amapari
Mine.
Randy V.J. Smallwood, P.Eng., at Goldcorp is the qualified
person responsible for the Mineral Reserve estimates for the
Wharf Mine.
10.
Michael G. Hester, FAusIMM of IMC is the qualified person
responsible for the Mineral Reserve estimate for the Los Filos
Project.
11.
Andrew F. Ross, M.Sc, P.Geo. of Snowden is the qualified person
responsible for the Mineral Resource estimate for the Los Filos
Project.
12.
Stephen Blais, Chief Engineer, is the qualified person
responsible for the Mineral Reserve estimate for the Campbell
Complex.
13.
Anthony Stechishen, Senior Resource Geologist, is the qualified
person responsible for the Mineral Resource estimate for the
Campbell Complex.
14.
Robert MacDonald, Chief Mine Engineer, is the qualified person
responsible for the Mineral Reserve estimate for the Musselwhite
Mine.
15.
Andrew Cheatle, Chief Geologist, is the qualified person
responsible for the Mineral Resource estimate for the
Musselwhite Mine.
16.
Stephen Taylor, Senior Mine Engineer, Peter Andrews, Senior
Project Engineer, Jason Floyd, Senior Mine Engineer, and Imola
Gotz, Senior Project Engineer, are the qualified persons
responsible for the Mineral Reserve estimate for the Porcupine
Mine.
17.
Alastair Still, Technical Services Manager, and Stephen Price,
Chief Geologist, are the qualified persons responsible for the
Mineral Resource estimate for the Porcupine Mine.
18.
Andres Guaringa Vasquez, Mine Engineer, is the qualified person
responsible for the Mineral Reserve and Mineral Resource
estimates for the La Coipa Mine.
19.
Peter Nahan, Senior Evaluation Engineer, is the qualified person
responsible for the Mineral Reserve estimate for the Pueblo
Viejo Project.
20.
Chris Keech, Senior Geologist / Geostatistician, is the
qualified person responsible for the Mineral Resource estimate
for the Pueblo Viejo Project.
The following are the technical reports prepared in accordance
with NI 43-101
from which certain technical information relating to
Goldcorp’s mineral projects contained in this Circular and
in the Renewal Annual Information Form of Goldcorp for the year
ended December 31, 2005 has been derived:
1.
Alumbrera Mine and Peak Mine — Harry Burgess, P.Eng.,
B. Terrence Hennessey, P.Geo., and David T. Wells, C.Eng., all
of Micon, prepared a
NI 43-101 report
for Wheaton River Minerals Ltd. (“Wheaton”)
entitled “Technical Report on Mining and Processing Assets
of Peak Gold Mines, in New South Wales, Australia and Minera
Alumbrera Ltd, in Argentina” dated January 2003.
2.
Luismin Mines — Velasquez Spring, P.Eng., Senior
Geologist at WGM, and G. Ross MacFarlane, P.Eng., Senior
Associate Operations Engineer at WGM, prepared a
NI 43-101 report
for Wheaton entitled “An audit of the Mineral Reserves/
Resources Tayoltita, Santa Rita, San Antonio, and San Martin
Mines as of December 31, 2004 for Wheaton River Minerals
Ltd.” dated March 9, 2005.
3.
Los Filos Project — P. John Barton, B.Sc (Eng), ARSM,
MAusIMM, Andrew F. Ross, M.Sc, P. Geo, both of Snowden, Michael
G. Hester of IMC, Daniel W. Kappes of Kappes Cassiday &
Associates (“Kappes”) and John F. Lupo, Ph.D,
P.E. of Golder Associates (“Golder”), prepared
a NI 43-101 report
for Goldcorp entitled “Technical Report
NI 43-101F1 Los
Filos Project, Mexico” dated March, 2006.
4.
Amapari Mine — Harry Burgess, P.Eng., D. W. Hooley,
BSc(Eng.), and Kenneth A. Grace, P.Eng., all of Micon, prepared
a NI 43-101 report
for Wheaton entitled “Review of the Amapari Mine Amapa
State, Brazil” dated November 2003.
5.
Pueblo Viejo Project — Susan F. Lomas, P.Geo, Lynton
S. Gormely, Ph.D., P.Eng, Ted Eggleston, Ph.D., P.Geo, all of
AMEC and Tracy E. Barnes, P.E. of Barnes Engineering Services,
Inc. (“Barnes”) prepared a
NI 43-101 report
for Placer Dome entitled “Pueblo Viejo Project, Province of
Sanchez Ramirez, Dominican Republic:
43-101 Technical Report
and Qualified Person’s Review” dated October 26,2005 which has since been
re-addressed to
Goldcorp.
Each of such reports are available on SEDAR at www.sedar.com and
a summary of such reports, except for the Los Filos and Pueblo
Viejo technical reports, is contained in the Renewal Annual
Information Form of Goldcorp for the year ended
December 31, 2005 under “Description of the
Business — Technical Information”.
None of Micon, WGM, nor Messrs. Burgess, Hennessey, Wells,
Giroux, Hooley, Grace, Spring or MacFarlane, held any securities
of Wheaton or of any associate or affiliate of Wheaton when they
prepared the reports referred to above or following the
preparation of such reports nor did they receive any direct or
indirect interest in any securities of Wheaton or of any
associate or affiliate of Wheaton in connection with the
preparation of such reports.
None of Barnes nor Messrs. Lomas, Eggleston, Barnes or
Gormely held any securities of Placer Dome or of any associate
or affiliate of Placer Dome when they prepared the Pueblo Viejo
Technical Report or following the preparation of such report nor
did they receive any direct or indirect interest in any
securities of Placer Dome or of any associate or affiliate of
Placer Dome in connection with the preparation of such report.
None of Micon, WGM, Snowden, Barnes, Golder, Kappes, its
directors, officers or employees, nor Messrs. Burgess,
Hennessey, Wells, Giroux, Hooley, Grace, Spring, MacFarlane,
Barton, Ross, Hester, Lupo, Kappes, Lomas, Gormely, Eggleston or
Barnes is currently expected to be elected, appointed or
employed as a director, officer or employee of the Goldcorp or
of any associate or affiliate of Goldcorp.
The audited consolidated financial statements of Goldcorp as at
December 31, 2005 and 2004 and for the years then ended
included in this Circular, have been so included upon the report
of Deloitte & Touche LLP, independent chartered
accountants with respect to 2005 and upon the report of
KPMG LLP with respect to 2004, and upon the authority of
such said firms as experts in accounting and auditing. Deloitte
& Touche LLP is independent of Goldcorp within the
meaning of the applicable rules of professional conduct in
Canada. KPMG LLP was independent of Goldcorp within the
meaning of the applicable rules of professional conduct in
Canada upon the date of their audit report, February 7,2005.
Risk Factors
The operations of Goldcorp are subject to risks due to the
nature of its business, which is the acquisition, exploration,
development and operation of precious metals properties. An
investment in Goldcorp Shares involves significant risks, which
should be carefully considered by prospective investors before
acquiring Goldcorp Shares. In addition to information set out
elsewhere, or incorporated by reference, in this Circular,
Glamis Shareholders should carefully consider the risk factors
set forth in the Renewal Annual Information Form of Goldcorp for
the year ended December 31, 2005 that is incorporated by
reference in this Circular. Such risk factors could materially
affect the future operating results of Goldcorp and the Combined
Company and could cause actual events to differ materially from
those described in forward-looking statements relating to
Goldcorp and the Combined Company.
THE COMBINED COMPANY AFTER THE ARRANGEMENT
General
On completion of the Arrangement, Goldcorp as the Combined
Company will continue to be a corporation incorporated under and
governed by the laws of the Province of Ontario. After the
Effective Date, Goldcorp will own all of the common shares of
Glamis.
The business and operations of Glamis will be managed and
operated as subsidiaries of Goldcorp. Goldcorp expects that the
business operations of Goldcorp and Glamis will be consolidated
and the principal executive office of the Combined Company will
be located at Suite 3400, 666 Burrard Street, Vancouver,
British Columbia, V6C 2X8 (telephone number 604-696-3000).
On completion of the Arrangement, the Combined Company’s
primary properties will consist of the following:
•
a 100% interest in the Red Lake Mines (currently held by
Goldcorp);
•
a 37.5% interest in the Alumbrera Mine (currently held by
Goldcorp);
•
a 100% interest in the San Dimas Mines, the San Martin
Mine and the Nukay Mine (currently held by Goldcorp);
•
a 100% interest in the Peak Mine (currently held by Goldcorp);
•
a 51% interest in the Porcupine Mine (currently held by
Goldcorp);
•
a 68% interest in the Musselwhite Mine (currently held by
Goldcorp);
a 50% interest in the La Coipa Mine (currently held by
Goldcorp);
•
a 100% interest in the Amapari Mine (currently held by Goldcorp);
•
a 100% interest in the Éléonore gold project in
Québec, Canada (currently held by Goldcorp);
•
a 100% interest in the Los Filos Project (currently held by
Goldcorp);
•
a 40% interest in the Pueblo Viejo Project (currently held by
Goldcorp);
•
a 100% interest in the Wharf Mine (currently held by Goldcorp);
•
a 100% interest in the El Sauzal gold mine in Mexico (currently
held by Glamis);
•
a 100% interest in the San Martin gold mine in Central
Honduras (currently held by Glamis);
•
a
662/3%
interest in the Marigold gold mine in Nevada, United States
(currently held by Glamis);
•
a 100% interest in the Marlin gold-silver mine in Guatemala
(currently held by Glamis); and
•
a 100% interest in the Peñasquito Project (currently held
by Glamis).
For the purposes of NI 43-101, the material mineral properties
of the Combined Company will be the following:
•
the Peñasquito Project;
•
Glamis’ Marlin mine;
•
the Pueblo Viejo Project;
•
the Red Lake Mines;
•
the Alumbrera Mine;
•
the San Dimas Mines; and
•
the Los Filos Project.
Current technical reports for the above-mentioned material
mineral properties, other than the Red Lake Mines, as required
under NI 43-101,
are filed on SEDAR. See “Information Concerning
Goldcorp — Red Lake Mines” for certain
information concerning the Red Lake Mines. Goldcorp and Glamis
are obtaining appropriate exemptive relief from the relevant
securities regulatory authorities with respect to the
requirement to file a current technical report for the Red Lake
Mines, provided that Goldcorp files a report within 45 days
after the date this Circular is filed on SEDAR.
Organization Chart
The following chart shows the corporate relationship between
Goldcorp and Glamis following the completion of the Arrangement:
Directors and Officers
Goldcorp has agreed under the Arrangement Agreement to use its
reasonable best efforts to ensure that, as of the Effective
Time, the board of directors of the Combined Company will
consist of ten directors, six of whom will be nominees of
Goldcorp, and four of whom will be nominees of Glamis. Ian
Telfer (current President and CEO of Goldcorp) will be Chairman
of the board of directors of the Combined Company, Kevin
McArthur (current President and CEO of Glamis) will be President
and CEO of the Combined Company, Charles Jeannes (current
Executive Vice President, Administration of Glamis) will be
appointed as an Executive Vice President of the Combined
Company, Charles Ronkos (current Vice President, Exploration of
Glamis) will be appointed Vice President, Exploration of the
Combined Company and the current officers of Goldcorp, other
than Mr. Telfer, are expected to continue to hold their
current positions with Goldcorp in the Combined Company. See
Goldcorp’s management information circular dated
March 20, 2006 for its most recent annual and special
meeting of shareholders and Goldcorp’s Renewal Annual
Information Form that are incorporated herein by reference for
information concerning the current directors and officers of
Goldcorp.
Capital Structure
The authorized capital of Goldcorp following the Arrangement
will continue to consist of an unlimited number of Goldcorp
Shares.
Goldcorp Shares
There are no limitations contained in the articles or
by-laws of Goldcorp on
the ability of a person who is not a Canadian resident to hold
Goldcorp Shares or exercise the voting rights associated with
Goldcorp Shares.
Dividends. Holders of Goldcorp Shares are entitled to
receive dividends when, as and if declared by the Goldcorp Board
out of funds legally available therefor. The OBCA provides that
a corporation may not declare or pay a dividend if there are
reasonable grounds for believing that the corporation is, or
after the payment of the dividend would be, unable to pay its
liabilities as they fall due or the realizable value of its
assets would thereby be less than the aggregate of its
liabilities and stated capital of all classes of shares of its
capital.
Liquidation. On dissolution, liquidation or winding up of
Goldcorp, holders of Goldcorp Shares are entitled to share
rateably in any assets remaining after the satisfaction in full
of the prior rights of creditors, including holders of
Goldcorp’s indebtedness.
Voting. Goldcorp Shareholders are entitled to one vote
for each share on all matters voted on by shareholders,
including the election of directors.
Post-Arrangement Shareholdings
Immediately after completion of the Arrangement, assuming that
no Glamis Shareholder exercises Dissent Rights, Glamis
Shareholders should own approximately 40%, and Goldcorp
Shareholders should own approximately 60%, of Goldcorp. Goldcorp
will own 100% of Glamis.
Post-Arrangement Goldcorp Options and Warrants
Based on information at September 25, 2006, immediately
after the Arrangement, Goldcorp will have outstanding Goldcorp
Options and warrants providing for the acquisition of an
aggregate of 25,560,481 Goldcorp Shares, at prices ranging from
Cdn.$2.05 to Cdn.$45.75, including 5,169,605 Goldcorp
Shares for issue under the Converted Goldcorp Options, at prices
ranging from Cdn.$4.37 to Cdn.$25.74.
Dividends
Goldcorp is expected to continue its policy of paying regular
dividends on Goldcorp Shares.
Auditors
Deloitte & Touche LLP, the current auditors of Goldcorp, are
expected to continue as the auditors of Goldcorp following the
Effective Date.
Transfer Agent and Registrar
The transfer agent and registrar for the Goldcorp Shares in
Canada is, and is expected after the Arrangement to remain, CIBC
Mellon Trust Company at its principal offices in Vancouver,
British Columbia and Toronto, Ontario in Canada. The co-transfer
agent and registrar for the Goldcorp Shares in the United States
is, and is expected after the Arrangement to remain, Mellon
Investor Services LLC at its principal offices in Jersey City,
New Jersey.
Post-Arrangement Reorganization
Under the Arrangement Agreement, Goldcorp has agreed to cause
Glamis, within 30 days after the Effective Date, to
amalgamate with either Goldcorp or a wholly-owned subsidiary
of Goldcorp.
The following information is presented on a pre-Arrangement
basis and reflects the current business, financial and share
capital position of Glamis. See “Information Concerning
Goldcorp” and “The Combined Company After the
Arrangement” in this Circular for current and pro forma
business, financial and share capital information relating to
Goldcorp and the Combined Company, respectively.
Risk Factors
Glamis Shareholders should carefully consider the risk factors
set forth in Glamis’ Annual Information Form for the year
ended December 31, 2005, which is incorporated by reference
in this Circular, as well as the risk factors associated with
the Arrangement described under “Risk Factors”.
History and Current Operations
Glamis was incorporated under the laws of British Columbia,
Canada on September 14, 1972 under the name Renniks
Resources Ltd. (N.P.L.). Since incorporation, Glamis has
undergone several capital reorganizations and on
December 12, 1977 its name was changed to Glamis Gold Ltd.
Glamis’ principal and executive offices are located at 5190
Neil Road, Suite 310, Reno, Nevada, USA 89502, and its
registered and records offices are located at 1500 –
1055 West Georgia Street, P.O. Box 11117, Vancouver,
British Columbia, Canada V6E 4N7.
Glamis’ operations are conducted by its subsidiaries, which
are shown on the following organizational chart.
Cautionary Note to United States Investors Concerning
Estimates of Measured, Indicated and Inferred Resources
This section uses the terms “Measured”,
“Indicated” and “Inferred” Resources. United
States investors are advised that while such terms are
recognized and required by Canadian regulations, the SEC does
not recognize them. “Inferred Mineral Resources” have
a great amount of uncertainty as to their existence, and as to
their economic and legal feasibility. It cannot be assumed that
all or any part of an Inferred Mineral Resource will ever be
upgraded to a higher category. Under Canadian rules, estimates
of Inferred Mineral Resources may not form the basis of
feasibility or other economic studies. United States
investors are cautioned not to assume that all or any part of
Measured or Indicated Mineral Resources will ever be converted
into Mineral Reserves. United States investors are also
cautioned not to assume that all or any part of an Inferred
Mineral Resource exists, or is economically or legally
mineable.
As at December 31, 2005, Glamis reported total proven and
probable mineral reserves containing approximately
5.7 million ounces of gold and 42 million ounces of
silver. In addition, the Peñasquito Project has total
proven and probable mineral reserves as reported in the
Peñasquito Feasibility Study of approximately
10 million ounces of gold and 575 million ounces of
silver.
Recent Developments
Gold and Silver Production
Glamis produced 434,010 ounces of gold and
252,789 ounces of silver in the year ended
December 31, 2005 and 286,418 ounces of gold and
697,807 ounces of silver in the six months ended June 30,2006. Glamis expects to produce approximately
611,000 ounces of gold in 2006, slightly below its 620,000
ounce forecast. Glamis continues to expect total cash costs per
ounce of gold produced to average approximately $190, consistent
with its previous guidance. The shortfall in production is due
to the fact that the Marlin mine in Guatemala has not yet
reached full-scale operations as scheduled and is expected to
produce 170,000 ounces in 2006 as compared to its 2006
production target of 215,000 ounces of gold. Most of this
deficit has been made up with additional production from the El
Sauzal mine in Mexico. Marlin has experienced normal course
start-up issues including mechanical problems with the SAG mill
and leach tanks which have now been addressed. The commencement
of the rainy season has resulted in ore feeding issues at the
crusher facility, as wet, sticky ore hangs up in the chutes and
feeder mechanism. Glamis believes that the system requires
modification and Glamis is in the final stages of considering
various alternatives with the goal of commencing retrofitting
the system later this year. As this is a mechanical issue rather
than a problem with the reserves or metallurgical recoveries,
gold production should not be reduced over the life of the mine.
Peñasquito Project, Mexico
Acquisition
Glamis acquired the Peñasquito Project through the
acquisition of Western Silver on May 3, 2006 through a plan
of arrangement carried out under the BCBCA. Pursuant to the plan
of arrangement, each common share of Western Silver was
exchanged for 0.688 of a Glamis Share and one common share of
Western Copper Corporation (“Western Copper”),
a new exploration company formed by Western Silver. In addition,
Western Silver transferred to Western Copper approximately
Cdn.$37 million in cash and an early stage Mexican mineral
exploration property. Glamis retains a right to acquire
2,562,979 common shares of Western Copper at Cdn.$3.50 per
share through a two-year share purchase warrant, which
represented approximately 5% of the fully diluted issued shares
of Western Copper at the time of closing. Western Silver was
principally engaged in the exploration for precious metals in
Mexico. Glamis issued approximately 33.88 million Glamis
Shares under the terms of the plan of arrangement and issued
1,385,055 share purchase options to the holders of Western
Silver share purchase options, exercisable at prices between
Cdn.$0.17 and Cdn.$13.62 per share, in exchange for their
existing Western Silver share purchase options. Glamis’
acquisition and transaction costs for the transaction were
approximately $12 million. The acquisition of Western
Silver has been accounted for using the purchase method. See the
Business Acquisition Report relating to the acquisition of
Western Silver, which is incorporated herein by reference and
filed on SEDAR, for pro forma financial information related to
the acquisition.
The Peñasquito Feasibility Study, which was prepared by M3
Engineering & Technology Corp. (“M3”),
describes the technical and economic aspects of placing the
Peñasquito Project into production, initially at a
processing
rate of 50,000 metric tons per day and ultimately at the
processing rate of 100,000 metric tons per day. The ore body
associated with the Peñasquito Project is polymetallic with
the precious metals of silver and gold providing over one-half
the revenue and the base metals of lead and zinc providing the
remainder.
The Peñasquito Feasibility Study sets forth conclusions and
recommendations, based on M3’s experience and professional
opinion, which result from its analysis of work and data
collected. The following Glamis personnel and other
professionals participated in the preparation of the
Peñasquito Feasibility Study, each being a “Qualified
Person” as defined in
NI 43-101:
Responsibility
Qualified Person
Registration
Company
Resource Modeling, Mine Planning, Reserves and Geology
James S. Voorhees
P.Eng.
Glamis
Metallurgical Testing
Jerry Hanks
P.Eng.
Independent
Flow Sheets
Tom Drielick
P.Eng.
M3
Pit Geotechnical
Tom Wythes
P.Eng.
Golder Associates Inc.
Process Plant and Costing
Conrad Huss
P.Eng.
M3
Foundation Design
Michael Pegnam
P.Eng.
Golder Associates Inc.
Tailings
Jim Johnson
P.Eng.
Golder Associates Inc.
Information in this section of the Circular of an economic,
scientific or technical nature in respect of the Peñasquito
Project is based upon the Peñasquito Feasibility Study and
has been prepared with the consent of the authors of the report.
The Peñasquito Feasibility Study may be viewed on SEDAR at
www.sedar.com and on Glamis’ website at www.glamis.com.
Property Description, Location and Accessibility
Glamis, through its wholly owned Mexican subsidiary, Minera
Peñasquito, S.A. de C.V. (“Minera
Peñasquito”) owns 100% of the mineral rights to a
large area covering approximately 39,000 hectares located in the
north-eastern portion of the State of Zacatecas in north-central
Mexico (the “Peñasquito Property”). The
closest major town is Concepción del Oro which lies
approximately 27 kilometres west of the Peñasquito Property
on Mexican highway 54, a well maintained, paved highway which
links the major cities of Zacatecas (in the state of Zacatecas),
approximately 250 kilometres to the southwest with Saltillo (in
the state of Coahuila) approximately 125 kilometres to the
northeast.
Investigations on the Peñasquito Property have identified
several major sulphide mineralization zones with significant
values of silver, gold, zinc and lead. The Peñasquito
Feasibility Study considers the economic development of two
zones, the Peñasco (the “Peñasco
Zone”) and the Chile Colorado (the “Chile
Colorado Zone”), which have been the subject of most of
the geological and metallurgical investigations to date
(collectively the “Peñasquito Project”).
Preliminary resource investigation has been performed on two
additional zones, Azul Breccia and El Sotol, but no development
plan has yet been evaluated for these zones. In addition to the
sulphide mineralization, the Peñasco Zone and the Chile
Colorado Zone also have substantial oxide ore and mixed ore
(oxide/sulphide transition material) caps which contain
recoverable gold and silver. The gold and silver recovered from
the oxide and mixed ores have been included in the
Peñasquito Project economic evaluation.
The following table lists the mineral claims associated with the
development of the Peñasquito Project. This table is not a
complete list of Minera Peñasquito’s mineral interests
associated with the Peñasquito Property.
A 2% net smelter return royalty is owed to Kennecott Canada
Explorations Inc. (“Kennecott”) on production
from the Peñasquito Project.
There is no previous mine development of any form in the
immediate area of the Peñasco Zone and the Chile Colorado
Zone and as such no environmental liabilities are attached to
the Peñasquito Project. All drill sites are cleaned and
rehabilitated on an ongoing basis.
Minera Peñasquito currently holds valid exploration permits
for the drill work being performed on the Peñasquito
Project. The development of the Peñasquito Project as a
mine will require additional permits from state and federal
authorities in Mexico as follows:
Key Permits Required for the 50,000 MTPD Plant at the
Peñasquito
Project(6)
REQUIRED
PERMIT
MINING STAGE
AGENCY
Environmental Impact
Manifest-mine(1)
Construction/operation/ abandonment
SEMARNAT- Federal Offices Mexico DF)
Land use change
study-mine(1)
Construction/operation
SEMARNAT-
DGGFS(2)-Federal
offices.
Risk analysis
study-mine(1)
Construction/operation
SEMARNAT-(Mexico City office)
Environmental Impact Manifest-power line
(1)
Construction/operation/
abandonment
SEMARNAT-State offices
Land use change study-power
line(1)
Construction/operation
SEMARNAT-DGGFS(2)-State
offices.
Land use
license(1)
Construction
Mazapil municipality
Explosive handling and storage permits
Construction/-operation
SEDENA(3)
(Also requires state and local approvals)
Archaeological release
letter(1)
Construction
INAH(4)
(State offices)
Water use concession title
Construction/operation
CNA(5)
(State offices)
Water discharge permit
Operation
CNA (State offices)
Unique license
Operation
SEMARNAT-State offices
Accident prevention plan
Operation
SEMARNAT-State offices
Note:
(1)
Mandatory to start construction activities.
(2)
DGGFS (General Department of Permitting for Forestry and Soils).
(3)
SEDENA (National Secretary of Defense).
(4)
INAH (National Institute of Anthropology and History).
(5)
CNA (National Water Commission).
(6)
Amendments to these permits will be required for a 100,000 MTPD
plant.
Physiography, Climate and Infrastructure
Physiography
The Peñasquito Project area lies within a wide valley
bounded to the north by the Sierra El Mascaron and the south by
the Sierra Las Bocas. Except for one small outcrop, the area is
covered by up to 30 metres of alluvium. The terrain is generally
flat, rolling hills. Vegetation is mostly scrub, with cactus and
coarse grasses. The prevailing elevation of the Peñasquito
Project is approximately 1900 metres above sea level. There is
adequate space for development of the proposed process
facilities and the tailings and waste areas.
Climate
The climate in the area of the Peñasquito Project is
generally dry with precipitation being limited for the most part
to a rainy season of June and July. Annual precipitation for the
area is approximately 700 millimetres, most of which falls in
the rainy season. Temperatures range between 20 degrees
Celsius and 30 degrees Celsius in the summer and
0 degrees Celsius to 15 degrees Celsius in the winter.
Access and Infrastructure
An adequate network of road and rail services exists in the
region to support the Peñasquito Project. Road access to
the Peñasquito Project is presently gained west out of
Concepción del Oro. The road is very steep immediately west
of Concepción del Oro with numerous tight switch-backs. It
is either paved or cobbled and maintained to approximately 6
kilometres from the Peñasquito Project, where the road
becomes a well-maintained gravel road. The Chile Colorado Zone
is within two kilometres of this main road and the
Peñasco Zone lies adjacent to the road. There is one
railhead approximately 100 kilometres to the west.
A new road is being constructed by the State of Zacatecas from
just east of the Peñasquito Project to Highway 54
approximately 25 kilometres south of Concepción del Oro.
This road will provide good access to the Peñasquito
Property. The road is approximately 70% complete with about
2.5 kilometres yet to be completed over a mountain pass.
Construction of the road has been halted for lack of government
funds. The final portion of the road must be completed before
the start of construction at the Peñasquito Project and it
is anticipated that Glamis will need to fund approximately
$2 million of construction costs. Use of this new road will
eliminate the rather steep switchback sections of the current
cobblestone road just west of Concepción del Oro and the
town of Concepción del Oro itself.
Negotiations for a high voltage power line
right-of-way are in
progress.
Given the mining experience in the area and the high
unemployment rate, there is expected to be an adequate pool of
mining personnel available.
There is adequate space for development of the process
facilities and the tailings and waste areas. The tailings
disposal will be constructed as a four-sided containment area
using mine waste for a starter dam and tailings for raising the
embankment. In general, this is a very favourable site for
development.
Surface Rights
Surface rights covering the Peñasquito Project are held by
one private individual and three Ejidos. Minera Peñasquito
is currently in negotiations to finalize surface rights to the
land required for the project. Signatures indicating agreement
to the granting of access to Minera Peñasquito have been
obtained from the Ejidos and the private owner.
An Ejido is a communal ownership of land recognized by the
federal laws in Mexico. While mineral rights are administered by
the federal government through federally issued mining
concessions, an Ejido controls surface rights over communal
property through a Board of Directors which is headed by a
president. An Ejido may also allow individual members of the
Ejido to obtain title to specific parcels of land and thus the
right to rent or sell the land. Negotiations with individual
members of the Ejido regarding their specific parcels are in
progress at this time. Relations with the Ejidos remain positive.
Water
A study has been conducted to confirm adequate water capacity
for the Peñasquito Project and a report was submitted to
the applicable Mexican authorities on December 15, 2004.
Typically, the multi-department review takes between 8 to
12 months. Upon completion of the review, the report and
associated findings are published in the official Diary of the
Federation. A letter of intent was prepared for a concession to
pump up to 10 million cubic metres of water per year to be
used for the Peñasquito Project. This letter was submitted
in April 2005. The Mexican authorities have given a preliminary
indication that they will permit an allocation of 5 million
cubic metres of water per year for the Peñasquito Project.
Additional drilling is ongoing to support an application for the
remaining 5 million cubic metres of water per year needed
to support the production at the Peñasquito Project.
History
The region in which the Peñasquito Property is located has
a strong tradition of mining going back to the mid 1500s when
silver mining first started in the region and the city of
Zacatecas was founded. Up until the 19th century, 20% of
all silver mined in the world was reportedly mined from the
region surrounding the City of Zacatecas. Mining remains active
in the State of Zacatecas.
Some limited exploration of the Peñasquito Project area was
carried out during the 1950s, however, it was not until 1994
when Kennecott initiated a comprehensive exploration program in
the project area that the size and potential of the mineralized
system were recognized.
Western Silver, now a wholly-owned subsidiary of Glamis,
acquired 100% of the Peñasquito Project from Kennecott in
March 1998.
On August 24, 2000, Western Silver optioned the
Peñasquito Property to Mauricio Hochschild & Cia
Ltda., (“Hochschild”), a Peruvian company.
During the fourth quarter of 2000, Hochschild completed a
14 hole, 4,601 metre drill program, with 11 holes
drilled in the Chile Colorado Zone and adjacent area. However,
Hochschild returned the property to Western Silver after
spending more than $1 million on drilling and land payments.
In 2002, Western Silver began actively drilling the
Peñasquito Property and continued to do so up until May of
2006 when Glamis acquired Western Silver. Exploration drilling
has recently focused on the Peñasco Zone.
Geological Setting
The local geology is dominated almost entirely by the rocks of
the Mexico Geosyncline, a
2.5-kilometre thick
series of marine sediments deposited during the Jurassic and
Cretaceous Periods and consisting of a
2,000-metre thick
sequence of carbonaceous and calcareous turbidic siltstones and
interbedded sandstones underlain by a
1,200-metre thick
limestone sequence.
A large granodiorite stock is believed to underlie the entire
area and the sediments of the Mexico Geosyncline are cut by
numerous intrusive dykes, sills and stocks of intermediate to
felsic composition.
Both the sediments of the Mexico Geosyncline and the
granodiorite are believed to have been intruded along the
western and southern margins of the granodiorite by one or two
quartz-feldspar porphyry stocks. The porphyry stocks did not
reach surface but are at depth. They are represented at the
bedrock surface by two hydrothermal diatreme breccia pipes, the
Azul Breccia Pipe and the Outcrop Breccia Pipe. There is a
single outcrop of silicified breccia of the Outcrop Breccia Pipe
which is associated with the Peñasco Zone. It is the only
outcrop on the property.
Both breccia pipes are believed to have erupted and breached the
surface. Their eruption craters and ejecta aprons have since
been eroded away, and the current bedrock surface at the
Peñasquito Property is estimated to be on the order of
50-75 metres below the
paleo-eruption surface. Both of the breccia pipes sit within a
hydrothermal alteration shell of propylitic alteration that has
largely been overprinted by weak phyllic alteration that
intensifies at depth.
Mineralization
Sulphide mineralization occurs in the Chile Colorado Zone and
the Peñasco Zone that are hosted in the Outcrop Breccia
Pipe and it occurs in association with other breccias located on
the property.
The Peñasco Zone is in the east half of the Outcrop Breccia
Pipe directly above the projected throat of the breccia pipe. In
plain view, the Peñasco Zone is ovoid in shape, is at least
500 metres wide in an east-west direction and is 1000 metres
long in a north-south direction. It has formed around a complex
series of small quartz-porphyry stocks and dikes with some
felsite dikes. It is composed of disseminations and veinlets of
medium to coarse-grained sphalerite-galena-argentite, other
unidentified silver sulfosalts, minor tetrahedrite-polybasite
and common gangue of calcite-rhodochrosite-quartz-fluorite.
The intrusive rocks themselves are also often mineralized.
Mineralization also extends upwards along the north and south
contacts of the Outcrop Breccia Pipe. At the south contract, it
extends upwards in the mixed clast breccia adjacent to the
northwest faults that cut the breccia pipe.
The most common mineral host is the intrusive hydrothermal
breccia. This breccia is the dominant rock below the
1,600-metre level. It
also is widely distributed as a halo around the porphyry stocks
and dikes. The porphyry often appears to brecciate into the
intrusive hydrothermal breccia as it passes upwards.
Mineralization is present in the upper mixed clast breccia along
the south contact, the quartz-feldspar porphyry intrusive
breccia and, to a lesser extent, the quartz-porphyry dikes. The
felsite dikes are at times also good mineral hosts.
The mineralization of the Chile Colorado Zone normally occurs as
both veining and narrow fracture filling, hosted in weakly
silicified sandstone, siltstone or shale. The mineralization has
been interpreted to represent stockworks, localized by a
north-south trending fracture zone.
Sphalerite and galena associated with carbonate and pyrite occur
as massive veins. Pyrite, sphalerite and galena have also been
observed as discrete crystals and disseminations within
sandstone units. Late state carbonates and pyrite fracture
fillings occur throughout the sediments.
Exploration
Kennecott completed numerous air and ground based geophysical
surveys on the Peñasquito claim groups between 1994 and
1997. The aeromagnetic survey of the region defined an
8 kilometres by 4 kilometres, north-south
trending magnetic high centered roughly on the Outcrop Breccia.
Drilling during 1996 resulted in the discovery of the Chile
Colorado Zone.
Kennecott completed an extensive rapid air blast
(“RAB”) drilling campaign across much of the
Peñasquito Project area after the discovery of the Chile
Colorado Zone. This program, designed to systematically test the
entire project area, consisted of 250 holes. The holes
penetrated the extensive overburden cover and collected chip
samples from anomalies, which had been discovered during the
numerous geophysical surveys as well as outlining other,
previously unknown anomalies. Twenty-eight of the RAB holes in
this campaign by Kennecott were drilled within and immediately
adjacent to the Peñasco Zone. The geochemical survey
results indicated that further exploration was warranted in this
area. Exploration drilling results have subsequently confirmed
significant mineralization in the Peñasco Zone.
During 1998 Western Silver completed nine core holes
(3,185 metres) and 13.4 line kilometres of geophysical
surveying. Most of the work was focused on the Chile Colorado
Zone and the adjacent area. In 2004, Western Silver initiated
additional geophysical surveys that extended coverage on the
older lines, and extended coverage to the east of the
pre-existing coverage. The geophysical database for the
Peñasquito Project area now provides a detailed electric
cross-section that images changes in geology, and appears to
identify specific targets of interest.
Drilling
The Peñasquito Property has been drilled by different
operators over several campaigns and phases beginning in 1995.
Drilling has focused on the exploration of three principal
areas: the Chile Colorado Zone, the Azul Zone (Azul Breccia,
Azul NE and Luna Azul) and the Peñasco Zone, including El
Sotol adjacent to the Peñasco Zone. Work is presently
concentrated on both
in-fill and step-out
exploration drilling of the Peñasco Zone.
The following table summarizes drilling performed and assayed to
date on the Peñasquito Property. This data has been used in
the preparation of the resource estimates used in the
Peñasquito Feasibility Study. Additional extensive drilling
is ongoing.
Summary of Project Drilling at the Peñasquito
Project — Through June 30, 2006
Number of
Metres of
Average Hole
Calendar Year
Drill Holes
Drilling(1)
Length (metres)
1994-1997 Drilling (Kennecott)
71
23,929
337
1998 Drilling (Western Silver)
9
3,185
354
2000 Drilling (Hochschild)
14
4,601
329
2002 Drilling (Western Silver)
45
19,795
440
2003 Drilling (Western Silver)
99
26,695
270
2004 Drilling (Western Silver)
120
57,051
475
2005 Drilling (Western Silver)
138
91,220
661
2006 Drilling to June 30 (Western Silver and Glamis)
32
22,944
717
Drilling Total
528
249,420
473
Note:
(1)
15,135 metres are reverse circulation drilling; the balance is
diamond core.
Sampling, Analysis, Security and Data Verification
Due to the alluvial cover, the vast majority of resource
sampling at the Peñasquito Project has been done using
either reverse circulation or diamond core drilling. All
drilling in 2004 and most other drilling has been primarily
large size core drilling, but narrower diameter core was used at
depth in the longer holes.
Minera Peñasquito has sampled drill holes from bedrock to
final depth. The standard sample interval is 2.0 metres.
Some samples are limited to geological boundaries and are less
than 2.0 metres in length. A senior geologist examined the core,
defined the primary sample contacts, and designated the axis
along which to cut the core. Special attention in veined areas
was taken to ensure representative splits were made
perpendicular and not parallel to veins.
Geological logging is very detailed and follows the geological
legend on a regional scale. Once the core was measured, marked,
photographed, and logged geotechnically and geologically, the
core boxes were brought to the diamond saw cutting stations. The
core was sawed in half. One-half of every sample was placed into
a heavy plastic
bag that the splitter’s helper had previously marked with
the drill hole and sample number and the sample tag was inserted
into the plastic bag. Standard Reference Material samples and
blanks were inserted into the sample stream going to the assay
laboratory in a documented sequence on a frequency of
approximately 1 in 20 samples.
A Minera Peñasquito truck transported the sacks to the ALS
Chemex Laboratories (“ALS”) in Guadalajara,
Mexico approximately once per week, where the samples were
prepped and pulped. Pulps were then sent to ALS in Vancouver,
British Columbia where they were assayed and checked. Almost all
of the drilled intervals are assayed for gold, silver, lead and
zinc. At present ALS is Minera Peñasquito’s primary
assay lab. Check samples were also sent to Acme Laboratories of
Vancouver. Both ALS and Acme are ISO9002-certified laboratories
and both use industry standard sample preparation procedures.
The sample preparation procedures on site before shipment to the
laboratory have been independently reviewed and deemed secure
and adequate. An independent sampling, preparation and assaying
audit has not been performed.
QA/QC procedures employed by Minera Peñasquito have been
independently reviewed by Independent Mining Consultants, Inc.
and no significant concerns were noted.
Based on a review of Minera Peñasquito’s sample
preparation, analysis, security, and QA/ QC procedures to date
with respect to database verification, the database used for the
resource estimates is deemed in the Peñasquito Feasibility
Study to be accurately compiled and maintained, and is suitable
for use in mineral resource estimation. Approximately 90% of the
data base assays were run on Minera Peñasquito samples.
The Peñasquito Feasibility Study states that no significant
problems were identified during reviews of the drilling data,
that the holes appear to have been properly located and
downhole-surveyed and to have recovered an adequate sample (core
recovery during the later Minera Peñasquito campaigns
averaged 97.8%).
Several thousand gold, silver, lead and zinc check assays run by
a check laboratory (usually Acme) on pulps prepared by the
primary laboratory that ran the data base assays (usually
Chemex) are available for the Kennecott campaign and for Minera
Peñasquito Drilling Phases 1, 2, 3, 5, 6,
7, 8, 9, 10 and 11. These assays act as a check on the
analytical procedures used by the primary lab. A few hundred
gold, silver, lead and zinc assays run by a check lab (Acme, M3/
Hazen Research or Davis Metallurgical Laboratories) on fresh
pulps prepared by the check lab are available for Minera
Peñasquito Drilling Phases 1, 2, 3, 7, 8,
9, 10, 11, 12, 13, and 14. These assays act as a check
on both the analytical and the sample preparation procedures
used by the primary lab. No check assays are available for the
Hochschild, 1998 and Minera Peñasquito Phase 4
campaigns, and as of the time of writing the Peñasquito
Feasibility Study, check assaying for Minera Peñasquito
Phases 15, 16, and 17 was in progress.
The Peñasquito Feasibility Study states that the check
assay comparisons show generally acceptable overall agreement
between the primary and check labs for all of the
campaigns/phases for which check assays are available. Standard
and blank assaying results also appear to be generally
acceptable. It is reported in the Peñasquito Feasibility
Study that there are indications that some of the data base
silver assays run by Chemex during the later Minera
Peñasquito phases may be
biased 5-15% low
as a result of analytical factors, but this bias cannot
presently be confirmed, and the errors introduced into net
smelter return value estimates would be minimal even if it did
exist.
The check assay data was supplemented by performing numerous
paired comparisons of grades from different drilling and
assaying campaigns, including those for which no check assays
are available. The results show no evidence to indicate that any
of the Minera Peñasquito and Kennecott data base assays are
affected by large analytical or sample preparation biases.
However, they do suggest that the Hochschild grades are quite
heavily high-biased relative to the Kennecott and Minera
Peñasquito grades for gold, silver, and zinc. No Hochschild
samples were available for re-assay, so the precautionary
decision was taken not to use the Hochschild assays when
estimating grades in the resource model. The paired-comparison
reviews did not detect any biases between core and reverse
circulation drilling. (About 10% of the exploration drilling is
reverse circulation.)
The following tables set forth the estimated Mineral Reserves
and Mineral Resources of the Peñasquito Project as set out
in the Peñasquito Feasibility Study.
Proven and Probable Mineral
Reserves(1)(2)(7)
Ore
Gold
Silver
Lead
Lead
Zinc
Zinc
Proven Category
Tonnes
Grade
Gold
Grade
Silver
Grade
Tonnes
Grade
Tonnes
Ounces
Ounces
(Millions)
(gpt)
(000s)
(gpt)
(000s)
(%)
(Millions)
(%)
(Millions)
Peñasco Pit Oxide
51.6
0.28
471
25.4
42,136
Peñasco Pit Sulfide
221.2
0.67
4,733
32.2
228,967
0.35
0.8
0.77
1.7
Chile Colorado Pit Oxide
16.7
0.22
120
20.3
10,878
Chile Colorado Pit Sulfide
46.7
0.29
442
50.9
76,372
0.56
0.3
0.97
0.5
Combined Pits Oxide Proven Reserves
68.2
0.27
591
24.2
53,014
Combined Pits Sulfide Proven Reserves
267.9
0.60
5,175
35.4
305,339
Combined Pits Proven Reserves
336.2
0.53
5,766
33.2
358,353
0.38
1.0
0.81
2.2
Probable Category
Peñasco Pit Oxide
16.6
0.35
186
23.4
12,465
Peñasco Pit Sulfide
207.3
0.60
3,999
30.2
201,405
0.31
0.6
0.70
1.5
Chile Colorado Pit Oxide
2.2
0.22
16
14.7
1,060
Chile Colorado Pit Sulfide
1.7
0.25
14
28.9
1,578
0.34
0.0
0.65
0.0
Combined Pits Oxide Probable Reserves
18.8
0.33
202
22.4
13,525
Combined Pits Sulfide Probable Reserves
209.0
0.60
4,013
30.2
202,983
Combined Pits Probable Reserves
227.8
0.58
4,215
29.6
216,508
0.31
0.6
0.70
1.5
Proven + Probable Totals
Peñasco Pit Oxide
68.2
0.30
657
24.9
54,601
Peñasco Pit Sulfide
428.5
0.63
8,732
31.2
430,372
0.33
1.4
0.74
3.2
Chile Colorado Pit Oxide
18.9
0.22
136
19.6
11,938
Chile Colorado Pit Sulfide
48.4
0.29
456
50.1
77,950
0.55
0.3
0.96
0.5
Combined Pits Oxide P+ P Reserves
87.1
0.28
793
23.8
66,539
Combined Pits Sulfide P+ P Reserves
476.9
0.60
9,188
33.2
508,322
Combined Pits P+ P Reserves
564.0
0.55
9,981
31.7
574,861
0.35
1.7
0.76
3.6
In addition to the Proven and Probable Mineral Reserves
described above, Glamis has delineated certain other Measured,
Indicated and Inferred Mineral Resources for the Peñasquito
Project. Measured, Indicated and Inferred Mineral Resources have
not been included in the Proven and Probable Mineral Reserve
estimates because even though enough drilling has been performed
to indicate a sufficient amount and grade to warrant further
exploration or development expenditures, these resources have
not been subjected to an economic feasibility analysis and
therefore do not qualify as proven and probable mineral
reserves. The Measured, Indicated and Inferred Mineral Resources
for the Peñasquito Project are not yet known to contain
commercially mineable ore bodies and cannot be considered such
unless and until further drilling and metallurgical work have
been conducted and economic and technical feasibility factors
have been examined and favourably determined.
Measured, Indicated and Inferred Mineral Resources
Gold
Silver
Lead
Lead
Zinc
Zinc
Measured Category(3), (4)
Tonnes
Grade
Gold
Grade
Silver
Grade
Tonnes
Grade
Tonnes
Ounces
Ounces
(Millions)
(gpt)
(000s)
(gpt)
(000s)
(%)
(Millions)
(%)
(Millions)
Peñasco Oxide
53.9
0.28
480
24.9
43,101
Peñasco Sulfide
242.6
0.65
5,095
31.1
242,693
0.33
0.8
0.74
1.8
Chile Colorado Oxide
30.4
0.18
176
17.3
16,950
Chile Colorado Sulfide
139.6
0.28
1,258
35.6
159,592
0.37
0.5
0.80
1.1
Combined Oxide Measured
84.3
0.24
656
22.2
60,051
Combined Sulfide Measured
382.3
0.52
6,353
32.7
402,285
Combined Measured Resources
466.6
0.47
7,009
30.8
462,336
0.34
1.3
0.76
2.9
Indicated
Category(3),
(4)
Peñasco Oxide
20.8
0.31
208
21.8
14,569
Peñasco Sulfide
263.3
0.58
4,941
29.2
246,957
0.29
0.8
0.67
1.8
Chile Colorado Oxide
19.1
0.14
89
17.5
10,776
Chile Colorado Sulfide
102.7
0.16
517
26.4
87,233
0.32
0.3
0.64
0.7
Combined Oxide Indicated
39.9
0.23
297
19.7
25,345
Combined Sulfide Indicated
366.0
0.46
5,458
28.4
334,190
Combined Indicated Resources
405.9
0.44
5,755
27.5
359,535
0.30
1.1
0.66
2.4
Inferred
Category(5),
(6)
Peñasco Oxide Resource
22.9
0.14
101
10.7
7,900
Peñasco Sulfide Resource
1,041.7
0.28
9,365
14.5
485,522
0.13
1.4
0.38
4.0
Chile Colorado Oxide Resource
149.1
0.06
287
5.0
23,793
Chile Colorado Sulfide Resource
1,362.9
0.10
4,514
8.3
364,539
0.08
1.0
0.23
3.1
Combined Oxide Inferred Resources
172.0
0.07
388
5.7
31,693
Combined Sulfide Inferred Resources
2,404.6
0.18
13,879
11.0
850,061
Combined Inferred Resources
2,576.6
0.17
14,267
10.6
881,754
0.10
2.4
0.29
7.1
Notes:
(1)
The terms Mineral Resource and Reserves as used herein conform
to the definitions contained in
NI 43-101 which
adopts the CIM Standards. These resource and reserves estimates
have been prepared under the supervision of James S. Voorhees,
Executive Vice President and Chief Operating Officer of Glamis,
who is a Qualified Person as defined in
NI 43-101.
(2)
Mineral Reserves have been calculated using assumed long-term
metals prices as follows: Gold — $450 per ounce;
Silver — $7.00 per ounce; Zinc —
$0.60 per pound; and Lead — $0.30 per pound.
Mineral Resources have been calculated using assumed long-term
metals prices as follows: Gold — $650 per ounce;
Silver — $10.00 per ounce; Zinc —
$0.86 per pound; and Lead — $0.43 per pound.
(3)
Measured and Indicated (“M&I”) Resources
are defined as being inside an optimized floating cone geometry
that was developed using the Mineral Resource metal prices set
forth above and all classifications of material. This defines a
resource that has the potential of being mined by open pit
methods and is not the total block model contained
mineralization. In the Peñasco Zone, Measured Resources are
defined as any block within the reasonably foreseeable open pit
that is within 35 metres of two or more drill holes. In the
Peñasco Zone, Indicated Resources are defined as any block
within the reasonably foreseeable open pit not defined as
Measured that is within 70 metres of two or more drill
holes. In the Chile Colorado Zone, Measured Resources are
defined as any block within the reasonably foreseeable open pit
that has five or more holes within 135 metres of the block
with the closest hole no more than 50 metres distance. In the
Chile Colorado Zone, Indicated Resources are defined as any
block within the reasonably foreseeable open pit not defined as
Measured that has two or more holes within 135 metres of
the block with the closest hole no more than 70 metres
distance.
(4)
The M&I Resources have been calculated using net smelter
return (“NSR”) cut-off grades and assuming the
long-term Mineral Resource metals prices set forth above. For
oxide M&I resources, an NSR cut-off grade of $1.30 was
applied. For sulfide M&I Resources, an NSR cut-off grade of
$3.60 was applied.
(5)
In the Peñasco Zone, Inferred Resources are defined as any
block within the computer model not defined as Measured or
Indicated that is located within a manually defined mineralized
grade domain. The grade domain was developed using geologic
interpretation of drill hole
assays, lithology and alteration
data. In the Chile Colorado Zone, Inferred Resources are defined
as any block within the computer model not defined as Measured
or Indicated that is located within 135 metres of a drill hole.
(6)
The Inferred Resources have been
stated using NSR cutoff grades and assuming the long-term
Mineral Resource metals prices set forth above. For oxide
Inferred Resources, an NSR cutoff grade of $0.70 was applied and
for sulfide Inferred Resources, an NSR cutoff grade of $1.60 was
applied, with both cutoff grades being based on reserve metal
prices.
(7)
Mineral Reserves are a subset of
Measured and Indicated Mineral Resources.
Proposed Mining Operations
Mine Plan
The mine plan for the Peñasquito Project provides for
sulphide ore to be processed by a mill — flotation
plant that will produce two concentrates for sale: a lead
concentrate and a zinc concentrate. The mine plan provides for
oxide and mixed ores to be processed by a heap leaching facility
that will produce a silver and gold doré.
The mine plan provides for a combined production schedule for
both sulphide and oxide ores from both the Peñasco and
Chile Colorado Zones. The start of mining operations is expected
to begin in calendar year 2008, and is taken as Year 0 in
the mining schedule. It is planned that half way through
Year 1, sufficient sulphide ore will be available such that
the mill operation can begin under a
6-month startup and
commissioning mode. Commercial mill production is scheduled to
begin in Year 2 and is planned to continue through Year 3 at an
annual mining rate of 18.2 million tonnes of sulphide ore
per year. Starting in Year 4, it is planned that production
of sulphide mill ore will increase to a rate of
36.5 million tonnes per year. The mine plan provides for
the total material mined per year to increase over the first
5 years to peak at 179.0 million tonnes per year
(511,430 tonnes per day).
The current ore reserves are 476.9 million tonnes of
sulphide ore, 87.1 million tones of leach ore with a life
of mine waste to ore ratio of 2.76:1. Commercial sulphide
production is scheduled for 17 years.
Environmental Considerations
The Peñasquito Project is located in a rural area of mining
tradition. The site is not within protected natural areas, and
the mining work is not considered a risk to the environmental
system integrity since all plans take into account the required
environmental control measures for the flora and fauna species
identified on the site.
Drainage and the site soils will also be impacted, but the site
impact will be lessened by mitigation and control measures to be
implemented in the different project phases.
It is believed that there are no reasons for the mining project
to be delayed on environmental impact grounds because the ideal
conditions are in place to comply with the present Mexican
environmental codes.
Metallurgical Testing
Metallurgical test work initiated since the completion of a
pre-feasibility study in 2004 includes comminution testing,
flotation testing, modal analyses, and gravity testing, all for
the sulphide process. For the oxide process, bottle roll and
column leach tests have been performed. Additional work is in
progress for both the sulphide and oxide mineralization. Samples
from both the Chile Colorado and the Peñasco Zones are
being tested. Most of the work now in progress and planned for
the near future utilizes metallurgical diamond drill hole
(“DDH”) samples produced in late 2004 and early
2005. A program consisting of 13 DDHs was completed in February
2005. The program produced approximately 3,400 metres of PQ
(83 millimetres) and 600 metres of HQ (64 millimetres
diameter) core. The core from the sulphide zone was
shrink-wrapped to prevent oxidation. Crushed sulphide samples
are also being stored in freezers until they can be tested.
Additionally, bulk samples for
run-of-mine testing of
the oxide ore were extracted from four hand-dug wells in the
Peñasco Zone.
The following are the current projected economic parameters for
the Peñasquito Project as set out in the Peñasquito
Feasibility Study:
Mine life (years)
17
Mill throughput (tonnes per day)
100,000 (50,000 initial)
Initial capital cost (millions)
$882
Sustaining capital (millions)
$327
Average Annual Payable Metal:
Gold (troy ounces)
387,500
Silver (troy ounces)
22,846,000
Lead (tonnes)
71,125
Zinc (tonnes)
137,400
Total production as gold equivalent (troy ounces):
1,339,300 (for scale comparison only)
Unit operating costs:
Mining cost per total tonne
$0.81
Milling cost per ore tonne
$2.98
G&A cost per ore tonne
$0.22
Average total cash costs per unit
(lead as by-product):
Gold (per ounce)
$125
Silver (per ounce)
$4.91
Zinc (per pound)
$0.44
Total cash cost per ounce gold production (utilizing all other
metals as by-products)
$(378)
Metals price assumptions:
Base case
Low Case
High Case
Gold (per ounce)
$
532.74
$
450
$
650
Silver (per ounce)
$
8.84
$
7.00
$
10.00
Zinc (per pound)
$
0.787
$
0.60
$
0.86
Lead (per pound)
$
0.424
$
0.30
$
0.43
Project IRR (after tax)
18.7
%
10.2
%
23.4
%
After Tax NPV 0% Discount (millions)
$
3,256
$
1,560
$
4,334
After Tax NPV 5% Discount (millions)
$
1,521
$
514
$
2,161
Payback (years)
5.6
7.6
4.8
Optimization and detailed design for the Peñasquito Project
is continuing and certain of the project parameters may change
as such work progresses. No smelting, refining or transportation
contracts have yet been entered into, nor have any discussions
in respect of such been initiated. Total cash cost of production
is not a Canadian GAAP number. Glamis estimates total cash cost
of production in accordance with the Gold Institute Production
Cost Standard. Total cash cost of production consists of all
direct mining and processing costs, refining and transportation
costs, royalties and production taxes.
Description of Share Capital
The authorized share capital of Glamis consists of an unlimited
number of Glamis Shares, of which 167,240,151 were issued
and outstanding as at September 25, 2006, and 5,000,000
preferred shares having a par value of Cdn.$10 each, issuable in
series, of which none are issued.
Glamis Shareholders are, as such, entitled to receive notice of
any meeting of Glamis Shareholders and to attend and vote
thereat, except those meetings at which only the holders of
shares of another class or of a particular series are
entitled to vote. Each Glamis Share entitles its holder to one
vote at meetings at which they are entitled to attend and vote.
The holders of Glamis Shares are entitled to receive on a pro
rata basis such dividends as the Glamis Board may declare out of
funds legally available therefor. On the dissolution,
liquidation, winding-up
or other distribution of the assets of Glamis, Glamis
Shareholders are entitled to receive on a pro rata basis all of
the assets of Glamis remaining after payment of all of
Glamis’ liabilities and subject to the prior rights
attached to the preferred shares of Glamis to receive a return
of capital and unpaid dividends. The Glamis Shares carry no
pre-emptive or conversion rights.
The Glamis Board may issue preferred shares from time to time in
one or more series with each series to consist of such number of
preferred shares as may be determined by the Glamis Board.
Before the issue of a series of preferred shares, the Glamis
Board may at its sole discretion determine the designation,
rights, privileges, restrictions and conditions attaching to the
series of preferred shares.
Shareholder Rights Plan
Rights to purchase Glamis Shares have been issued to Glamis
Shareholders under the Glamis Rights Plan. One right is attached
to each Glamis Share. Each right entitles a Glamis Shareholder,
on the occurrence of certain specified events and within certain
limitations, to purchase one Glamis Share at an exercise price
of Cdn.$100 (the “Exercise Price”), subject to
adjustment and certain anti-dilution provisions. In certain
events (including when a person or group becomes the beneficial
owner of 20% or more of any class of voting shares of Glamis
without complying with the “permitted bid” provisions
of the rights agreement or without the approval of the Glamis
Board), exercise of the rights would entitle the holders of the
rights (other than the acquiring person or group) to acquire
that number of Glamis Shares having an aggregate market price on
the date of the event equal to twice the Exercise Price for an
amount in cash equal to the Exercise Price. Accordingly,
exercise of the rights may cause substantial dilution to a
person who attempts to acquire control of Glamis. The rights,
which expire in 2009 (unless extended as provided in the rights
agreement), may be redeemed at a price of Cdn.$0.00001 per
right at any time until a person or group has acquired 20% of
the Glamis Shares, except as otherwise provided in the rights
agreement. The rights agreement may have certain anti-takeover
effects.
As required by the Arrangement Agreement, the Glamis Board has
postponed the Separation Time (as defined in the Glamis Rights
Plan) in respect of the Arrangement.
Accordingly, no rights are currently exercisable under the
Glamis Rights Plan or will become exercisable prior to the
Effective Time in connection with the Arrangement.
Changes in Share Capital
From December 31, 2005 to September 25, 2006, Glamis
issued a total of 35,321,348 Glamis Shares pursuant to the
exercise of Glamis Options, the acquisition of Western Silver
and the grant of awards under the Glamis Equity Plan. As at
September 25, 2006, Glamis had outstanding Glamis Options
to purchase up to 3,058,938 Glamis Shares at prices ranging
from Cdn.$7.38 to Cdn.$45.23.
The Glamis Shares are listed and posted for trading on the TSX
and the NYSE under the symbol “GLG”. The
following tables set forth information relating to the trading
of the Glamis Shares on the TSX and on the NYSE for the months
indicated (Source: Bloomberg):
TSX
Sales Price
2005
Low
High
Volume
(Cdn.$)
January
18.92
20.87
17,231,780
February
19.36
22.36
19,416,350
March
18.10
21.69
8,026,382
April
16.88
19.23
7,394,626
May
16.28
18.65
6,213,837
June
17.76
21.49
11,707,741
July
19.55
22.12
6,646,018
August
21.33
24.21
7,839,743
September
22.97
26.50
10,314,468
October
22.35
26.02
12,049,240
November
24.01
28.19
15,151,562
December
25.88
32.42
13,044,518
2006
January
32.31
37.40
15,305,463
February
30.80
37.19
32,142,116
March
29.25
38.50
25,658,981
April
38.22
44.51
20,135,502
May
35.25
48.40
36,438,486
June
32.97
43.40
25,712,020
July
37.41
44.30
12,702,350
August
39.07
52.50
28,137,529
September (to September 25)
40.43
53.05
37,957,131
The price of the Glamis Shares as reported by the TSX at the
close of business on August 30, 2006, the last trading day
immediately before the announcement of the Arrangement, was
Cdn.$43.02. The price of the Glamis Shares as reported by the
TSX at the close of business on September 25, 2006 was
Cdn.$41.19.
The price of the Glamis Shares as reported by the NYSE at the
close of business on August 30, 2006, the last trading day
immediately before the announcement of the Arrangement, was
$38.86. The price of the Glamis Shares as reported by the NYSE
at the close of business on September 25, 2006 was $36.84.
Transfer Agent and Registrar
The registrar and transfer agent for the Glamis Shares is
Computershare at its principal office in Vancouver, British
Columbia.
Available Information
Glamis files reports and other information with Canadian
provincial securities commissions. These reports and information
are available to the public free of charge on SEDAR at
www.sedar.com.
Glamis is subject to the reporting requirements of the
U.S. Exchange Act, and in accordance therewith files
periodic reports and other information with the SEC. Under a
multi-jurisdictional disclosure system adopted by United States
and Canadian securities regulators, such reports and other
information may be prepared in accordance with the disclosure
requirements of Canada, which requirements differ from those of
the United States. Glamis is exempt from the rules under the
U.S. Exchange Act prescribing the furnishing and content of
proxy statements, and its officers, directors and principal
shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the
U.S. Exchange Act. Reports and other information filed by
Glamis with the SEC may be inspected and copied (at prescribed
rates) at the public reference facilities maintained by the
SEC’s Public Reference Room located at 100 F. Street
NE, Washington, D.C. 20549 and are available for viewing at
the SEC website at www.sec.gov. Prospective investors may call
the SEC at
1-800-SEC-0330 for
further information regarding the public reference facilities or
visit the SEC’s website at www.sec.gov. Such reports and
other information concerning Glamis may also be inspected at the
offices of The New York Stock Exchange, 20 Broad Street,
New York, N.Y.10005.
The audited consolidated financial statements of Glamis as at
December 31, 2005 and 2004 and for each of the years in the
three-year period ended December 31, 2005, incorporated by
reference in this Circular, have been so incorporated in
reliance upon the report of
KPMG llp,
independent chartered accountants, and upon the authority of
such firm as experts in accounting and auditing.
KPMG llp is
independent within the meaning of the applicable rules of
professional conduct in Canada.
The audited consolidated financial statements of Western Silver
as at September 30, 2005 and 2004 and for each of the years in
the three-year period ended September 30, 2005, included in
the business acquisition report of Glamis dated July 14,2006 relating to the acquisition of Western Silver which is
incorporated by reference in this Circular, have been so
incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent chartered accountants,
and upon the authority of such firm as experts in accounting and
auditing. PricewaterhouseCoopers LLP is independent within the
meaning of the applicable rules of professional conduct in
Canada.
The Proven and Probable Mineral Reserves and the Mineral
Resources of Glamis as at December 31, 2005, 2004, and 2003
included in Glamis’ Annual Information Form for the year
ended December 31, 2005, which is incorporated herein by
reference, were determined by employees of Glamis under the
supervision of James S. Voorhees, P. Eng., Chief Operating
Officer of Glamis, given on his authority as an expert in
mining, engineering and geology. Mr. Voorhees is a
“Qualified Person” within the meaning of NI
43-101. The Proven and
Probable Mineral Reserves as reported in Glamis’ Annual
Information Form were audited by Mine Development Associates,
Inc., an entity that is not affiliated with Glamis.
The Proven and Probable Mineral Reserves and the Mineral
Resources disclosed in the Peñasquito Feasibility Study, on
which information in this Circular is based, were determined by
employees of Glamis under the direct supervision of
Mr. Voorhees.
Each of the above named experts has advised Glamis that they
beneficially own, directly or indirectly, less than 1% of the
outstanding Glamis Shares, and as a group they own less than 1%
of the issued Glamis Shares.
LEGAL MATTERS
Certain legal matters relating to the Arrangement and to the
Goldcorp Shares to be distributed pursuant to the Arrangement
will be reviewed on behalf of Glamis by Lang Michener LLP,
Vancouver, British Columbia and certain U.S. legal matters
relating to the Arrangement will be reviewed on behalf of Glamis
by Neal, Gerber & Eisenberg LLP, Chicago, Illinois. As
of the date hereof, the partners and associates of Lang Michener
LLP and Neal, Gerber & Eisenberg LLP, as a group,
beneficially owned, directly or indirectly, less than 1% of the
issued Glamis Shares.
DIRECTORS’ APPROVAL
The contents and the sending of the Notice of Meeting and this
Circular have been approved by the Glamis Board.
We have read the Notice and Information Circular (the
“Circular”) of Glamis Gold Ltd. (the
“Company”) dated September 25, 2006 relating to
the special meeting of shareholders of the Company to approve
the Arrangement between the Company and Goldcorp Inc. We have
complied with Canadian generally accepted standards for an
auditor’s involvement with offering documents.
We consent to the incorporation by reference in the
above-mentioned Circular of our report to the shareholders of
the Company on the consolidated balance sheets of the Company as
at December 31, 2005 and 2004 and the consolidated
statements of operations, deficit and cash flows for each of the
years in the three year period ended December 31, 2005. Our
report is dated February 3, 2006, except as to note 16
which is as of February 24, 2006.
We have read the Notice and Information Circular (the
“Circular”) of Glamis Gold Ltd. (the
“Company”) dated September 25, 2006 relating to
the special meeting of shareholders of the Company to approve
the Arrangement between the Company and Goldcorp Inc. We have
complied with Canadian generally accepted standards for an
auditor’s involvement with offering documents.
We consent to the incorporation by reference in the
above-mentioned Circular of our report to the shareholders of
Western Silver Corporation on the balance sheets of Western
Silver Corporation as at September 30, 2005 and 2004 and
the statements of loss and deficit, cash flows and
shareholders’ equity for each of the years in the
three-year period ended September 30, 2005. Our report is
dated November 14, 2005.
We have read the Notice and Information Circular (the
“Circular”) of Glamis Gold Ltd. (the
“Company”) dated September 25, 2006 relating to
the special meeting of shareholders of the Company to approve
the Arrangement between the Company and Goldcorp Inc. We have
complied with Canadian generally accepted standards for an
auditor’s involvement with offering documents.
We consent to the inclusion in the above-mentioned Circular of
our report to the directors of Goldcorp Inc. on the consolidated
balance sheet of Goldcorp Inc. as at December 31, 2005 and
the consolidated statements of earnings, shareholders’
equity and cash flows for the year then ended. Our report is
dated March 3, 2006 (except for Note 19 which is as of
September 25, 2006).
We have read the Notice and Information Circular (the
“Circular”) of Glamis Gold Ltd. (the
“Company”) dated September 25, 2006 relating to
the special meeting of shareholders of the Company to approve
the Arrangement between the Company and Goldcorp Inc. We have
complied with Canadian generally accepted standards for an
auditor’s involvement with offering documents.
We consent to the inclusion in the above-mentioned Circular of
our report to the directors of Goldcorp Inc. on the consolidated
balance sheet of Goldcorp Inc. as at December 31, 2004 and
the consolidated statements of earnings, shareholders’
equity and cash flows for the year then ended. Our report is
dated February 7, 2005.
We have read the Notice and Information Circular (the
“Circular”) of Glamis Gold Ltd. (the
“Company”) dated September 25, 2006 relating to
the special meeting of shareholders of the Company to approve
the Arrangement between the Company and Goldcorp Inc. We have
complied with Canadian generally accepted standards for an
auditor’s involvement with offering documents.
We consent to the incorporation by reference in the
above-mentioned Circular of our report to the Directors of
Placer Dome (CLA) Limited (“Placer Dome”) on the
combined balance sheets of the Placer Dome Operations to be
Acquired by Goldcorp Inc. as at December 31, 2005 and 2004
and the combined statements of earnings (loss) and Placer
Dome’s net investment and cash flows for each of the years
then ended. Our report is dated February 13, 2006.
the Arrangement under Section 288 of the Business
Corporations Act (British Columbia) set forth in the Plan of
Arrangement attached as Appendix C to the Information
Circular of Glamis Gold Ltd. (“Glamis”) accompanying
the Notice of Meeting is authorized and approved;
2.
the board of directors of Glamis, without further notice to or
approval of the shareholders of Glamis, may, in accordance with
the terms of the Arrangement, elect not to proceed with the
Arrangement or otherwise give effect to the special resolution,
at any time prior to the Arrangement becoming effective; and
3.
any one or more of the director and officers of Glamis be
authorized and directed to perform all such acts, deeds and
things and execute, under the seal of Glamis or otherwise, all
such documents and other writings, including as may be required
to give effect to the true intent of this resolution.
PRO FORMA FINANCIAL STATEMENTS OF THE COMBINED COMPANY
Compilation Report
To the Directors of
Goldcorp Inc.
We have read the accompanying unaudited pro forma condensed
consolidated financial statements of Goldcorp Inc. (the
“Company”) as at June 30, 2006 and for the six
months ended June 30, 2006 and the year ended
December 31, 2005, and have performed the following
procedures.
1.
Compared the figures in the columns captioned “Goldcorp
Inc.” to the interim unaudited consolidated financial
statements of the Company for the six months ended June 30,2006 and the audited consolidated financial statements of the
Company for the year ended December 31, 2005 and found them
to be in agreement.
2.
Compared the figures in the columns captioned “Glamis Gold
Ltd.” to the interim unaudited consolidated financial
statements of Glamis Gold Ltd. for the six months ended
June 30, 2006 and the audited consolidated financial
statements of Glamis Gold Ltd. for the year ended
December 31, 2005 and found them to be in agreement.
3.
Compared the figures in the columns captioned “Placer Dome
Operations and projects” to Schedule I and compared
the figures in Schedule I to the unaudited results of
operations of the Operations to be Acquired by Goldcorp Inc. for
the period from April 1, 2006 to May 12, 2006, the
interim unaudited combined financial statements of the
Operations to be Acquired by Goldcorp Inc. for the three month
period ended March 31, 2006 and the audited combined
financial statements of the Operations to be Acquired by
Goldcorp Inc. for the year ended December 31, 2005, and
found them to be in agreement.
4.
Compared the figures in the columns captioned “Western
Silver Corporation” to Schedules II and III, where
applicable, and compared the figures in Schedule II to the
unaudited results of operations of Western Silver Corporation
for the period from April 1, 2006 to May 3, 2006, the
interim unaudited consolidated financial statements of Western
Silver Corporation for the three month period ended
March 31, 2006 converted to U.S. dollars based on the
Canadian/ U.S. dollar average exchange rate for the three months
ended March 31, 2006, and compared the figures in
Schedule III to the audited consolidated financial
statements of Western Silver Corporation for the year ended
September 30, 2005 and the interim unaudited consolidated
financial statements of Western Silver Corporation for the three
month periods ended December 31, 2005 and 2004 converted to
U.S. dollars based on the Canadian/ U.S. dollar average exchange
rate for the year ended December 31, 2005 and found them to
be in agreement.
5.
Compared the figures in the column captioned “Wheaton River
Minerals” to the unaudited results of operations of Wheaton
River Minerals Ltd. for the period from January 1, 2005 to
February 14, 2005 and found them to be in agreement.
6.
Made enquiries of certain officials of the Company who have
responsibility for financial and accounting matters about:
(a)
the basis for determination of the pro forma adjustments; and
(b)
whether the pro forma consolidated condensed financial
statements comply as to form in all material respects with the
published requirements of the Canadian Securities Legislation.
The officials:
(a)
described to us the basis for determination of the pro forma
adjustments; and
(b)
stated that the pro forma consolidated condensed financial
statements comply as to form in all material respects with the
published requirements of the Canadian Securities Legislation.
7.
Read the notes to the pro forma consolidated condensed financial
statements, and found them to be consistent with the basis
described to us for determination of the pro forma adjustments.
Recalculated, where applicable, the application of the pro forma
adjustments to the aggregate of the amounts in the columns
captioned “Goldcorp Inc.”, “Glamis Gold
Ltd.”, “Placer Dome Operations and projects”,
“Western Silver Corporation” and “Wheaton River
Minerals” as at June 30, 2006 and for the six months
ended June 30, 2006 and the year ended December 31,2005 and found the amounts in the column captioned “Pro
forma consolidated” to be arithmetically correct.
A pro forma financial statement is based on management’s
assumptions and adjustments, which are inherently subjective.
The foregoing procedures are substantially less than either an
audit or a review, the objective of which is the expression of
assurance with respect to management’s assumptions, the pro
forma adjustments, and the application of the adjustments to the
historical financial information. Accordingly, we express no
such assurance. The foregoing procedures would not necessarily
reveal matters of significance to the pro forma consolidated
statements of operations, and we therefore make no
representation about the sufficiency of the procedures for the
purposes of a reader of such statements.
(Tabular amounts expressed in millions of United States
dollars unless otherwise stated, except per
share amounts)
1.
BASIS OF PRESENTATION
The unaudited pro forma consolidated balance sheet of Goldcorp
Inc. (the “Company” or “Goldcorp”) as at
June 30, 2006 and unaudited pro forma consolidated
statements of operations for the six month period ended
June 30, 2006 and for the year ended December 31, 2005
have been prepared by management of Goldcorp, in accordance with
Canadian generally accepted accounting principles
(“Canadian GAAP”), for illustrative purposes only, to
show the effect of the plan of arrangement entered into with
Glamis Gold Ltd. (“Glamis”) whereby Glamis’
common shareholders will exchange each Glamis common share for
1.69 common shares of Goldcorp and Cdn.$0.0001 in cash resulting
in the acquisition of Glamis by Goldcorp.
In addition, these unaudited pro forma financial statements show
the effects of the agreement entered into by Goldcorp with
Barrick Gold Corporation (“Barrick”) that resulted in
the purchase of certain operations and projects of Placer Dome
Inc. (“Placer Dome”) on May 12, 2006, the
acquisition by Glamis of Western Silver Corporation
(“Western Silver”) on May 3, 2006 and the
acquisition by Goldcorp of Wheaton River Minerals Ltd.
(“Wheaton”) on February 14, 2005 as if they had
occurred on January 1, 2005. These pro forma consolidated
financial statements have been compiled from, and include:
(a)
A pro forma consolidated balance sheet combining the unaudited
consolidated balance sheet of Goldcorp as at June 30, 2006
and the unaudited consolidated balance sheet of Glamis as at
June 30, 2006.
(b)
A pro forma consolidated statement of operations for the six
months ended June 30, 2006 combining:
(i)
the unaudited consolidated statement of operations of Goldcorp
for the six months ended June 30, 2006;
(ii)
the unaudited consolidated statement of operations of Glamis for
the six months ended June 30, 2006;
(iii)
the unaudited combined statement of operations for the three
month period ended March 31, 2006 and the unaudited results
of operations for the period from April 1, 2006 to the date
of acquisition by Goldcorp of May 12, 2006 of the Placer
Dome Operations and projects; and
(iv)
the unaudited consolidated statement of operations for the three
month period ended March 31, 2006 converted to U.S. dollars
based on the Canadian/ U.S. dollar average exchange rate for the
three month period ended March 31, 2006 and the unaudited
results of operations for the period from April 1, 2006 to
the date of acquisition by Glamis of May 3, 2006 of Western
Silver.
(c)
A pro forma consolidated statement of operations for the year
ended December 31, 2005 combining:
(i)
the audited consolidated statement of operations of Goldcorp for
the year ended December 31, 2005;
(ii)
the audited consolidated statement of operations of Glamis for
the year ended December 31, 2005;
(iii)
the audited combined statement of operations of the Placer Dome
Operations and projects for the year ended December 31,2005;
(iv)
the audited consolidated statement of operations of Western
Silver for the year ended September 30, 2005 and the
interim unaudited consolidated statement of operations of
Western Silver for the three month periods ended
December 31, 2005 and 2004 converted to U.S. dollars based
on the Canadian/ U.S. dollar average exchange rate for the year
ended December 31, 2005; and
The pro forma consolidated balance sheet as at June 30,2006 has been prepared as if the transactions described in
Note 3 had occurred on June 30, 2006. The pro forma
consolidated statements of operations for the six months ended
June 30, 2006 and for the year ended December 31, 2005
have been prepared as if the transactions described in
Note 3 had occurred on January 1, 2005.
It is management’s opinion that these pro forma
consolidated financial statements present in all material
respects, the transactions, assumptions, and adjustments
described in Note 3 and 4, in accordance with Canadian
GAAP. The accounting policies used in the preparation of these
statements are consistent with Goldcorp’s accounting
policies for the year ended December 31, 2005. The pro
forma consolidated financial statements are not intended to
reflect the results of operations or the financial position of
Goldcorp which would have actually resulted had the transactions
been effected on the dates indicated. Actual amounts recorded
upon consummation of the agreements will likely differ from
those recorded in the unaudited pro forma consolidated financial
statement information. Any potential synergies that may be
realized and integration costs that may be incurred upon
consummation of the transactions have been excluded from the
unaudited pro forma financial statement information. Further,
the pro forma financial information is not necessarily
indicative of the results of operations that may be obtained in
the future.
Certain elements of the Goldcorp, Glamis and Western Silver
consolidated financial statements and the Placer Dome Operations
and projects combined financial statements have been
reclassified to provide a consistent format.
The unaudited pro forma consolidated financial statements should
be read in conjunction with the historical financial statements
and notes thereto of Goldcorp, Glamis, the Placer Dome
Operations and projects, Western Silver and Wheaton.
The accounting policies used in the preparation of this
unaudited pro forma consolidated financial statement information
are those set out in Goldcorp’s audited consolidated
financial statements for the year ended December 31, 2005.
In preparing the unaudited pro forma consolidated financial
information a review was undertaken to identify Glamis, Placer
Dome and Western Silver accounting policy differences where the
impact was potentially material and could be reasonably
estimated. Further accounting policy differences may be
identified after consummation and integration of the proposed
acquisitions. The significant accounting policies of Goldcorp
conform in all material respects to those of Glamis, Placer Dome
and Western Silver, except as noted in Note 4 for Western
Silver.
3.
BUSINESS ACQUISITIONS
(a) Agreement
with Glamis
On August 31, 2006, Goldcorp and Glamis announced that the
respective boards of directors had agreed to combine Goldcorp
and Glamis. A special meeting of shareholders of Glamis will be
held to seek shareholder approval of the proposed transaction on
October 26, 2006. Each Glamis common share will be
exchanged for 1.69 Goldcorp common shares and Cdn.$0.0001 in
cash. All outstanding Glamis stock appreciation rights
(“SARs”) will be exercised by the holders into Glamis
shares such that holders of the SARs will receive Goldcorp
shares and cash at the same share exchange ratio. As a result of
the proposed transaction, the combined company will be held
approximately 60% by existing Goldcorp shareholders and
approximately 40% by existing Glamis shareholders. Each Glamis
stock option which gives the holder the right to acquire shares
in the common stock of Glamis when presented for execution will
be exchanged for a stock option which will give the holder the
right to acquire shares in the common stock of Goldcorp on the
same basis as the exchange of Glamis common shares for Goldcorp
common shares.
This business combination will be accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Glamis as the acquiree.
The unaudited pro forma consolidated financial information
assumes the cost of acquisition will include the fair value of
the Goldcorp shares issued is based on the deemed issuance of
281.9 million Goldcorp common shares at $28.71, plus stock
appreciation rights of Glamis exercised for 0.5 million
common shares of Goldcorp at $28.71, plus 5.8 million stock
options of Glamis exchanged for those of Goldcorp with a fair
value of $109.3 million, cash of $15 thousand plus
Goldcorp’s transaction costs of $20.0 million,
equalling a total purchase price of $8.2 billion. The price
of the Goldcorp common shares was calculated as the average
share price of Goldcorp two days before, the day of, and two
days after the date of announcement. The stock options have been
valued using the Black-Scholes option pricing model.
Goldcorp has not yet determined the fair value of all
identifiable assets and liabilities acquired, the amount of the
purchase price that may be allocated to goodwill, or the
complete impact of applying purchase accounting on the income
statement. Therefore, after reflecting the pro forma purchase
adjustments identified to date, the excess of the purchase
consideration over the adjusted book values of Glamis’
assets and liabilities has been presented as “unallocated
purchase price.” Goldcorp is currently undergoing a process
whereby the fair value of all identifiable assets and
liabilities acquired as well as any goodwill arising upon the
acquisition will be determined. On completion of valuations,
with a corresponding adjustment to the historic carrying amounts
of mining interests, or on recording of any finite life
intangible assets on acquisition, these adjustments will impact
the measurement of amortization recorded in the consolidated
income statements of Goldcorp for periods after the date of
acquisition. Goldcorp estimates that a $100 million
adjustment to the carrying amount of mining interests of Glamis
would result in a corresponding adjustment to pre-tax
amortization expense in the pro forma condensed consolidated
statement of operations by approximately $6.25 million for
the six months ended June 30, 2006 and approximately
$12.5 million for the year ended December 31, 2005. No
pro forma adjustments have been reflected for any changes in
future tax assets or liabilities that would result from
recording Glamis’ identifiable assets and liabilities at
fair value as the process of estimating the fair value of
identifiable assets and liabilities is not complete.
Purchase price
281.9 million common shares of Goldcorp and cash
$
8,092.5
0.5 million common shares of Goldcorp on exercise of Glamis
stock appreciation rights
15.0
Stock options of Glamis exchanged for those of Goldcorp
109.3
Acquisition costs
20.0
$
8,236.8
Net assets acquired
Current assets
$
110.0
Other assets
27.7
Mining interests
2,062.0
Liabilities
(615.1
)
Unallocated purchase price
6,652.2
$
8,236.8
(b) Agreement
with Barrick
On October 30, 2005, Goldcorp entered into an agreement
with Barrick to acquire certain of Placer Dome’s Canadian
and other mining assets and interests upon Barrick’s
successful acquisition of Placer Dome. On March 15, 2006,
Barrick acquired 100% of the outstanding shares of Placer Dome
for approximately $10.0 billion in shares and cash. On
May 12, 2006, Goldcorp completed the agreement with Barrick
for cash of approximately $1.6 billion. The acquisition was
funded with a $250 million advance payment paid in January
2006
from cash on hand. The remainder was paid upon closing by
drawing down on credit facilities in the amount of
$1.3 billion and cash on hand. Goldcorp has acquired Placer
Dome’s interests in the Campbell (100%), Porcupine (51%)
and Musselwhite (68%) gold mines in Canada, and the La Coipa
(50%) gold/silver mine in Chile. Goldcorp has also acquired a
40% interest in the Pueblo Viejo gold development project in the
Dominican Republic, together with Placer Dome’s interests
in its Canadian exploration properties, including the Mount
Milligan copper/gold deposit in British Columbia.
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
the Placer Dome Operations as the acquiree. The results of
operations of the Placer Dome Operations have been included in
the consolidated financial statements of Goldcorp from
May 12, 2006.
The preliminary allocation of the purchase price of the Placer
Dome Operations is summarized in the following table and is
subject to adjustment:
Purchase price, subject to final adjustments
Cash
$
1,589.9
Acquisition costs
9.9
$
1,599.8
Net assets acquired
Current assets
$
54.8
Other assets
13.5
Mining interests
1,389.8
Current liabilities
(56.4
)
Future income tax liabilities
(273.6
)
Reclamation and closure cost obligations
(80.7
)
Goodwill
552.4
$
1,599.8
For the purposes of these pro forma condensed consolidated
financial statements, the purchase consideration has been
allocated on a preliminary basis to the fair value of assets
acquired and liabilities assumed, with goodwill assigned to a
specific reporting unit, based on management’s best
estimates and taking into account all available information at
the time of acquisition as well as applicable information at the
time of these pro forma condensed consolidated financial
statements. Goldcorp will continue to review information and
perform further analysis with respect to these assets, including
an independent valuation, prior to finalizing the allocation of
the purchase price. This process will be performed in accordance
with the accounting pronouncement relating to Mining
Assets — Impairment and Business Combination
(Emerging Issues Committee Abstract 152). Although the
results of this review are presently unknown, it is anticipated
that it may result in a change to the amount assigned to
goodwill and a change to the value attributable to tangible
assets.
(c) Acquisition
of Western Silver Corporation
On May 3, 2006, Glamis acquired all the issued and
outstanding shares of Western Silver pursuant to a plan of
arrangement. Glamis exchanged 0.688 of a common share of Glamis
for each issued Western Silver share. Prior to Glamis’
acquisition of all of the issued and outstanding shares of
Western Silver, Western Silver transferred approximately
Cdn.$37.0 million in cash and two properties located in
Canada and Mexico to a new exploration company, named Western
Copper Corporation (“Western Copper”). The
shareholders of Western Silver received, in addition to the
0.688 of a common share of Glamis, one share of Western Copper
for each share of Western Silver owned. Glamis retains a right
to acquire a 5% stake in Western Copper.
This business combination has been accounted for as a purchase
transaction, with Glamis being identified as the acquirer and
Western Silver as the acquiree. The results of operations of
Western Silver have been included in the consolidated financial
statements of Glamis from May 3, 2006.
The preliminary allocation of the purchase price of Western
Silver is summarized in the following table and is subject to
adjustment:
Purchase price
33.9 million common shares of Glamis
$
994.7
Stock options of Glamis exchanged for those of Western Silver
29.2
Acquisition costs
12.0
$
1,035.9
Net assets acquired
Mining interests
$
1,432.4
Future income tax liabilities
(396.5
)
$
1,035.9
(d) Acquisition
of Wheaton River Minerals Ltd.
On December 6, 2004, Goldcorp and Wheaton issued a joint
press release announcing a proposed transaction which provided
for Goldcorp to make a take-over bid for Wheaton on the basis of
one Goldcorp share for every four Wheaton shares. On
December 29, 2004, Goldcorp mailed the Goldcorp take-over
bid circular to the Wheaton shareholders.
On February 8, 2005, Goldcorp announced a special $0.50 per
share cash dividend would be payable to existing Goldcorp
shareholders should shareholders approve by majority
Goldcorp’s take-over bid for Wheaton and Wheaton
shareholders tender the minimum two-thirds bid requirement. The
payment of a special dividend resulted in an adjustment to the
exchange ratio of Goldcorp’s outstanding
warrants — an increase in entitlement from 2.0 to 2.08
Goldcorp shares per warrant.
On February 10, 2005, at the special meeting of
shareholders, approximately 65% of Goldcorp shareholders who
voted were in favour of approval of the issuance of additional
Goldcorp common shares to effect the acquisition of Wheaton. As
of February 14, 2005, approximately 70% of the outstanding
Wheaton common shares (403,165,952 shares) were tendered to
Goldcorp’s offer. This satisfied the minimum two-thirds bid
requirement under the terms of the offer to acquire Wheaton. On
the same day, Goldcorp extended the offer expiry date to
February 28, 2005 to give remaining Wheaton shareholders
more time to tender their shares. With conditions met, the
special $0.50 per share dividend, totaling approximately
$95 million, payable to Goldcorp shareholders of record on
February 16, 2005, was paid on February 28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of
the outstanding Wheaton common shares. Goldcorp and a subsidiary
entered into a series of transactions with Wheaton that resulted
in Goldcorp owning 100% of Wheaton common shares on
April 15, 2005. Further, the series of transactions
resulted in each Wheaton warrant or stock option, which gives
the holder the right to acquire common shares of Wheaton, being
exchanged for a warrant or stock option of Goldcorp which gives
the holder the right to acquire common shares of Goldcorp on the
same basis as the exchange of Wheaton common shares for Goldcorp
common shares. The Wheaton options and warrants have been
included as part of the purchase price consideration.
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Wheaton as the acquiree.
The allocation of the purchase price is summarized in the table
below:
Purchase price
143.8 million common shares of Goldcorp
$
1,887.4
Stock options and warrants of Goldcorp exchanged for those of
Wheaton
The fair value of the Goldcorp shares issued is based on the
deemed issuance of 143.8 million Goldcorp common shares at
$13.13 being the average share price of Goldcorp two days
before, the day of, and two days after February 8, 2005,
the day when the special $0.50 dividend was announced in
connection with the offer to acquire Wheaton, adjusted for the
special $0.50 dividend.
4.
PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
Pro forma adjustments to
consolidated balance sheet
The unaudited pro forma consolidated balance sheet reflects the
following adjustments as if the transaction with Glamis had
occurred on June 30, 2006:
(a)
To record the acquisition of Glamis at a purchase price of
$8,236.8 million.
Pro forma adjustments to
consolidated statements of operations
The unaudited pro forma consolidated statements of operations
reflect the following adjustments as if the acquisitions of
Glamis, certain Placer Dome Operations, Western Silver and
Wheaton had occurred on January 1, 2005:
(b)
To record adjustments to depletion expense resulting from
adjustments to asset carrying values in the purchase allocations
relating to the Placer Dome Operations and Wheaton assets.
(c)
An increase in interest expense of $15.9 million for the
six month period ended June 30, 2006 and $42.4 million
for the year ended December 31, 2005 to reflect the
interest expense on the long-term debt of $850 million
taken to partially finance the acquisition of the Placer Dome
Operations.
To reverse the non-controlling interest share of income arising
from Goldcorp owning 82% of Wheaton between February 15,2005 and April 15, 2005.
(e)
To record the tax effect of the pro forma adjustments at 40%.
(f)
An increase in exploration expense by Western Silver of
$11.6 million for the year ended December 31, 2005 to
conform with Goldcorp’s accounting policy of expensing
exploration expenditures on properties not advanced enough to
identify their development potential. A positive economic
analysis was completed by Western Silver in November 2005 on its
Peñasquito property at which time, under Goldcorp’s
accounting policy, further development costs would be
capitalized. Accordingly, no adjustment is required in the pro
forma consolidated statement of operations for the six months
ended June 30, 2006.
(g)
An increase in stock-based compensation of $0.2 million for
the six months ended June 30, 2006 and $1.2 million
for the year ended December 31, 2005 deferred by Western
Silver to properties in the exploration stage which would be
expensed under Goldcorp’s accounting policies.
(h)
The reduction of interest income of Western Silver to $Nil from
$0.6 million and $1.3 million, respectively, for the
six months ended June 30, 2006 and for the year ended
December 31, 2005, as Glamis did not acquire cash assets as
part of the Western Silver transaction.
5.
PRO FORMA EARNINGS PER SHARE
The weighted average shares outstanding have been adjusted to
reflect the additional shares resulting from transactions
described in Notes 3 and 4 effective January 1, 2005.
In this Plan of Arrangement, unless the context otherwise
requires, the following words and terms with the initial letter
or letters thereof capitalized shall have the meanings ascribed
to them below:
(a)
“affiliate” shall have the meaning ascribed to such
term under the BCBCA;
(b)
“Arrangement” means the arrangement under the
provisions of the BCBCA on the terms and subject to the
conditions set forth in this Plan of Arrangement, subject to any
amendment or supplement hereto made in accordance with the
Arrangement Agreement, the provisions hereof or at the direction
of the Court in the Final Order;
(c)
“Arrangement Agreement” means the amended and restated
arrangement agreement dated as of August 30, 2006 between
Goldcorp and Glamis, as amended, amended and restated or
supplemented prior to the Effective Date, entered into in
connection with the Arrangement;
(d)
“BCBCA” means the Business Corporations Act
(British Columbia);
(e)
“Business Day” means any day other than a Saturday, a
Sunday or a statutory holiday in Toronto, Ontario or Vancouver,
British Columbia;
(f)
“Canadian Resident” means a beneficial owner of Glamis
Common Shares immediately prior to the Effective Time who is a
resident of Canada for purposes of the Tax Act (other than a Tax
Exempt Person), or a partnership any member of which is a
resident of Canada for the purposes of the Tax Act (other than a
Tax Exempt Person);
(g)
“Converted Goldcorp Option” shall have the meaning
ascribed thereto in subsection 3.01(c) hereof;
(h)
“Court” means the Supreme Court of British Columbia;
(i)
“Depositary” means CIBC Mellon Trust Company or
any other trust company, bank or financial institution agreed to
in writing between Goldcorp and Glamis for the purpose of, among
other things, exchanging certificates representing Glamis Common
Shares for Goldcorp Common Shares in connection with the
Arrangement;
(j)
“Dissent Procedures” means the procedures set forth in
Division 2 of Part 8 of the BCBCA required to be taken by a
registered holder of Glamis Common Shares to exercise the right
of dissent in respect of such Glamis Common Shares in connection
with the Arrangement, as modified by Article 4 hereof, the
Interim Order and the Final Order;
(k)
“Dissenting Shareholder” means a registered holder of
Glamis Common Shares who dissents in respect of the Arrangement
in strict compliance with the Dissent Procedures and who is
ultimately entitled to be paid fair value for their Glamis
Common Shares;
(l)
“Effective Date” means the date designated by Goldcorp
and Glamis by notice in writing as the effective date of the
Arrangement, after all of the conditions of the Arrangement
Agreement and the Final Order have been satisfied or waived;
(m)
“Effective Time” means 12:01 a.m. (Vancouver
time) on the Effective Date;
(n)
“Eligible Holder” means a beneficial holder of Glamis
Common Shares immediately prior to the Effective Time who is
either: (i) a Canadian Resident, or (ii) an Eligible
Non-Resident;
(o)
“Eligible Non-Resident” means a beneficial holder of
Glamis Common Shares immediately prior to the Effective Time who
is not, and is not deemed to be, a resident of Canada for
purposes of the Tax Act and whose Glamis Common Shares are
“taxable Canadian property” and not
“treaty-protected property”, in each case as defined
in the Tax Act;
“Final Order” means the order of the Court approving
the Arrangement, including all amendments thereto, pursuant to
section 291 of the BCBCA or, if appealed, then unless such
appeal is withdrawn or denied, as affirmed;
(q)
“Former Glamis Shareholders” means the holders of
Glamis Common Shares immediately prior to the Effective Time;
(r)
“Glamis” means Glamis Gold Ltd., a company existing
under the BCBCA;
(s)
“Glamis Common Shares” means the issued and
outstanding common shares of Glamis;
(t)
“Glamis Meeting” means the special meeting of the
holders of Glamis Common Shares held to consider and approve,
among other things, the Arrangement;
(u)
“Glamis Options” means the outstanding options to
purchase Glamis Common Shares issued pursuant to the Glamis
Share Option Plan and otherwise;
(v)
“Glamis Share Option Plan” means the Incentive Share
Option Plan of Glamis dated September 30, 1995, as amended,
and the Glamis-Western Silver Option Exchange Plan, collectively;
(w)
“Goldcorp” means Goldcorp Inc., a corporation existing
under the Business Corporations Act (Ontario);
(x)
“Goldcorp Common Shares” means the common shares in
the authorized share capital of Goldcorp;
(y)
“In the Money Amount” means in respect of a stock
option at any time, the amount, if any, by which the aggregate
fair market value at that time of the securities subject to the
option exceeds the aggregate exercise price under the option;
(z)
“Interim Order” means the interim order of the Court,
including any amendment thereto, made pursuant to
section 291 of the BCBCA made in connection with the
Arrangement;
(aa)
“Meeting Date” means the date of the Glamis Meeting;
(bb)
“Plan of Arrangement” means this plan of arrangement,
as amended, modified or supplemented from time to time in
accordance herewith and with any order of the Court;
(cc)
“Proxy Circular” means the management information
circular of Glamis prepared for the Glamis Meeting;
(dd)
“Section 85 Election” shall have the meaning
ascribed thereto in section 3.02(c);
(ee)
“Share Exchange Ratio” shall have the meaning ascribed
thereto in section 3.01(a);
(ff)
“Tax Act” means the Income Tax Act (Canada) and
the regulations thereunder, as amended from time to time; and
(gg)
“Tax Exempt Person” means a person who is exempt from
tax under Part I of the Tax Act.
In addition, words and phrases used herein and defined in the
BCBCA and not otherwise defined herein shall have the same
meaning herein as in the BCBCA unless the context otherwise
requires.
Section 1.02 Interpretation Not Affected by
Headings
The division of this Plan of Arrangement into articles,
sections, paragraphs and subparagraphs and the insertion of
headings herein are for convenience of reference only and shall
not affect the construction or interpretation of this Plan of
Arrangement. The terms “this Plan of Arrangement”,
“hereof”, “herein”, “hereto”,
“hereunder” and similar expressions refer to this Plan
of Arrangement and not to any particular article, section or
other portion hereof and include any instrument supplementary or
ancillary hereto.
Section 1.03 Number, Gender and Persons
In this Plan of Arrangement, unless the context otherwise
requires, words importing the singular shall include the plural
and vice versa, words importing the use of either gender
shall include both genders and neuter and the word person and
words importing persons shall include a natural person, firm,
trust, partnership, association, corporation, joint venture or
government (including any governmental agency, political
subdivision or instrumentality thereof) and any other entity or
group of persons of any kind or nature whatsoever.
Section 1.04 Date for any Action
If the date on which any action is required to be taken
hereunder is not a Business Day, such action shall be required
to be taken on the next succeeding day which is a Business Day.
Any reference in this Plan of Arrangement to a statute includes
all regulations made thereunder, all amendments to such statute
or regulation in force from time to time and any statute or
regulation that supplements or supersedes such statute or
regulation.
Section 1.06 Currency
Unless otherwise stated, all references herein to amounts of
money are expressed in lawful money of Canada.
ARTICLE TWO
ARRANGEMENT AGREEMENT
Section 2.01 Arrangement Agreement
This Plan of Arrangement is made pursuant to, and is subject to
the provisions of, the Arrangement Agreement.
ARTICLE THREE
ARRANGEMENT
Section 3.01 Arrangement
At the Effective Time, the following shall occur and be deemed
to occur without any further act or formality simultaneously:
(a)
each Glamis Common Share held by a Former Glamis Shareholder
(other than a Dissenting Shareholder or Goldcorp or any
subsidiary of Goldcorp) shall be transferred to Goldcorp and in
consideration thereof Goldcorp shall issue Goldcorp Common
Shares on the basis of 1.69 fully paid and non-assessable
Goldcorp Common Shares (the “Share Exchange Ratio”)
and $0.0001 in cash for each Glamis Common Share, subject to
sections 3.03, 3.04 and Article 5 hereof;
(b)
each Glamis Common Share held by a Dissenting Shareholder shall
be deemed to be transferred by the holder thereof, without any
further act or formality on its part, free and clear of all
liens, claims and encumbrances, to Goldcorp and Goldcorp shall
thereupon be obliged to pay the amount therefor determined and
payable in accordance with Article 4 hereof, and the name
of such holder shall be removed from the central securities
register as holders of Glamis Common Shares and Goldcorp shall
be recorded as the registered holder of the Glamis Common Shares
so transferred and shall be deemed to be the legal owner of such
Glamis Common Shares; and
(c)
each Glamis Option outstanding immediately before the Effective
Time, whether or not vested, shall be exchanged for an option (a
“Converted Goldcorp Option”) to acquire (on the same
terms and conditions as were applicable to such Glamis Option
immediately before the Effective Time under the relevant Glamis
Share Option Plan under which it was issued and the agreement
evidencing the grant thereof and, in particular, but without
limitation, if the Glamis Option is deemed to vest at the
Effective Time in accordance with the Glamis Share Option Plan
or such agreement, then the Converted Goldcorp Option shall be
fully vested) the number (rounded down to the nearest whole
number) of Goldcorp Common Shares equal to the product of:
(A) the number of Glamis Common Shares subject to such
Glamis Option immediately before the Effective Time and
(B) the Share Exchange Ratio. The exercise price per
Goldcorp Common Share subject to any such Converted Goldcorp
Option shall be an amount (rounded up to the nearest
one-hundredth of a cent) equal to the quotient of (A) the
exercise price per Glamis Common Share subject to such Glamis
Option immediately before the Effective Time divided by
(B) the Share Exchange Ratio, provided that the exercise
price otherwise determined shall be increased to the extent, if
any, required to ensure that the In the Money Amount of the
Converted Goldcorp Option immediately after the exchange is
equal to the In the Money Amount of the exchanged Glamis Option
immediately before the exchange.
Section 3.02 Post-Effective Time Procedures
(a)
On or promptly after the Effective Date, Goldcorp shall deliver
or arrange to be delivered to the Depositary certificates
representing the Goldcorp Common Shares required to be issued to
Former Glamis Shareholders and the requisite cash required to be
paid to Former Glamis Shareholders in accordance with the
provisions of section 3.01 hereof, which certificates and
cash shall be held by the Depositary as agent and nominee for
such Former Glamis Shareholders for distribution to such Former
Glamis Shareholders in accordance with the provisions of
Article 5 hereof.
(b)
Subject to the provisions of Article 5 hereof, Former
Glamis Shareholders shall be entitled to receive delivery of the
certificates representing the Goldcorp Common Shares and a
cheque for the cash consideration to which they are entitled
pursuant to subsection 3.01(a) hereof.
(c)
An Eligible Holder whose Glamis Common Shares are exchanged for
Goldcorp Common Shares and cash pursuant to the Arrangement
shall be entitled to make an income tax election, pursuant to
section 85 of the Tax Act (and any analogous provision of
provincial income tax law) (a “Section 85
Election”) with respect to the exchange by providing two
signed copies of the necessary election forms to an appointed
representative, as directed by Goldcorp, within 90 days
after the Effective Date, duly completed with the details of the
number of Glamis Common Shares transferred and the applicable
agreed amounts for the purposes of such elections. Goldcorp
shall, within 90 days after receiving the election forms,
and subject to such election forms being correct and complete
and complying with requirements imposed under the Tax Act (or
applicable provincial income tax law), sign and return them to
the Former Glamis Shareholder for filing with the Canada Revenue
Agency (or the applicable provincial tax authority). Neither
Glamis, Goldcorp nor any successor corporation shall be
responsible for the proper completion of any election form nor,
except for the obligation to sign and return duly completed
election forms which are received within 90 days of the
Effective Date, for any taxes, interest or penalties resulting
from the failure of an Eligible Holder to properly complete or
file such election forms in the form and manner and within the
time prescribed by the Tax Act (or any applicable provincial
legislation). In its sole discretion, Goldcorp or any successor
corporation may choose to sign and return an election form
received by it more than 90 days following the Effective
Date, but will have no obligation to do so.
(d)
Upon receipt of a letter of transmittal in which an Eligible
Holder has indicated that the Eligible Holder intends to make a
Section 85 Election, Goldcorp will promptly deliver a tax
instruction letter (and a tax instruction letter for the
equivalent Quebec election, if applicable), together with the
relevant tax election forms (including the Quebec tax election
forms, if applicable) to the Eligible Holder.
Section 3.03 No Fractional Goldcorp Common
Shares
No fractional Goldcorp Common Shares shall be issued to Former
Glamis Shareholders. The number of Goldcorp Common Shares to be
issued to Former Glamis Shareholders shall be rounded up to the
nearest whole Goldcorp Common Share in the event that a Former
Glamis Shareholder is entitled to a fractional share
representing 0.5 or more of a Goldcorp Common Share and shall be
rounded down to the nearest whole Goldcorp Common Share in the
event that a Former Glamis Shareholder is entitled to a
fractional share representing less than 0.5 of a Goldcorp Common
Share.
Section 3.04 Fractional Cash Consideration
Any cash consideration owing to a Former Glamis Shareholder
shall be rounded up to the next whole cent.
ARTICLE FOUR
DISSENT PROCEDURES
Section 4.01 Dissent Procedures
Holders of Glamis Common Shares may exercise Dissent Procedures
with respect to Glamis Common Shares in connection with the
Arrangement, provided that, notwithstanding the Dissent
Procedures, the written objection to the special resolution to
approve the Arrangement contemplated by section 242 of the
BCBCA must be sent to Glamis by holders who wish to dissent at
least two days before the Glamis Meeting or any date to which
the Glamis Meeting may be postponed or adjourned and provided
further that holders who exercise such rights of dissent and who:
(a)
are ultimately entitled to be paid fair value for their Glamis
Common Shares, which fair value shall be the fair value of such
shares immediately before the passing by the holders of the
Glamis Common Shares of the resolution approving the
Arrangement, shall be paid an amount equal to such fair value by
Goldcorp; and
are ultimately not entitled, for any reason, to be paid fair
value for their Glamis Common Shares shall be deemed to have
participated in the Arrangement, as of the Effective Time, on
the same basis as a non-dissenting holder of Glamis Common
Shares and shall be entitled to receive only the consideration
contemplated in subsection 3.01(a) hereof that such holder
would have received pursuant to the Arrangement if such holder
had not exercised Dissent Procedures,
but further provided that in no case shall Goldcorp, Glamis or
any other person be required to recognize holders of Glamis
Common Shares who exercise Dissent Procedures as holders of
Glamis Common Shares after the time that is immediately prior to
the Effective Time, and the names of such holders of Glamis
Common Shares who exercise Dissent Procedures shall be deleted
from the central securities register as holders of Glamis Common
Shares at the Effective Time.
ARTICLE FIVE
DELIVERY OF GOLDCORP COMMON SHARES
Section 5.01 Delivery of Goldcorp Common
Shares
(a)
Upon surrender to the Depositary for cancellation of a
certificate that immediately before the Effective Time
represented one or more outstanding Glamis Common Shares that
were exchanged for Goldcorp Common Shares in accordance with
section 3.01 hereof, together with such other documents and
instruments as would have been required to effect the transfer
of the Glamis Common Shares formerly represented by such
certificate under the BCBCA and the articles of Glamis and such
additional documents and instruments as the Depositary may
reasonably require, the holder of such surrendered certificate
shall be entitled to receive in exchange therefor, and the
Depositary shall deliver to such holder following the Effective
Time, a certificate representing the Goldcorp Common Shares that
such holder is entitled to receive in accordance with
section 3.01 hereof and a cheque for the cash consideration
to which such holder is entitled.
(b)
After the Effective Time and until surrendered for cancellation
as contemplated by subsection 5.01(a) hereof, each
certificate that immediately prior to the Effective Time
represented one or more Glamis Common Shares shall be deemed at
all times to represent only the right to receive in exchange
therefor a certificate representing the Goldcorp Common Shares
and the cash consideration that the holder of such certificate
is entitled to receive in accordance with section 3.01
hereof.
Section 5.02 Lost Certificates
In the event any certificate, that immediately prior to the
Effective Time represented one or more outstanding Glamis Common
Shares that were exchanged for Goldcorp Common Shares and the
cash consideration in accordance with section 3.01 hereof,
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the holder claiming such certificate
to be lost, stolen or destroyed, the Depositary shall deliver in
exchange for such lost, stolen or destroyed certificate, a
certificate representing the Goldcorp Common Shares and a cheque
in the amount of the cash consideration that such holder is
entitled to receive in accordance with section 3.01 hereof.
When authorizing such delivery of a certificate representing the
Goldcorp Common Shares and the cash consideration that such
holder is entitled to receive in exchange for such lost, stolen
or destroyed certificate, the holder to whom a certificate
representing such Goldcorp Common Shares and a cheque in the
amount of the cash consideration is to be delivered shall, as a
condition precedent to the delivery of such Goldcorp Common
Shares and cheque, give a bond satisfactory to Goldcorp and the
Depositary in such amount as Goldcorp and the Depositary may
direct, or otherwise indemnify Goldcorp and the Depositary in a
manner satisfactory to Goldcorp and the Depositary, against any
claim that may be made against Goldcorp or the Depositary with
respect to the certificate alleged to have been lost, stolen or
destroyed and shall otherwise take such actions as may be
required by the articles of Glamis.
Section 5.03 Distributions with Respect to
Unsurrendered Certificates
No dividend or other distribution declared or made after the
Effective Time with respect to Goldcorp Common Shares with a
record date after the Effective Time shall be delivered to the
holder of any unsurrendered certificate that, immediately prior
to the Effective Time, represented outstanding Glamis Common
Shares unless and until the holder of such certificate shall
have complied with the provisions of section 5.01 or
section 5.02 hereof. Subject to applicable law and to
section 5.04 hereof, at the time of such compliance, there
shall, in addition to the delivery of a certificate representing
the Goldcorp Common Shares and a cheque for the cash
consideration to which such holder is thereby
entitled, be delivered to such holder, without interest, the
amount of the dividend or other distribution with a record date
after the Effective Time theretofore paid with respect to such
Goldcorp Common Shares.
Section 5.04 Withholding Rights
Goldcorp and the Depositary shall be entitled to deduct and
withhold from all dividends or other distributions otherwise
payable to any Former Glamis Shareholder such amounts as
Goldcorp or the Depositary is required or permitted to deduct
and withhold with respect to such payment under the Tax Act, the
United States Internal Revenue Code of 1986 or any
provision of any applicable federal, provincial, state, local or
foreign tax law or treaty, in each case, as amended. To the
extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the
Former Glamis Shareholder in respect of which such deduction and
withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority.
Section 5.05 Limitation and Proscription
To the extent that a Former Glamis Shareholder shall not have
complied with the provisions of section 5.01 or
section 5.02 hereof on or before the date that is six years
after the Effective Date (the “final proscription
date”), then the Goldcorp Common Shares that such Former
Glamis Shareholder was entitled to receive shall be
automatically cancelled without any repayment of capital in
respect thereof and the certificates representing such Goldcorp
Common Shares, together with the cash consideration to which
such Former Glamis Shareholder was entitled, shall be delivered
to Goldcorp by the Depositary and the share certificates shall
be cancelled by Goldcorp, and the interest of the Former Glamis
Shareholder in such Goldcorp Common Shares and the cash
consideration to which it was entitled shall be terminated as of
such final proscription date.
Goldcorp and Glamis reserve the right to amend, modify or
supplement this Plan of Arrangement at any time and from time to
time, provided that each such amendment, modification or
supplement must be (i) set out in writing, (ii) agreed
to in writing by Goldcorp and Glamis, (iii) filed with the
Court and, if made following the Glamis Meeting, approved by the
Court, and (iv) communicated to holders or former holders
of Glamis Common Shares if and as required by the Court.
(b)
Any amendment, modification or supplement to this Plan of
Arrangement may be proposed by Glamis at any time prior to the
Glamis Meeting provided that Goldcorp shall have consented
thereto in writing, with or without any other prior notice or
communication, and, if so proposed and accepted by the persons
voting at the Glamis Meeting (other than as may be required
under the Interim Order), shall become part of this Plan of
Arrangement for all purposes.
(c)
Any amendment, modification or supplement to this Plan of
Arrangement that is approved by the Court following the Glamis
Meeting shall be effective only if: (i) it is consented to
in writing by each of Goldcorp and Glamis; and (ii) if
required by the Court, it is consented to by holders of the
Glamis Common Shares voting in the manner directed by the Court.
Orion Securities Inc. (“Orion”) understands that
Glamis Gold Ltd. (“Glamis” or the “Company”)
proposes to enter into an arrangement agreement (the
“Arrangement Agreement”) to be dated August 30,2006 with Goldcorp Inc. (“Goldcorp”) providing for the
amalgamation of Glamis and a subsidiary of Goldcorp pursuant to
an arrangement of Glamis to be effected under the laws of the
Province of British Columbia (the “Plan of
Arrangement”).
Each outstanding common share of Glamis (a “Glamis Common
Share” and collectively, the “Glamis Common
Shares”), (other than Glamis Common Shares held by a holder
who has validly exercised its dissent rights pursuant to the
Plan of Arrangement or by Goldcorp or any subsidiary of
Goldcorp) will be exchanged by a holder thereof for 1.69 common
shares (a “Goldcorp Common Share”) of Goldcorp
(“Share Exchange Ratio”);
(b)
each common share option of Glamis (a “Glamis Option”
and collectively, the “Glamis Options”) outstanding
immediately prior to the Effective Time, whether or not vested,
shall be exchanged for an option granted by Goldcorp (a
“Converted Goldcorp Option”) to acquire (on the same
terms and conditions as were applicable to such Glamis Option
pursuant to the relevant Glamis option plan under which it was
issued and the agreement evidencing the grant thereof prior to
the Effective Time) the number (rounded down to the nearest
whole number) of Goldcorp Common Shares determined by
multiplying: (A) the number of Glamis Common Shares subject
to such Glamis Option immediately prior to the Effective Time by
(B) the Share Exchange Ratio. The exercise price per Goldcorp
Common Share subject to any such Converted Goldcorp Option will
be an amount (rounded up to the nearest one-hundredth of a cent)
equal to the quotient of (A) the exercise price per Glamis
Common Share subject to such Glamis Option immediately prior to
the Effective Time and (B) the Share Exchange Ratio; and
(c)
Glamis shall take such action as may be required in order to
ensure that: (i) all outstanding Glamis stock appreciation
rights granted pursuant to the equity incentive plan of Glamis
dated January 1, 2004 (the “Glamis Equity Incentive
Plan”) are accelerated as to vesting and exercised at or
prior to the Effective Time and (ii) all outstanding
restricted Glamis Common Shares in respect of which the
restricted period has not expired issued pursuant to the Glamis
Equity Incentive Plan are accelerated as to vesting at or prior
to the Effective Time.
The terms of the Plan of Arrangement will be more fully
described in information circular to be mailed to shareholders
of Glamis in connection with the Plan of Arrangement.
The board of directors (the “Board”) of the Company
has retained Orion to provide advice and assistance to the Board
in evaluating the Plan of Arrangement, including the preparation
and delivery to the Board of Orion’s opinion (the
“Fairness Opinion”) as to the fairness from a
financial point of view of the consideration to be received by
the
holders of common shares of Glamis (the “Glamis
Shareholders”) pursuant to the Plan of Arrangement. Orion
has not prepared a valuation of Glamis or Goldcorp or any of
their respective securities or assets and the Fairness Opinion
should not be construed as such.
Engagement
The Company initially contacted Orion in July, 2006 regarding a
potential advisory assignment and Orion was formally engaged by
the Company through an agreement between the Company and Orion
dated August 29th, 2006 (the “Engagement
Letter”). Orion’s services to the Company included
providing financial analysis and advice on structuring, planning
and negotiating a transaction with a third party and providing
the Fairness Opinion. The terms of the Engagement Letter provide
that Orion will receive a fee for its services contingent upon
successful completion of this transaction. In addition, Orion is
to be reimbursed for its reasonable out-of-pocket expenses and
to be indemnified by the Company in certain circumstances.
Orion consents to the inclusion of the Fairness Opinion in its
entirety and a summary thereof in the information circular of
the Company to be mailed to Glamis Shareholders in connection
with the Plan of Arrangement and to the filing thereof, as
necessary, by the Company with the securities commissions of
similar securities regulatory authorities in Canada and the
United States.
In the past, Orion has provided financial advisory services to
the Board of the Company and financing services to the Company
in connection with a public offering of common shares of Glamis
in December 2002, and in connection with advising Glamis on its
acquisition of Western Silver Corp. in March 2006.
Other
Orion is not an insider, associate, or affiliate of Glamis or
Goldcorp and is not an advisor to any person or company other
than to Glamis with respect to the Plan of Arrangement. Orion
has not entered into any other agreements or arrangements with
Glamis or Goldcorp or any of their affiliates with respect to
any future dealings. Orion, however, acts as a trader and
dealer, both as principal and agent, in major financial markets
and, as such, may have had and may in the future have positions
in the securities of the Company and Goldcorp or any of their
respective associates or affiliates and, from time to time, may
have executed or may execute transactions on behalf of such
companies or clients for which it received or may receive
compensation. As an investment dealer, Orion conducts research
on securities and may, in the ordinary course of its business,
provide research reports and investment advice to its clients on
investment matters, including with respect to the Company,
Goldcorp or the Plan of Arrangement.
Credentials of Orion Securities
Orion is one of Canada’s leading independent investment
banking firms, with operations in all facets of corporate
finance, mergers and acquisitions, equity sales and trading and
equity research. The Fairness Opinion expressed herein
represents the opinion of Orion and the form and content herein
have been approved for release by a committee of its directors,
each of whom is experienced in merger, acquisition, divestiture
and fairness opinion matters.
Scope of Review and Approach to Analysis
In arriving at its opinion, Orion has (i) reviewed and
analyzed the most recent draft of the Arrangement Agreement
dated August 29, 2006 and the terms of the Plan of
Arrangement; (ii) reviewed and analyzed certain publicly
available financial statements and other information of the
Company and Goldcorp as well as other information relating to
the Company and Goldcorp provided by the Company;
(iii) performed a comparison of the multiples implied under
the terms of the Plan of Arrangement to an analysis of recent
precedent transactions involving companies we deemed relevant
and the consideration received for such companies;
(iv) performed a comparison of the consideration to be
received by Glamis Shareholders under the terms of the Plan of
Arrangement to the recent trading levels of the common shares of
the Company and Goldcorp; (v) reviewed certain internal
financial analyses and forecasts prepared by the managements of
the Company and Goldcorp relating to their respective
businesses; (vi) reviewed historical metal commodity prices
and considered the impact of various commodity pricing
assumptions on the respective businesses, prospects and
financial forecasts of the Company and Goldcorp;
(vii) performed a comparison of the relative contribution
of assets, cash flow, earnings, net asset value, production and
reserves by the Company and Goldcorp to the pro forma relative
ownership of Goldcorp by the Glamis Shareholders and the holders
of common shares of Goldcorp assuming the Plan of Arrangement is
completed; and (viii) performed such other financial
studies and analyses and considered such other information as we
deemed appropriate for the purposes of this Fairness
Opinion. In its assessment, Orion looked at several techniques
and used a blended approach to determine its opinion on the Plan
of Arrangement. Orion based its Fairness Opinion upon a number
of quantitative and qualitative factors. In arriving at the
Fairness Opinion, Orion has attributed greater weight to certain
analyses and factors that it deemed appropriate based on
Orion’s experience in rendering such opinions.
In addition, Orion has had discussions with the Company’s
management, management of Goldcorp, and legal counsel concerning
the Company’s business, operations, assets and financial
condition and has undertaken and/or reviewed such other
corporate, industry and financial market information,
investigations and analyses as Orion considered necessary or
appropriate under the circumstances.
Orion has not, to the best of its knowledge, been denied access
by the Company to any information requested by Orion.
This Fairness Opinion has been prepared in accordance with the
Disclosure Standards for Formal Valuations and Fairness Opinions
of the Investment Dealers Association of Canada (the
“IDA”) but the IDA has not been involved in the
preparation or review of this Fairness Opinion.
Assumptions and Limitations
With the Board’s approval, Orion has assumed and relied
upon, without independent verification, the completeness,
accuracy and fair presentation of all of the information
(financial or otherwise) data, documents, opinions, appraisals,
valuations or other information and materials of whatsoever
nature or kind reviewed by Orion and all information respecting
the Plan of Arrangement, the Company and its subsidiaries and
Goldcorp and its subsidiaries (collectively, the
“Information”) obtained by Orion from public sources
and from senior management of the Company and its consultants
and advisers. The Fairness Opinion is conditional upon such
completeness, accuracy and fair presentation of such Information.
Senior officers of the Company have represented to Orion in a
certificate delivered as of the date hereof, among other things,
that (i) the Information provided orally by, or in the
presence of, an officer or employee of the Company or in writing
by the Company to Orion relating to the Company or the Plan of
Arrangement for the purpose of preparing this Fairness Opinion
was, at the date the Information was provided to Orion, and is,
except as has been disclosed in writing to Orion, complete, true
and correct in all material respects, and did not and does not
contain any untrue statement of a material fact (as such term is
defined in the Securities Act (Ontario) (the
“Act”)) in respect of the Company or the Plan of
Arrangement or omit to state a material fact, necessary to make
the Information not misleading in light of the circumstances
under which the Information was provided; and (ii) since
the dates on which the Information was provided to Orion, except
as has been disclosed in writing to Orion, there has been no
material change, financial or otherwise, in the financial
condition, assets, liabilities (contingent or otherwise),
business, operations or prospects of the Company.
Orion has assumed that all of the conditions required to
implement the Plan of Arrangement will be met. Orion has not
been asked to prepare and has not prepared, in connection with
the delivery of the Fairness Opinion, a formal valuation of the
Company or any of its assets or securities and the Fairness
Opinion should not be construed as such.
Orion has not conducted an investigation concerning the
financial condition, assets, liabilities (contingent or
otherwise), business, operations or prospects of Goldcorp or any
of its subsidiaries (other than as set forth in this Fairness
Opinion) and the Fairness Opinion should not be construed as a
valuation or appraisal of any assets or securities of Goldcorp.
The Fairness Opinion is rendered on the basis of securities
markets, economic, financial and general business conditions
prevailing as at the date hereof and the condition, financial
and otherwise, of the Company, as it was reflected in the
Information and as they have been represented to Orion in
discussions with management of the Company. In its analyses and
in preparing the Fairness Opinion, Orion made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Orion or any party involved in
the Plan of Arrangement.
The Fairness Opinion is provided to the Board for its use only
and may not be relied upon by any other person. The Fairness
Opinion is given as of the date hereof and Orion disclaims any
undertaking or obligation to advise any person of any change in
any fact or matter affecting the Fairness Opinion which may come
or be brought to Orion’s attention after the date hereof.
Without limiting the foregoing, in the event that there is any
material change in any fact or matter affecting the Fairness
Opinion, including, without limitation, the terms and conditions
of the Plan of
Arrangement, or if Orion learns that the Information relied upon
in rendering the Fairness Opinion was inaccurate, incomplete or
misleading in any material respect, Orion reserves the right to
change, modify or withdraw the Fairness Opinion.
Orion believes that its analyses must be considered as a whole
and that selecting portions of the analyses or the factors
considered by it, without considering all factors and analyses
together, could create a misleading view of the process
underlying the Fairness Opinion. The preparation of a Fairness
Opinion is a complex process and is not necessarily susceptible
to partial analysis or summary description. Any attempt to do so
could lead to undue emphasis on any particular factor or
analysis.
Conclusion
Based upon and subject to the foregoing, and such other matters
as Orion considered relevant, Orion is of the opinion that, as
of the date hereof, the consideration to be received by the
Glamis Shareholders pursuant to the terms of the Plan of
Arrangement is fair from a financial point of view to the Glamis
Shareholders.
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of common shares (the
“Company Common Shares”), of Glamis Gold Ltd. (the
“Company”) of the Exchange Ratio (as defined below) in
the proposed business combination (the “Transaction”)
of the Company with Goldcorp Inc. (“Goldcorp”).
Pursuant to the Arrangement Agreement (the
“Agreement”), among the Company, Goldcorp and a
subsidiary of Goldcorp, the business and assets of the Company
will combine with those of Goldcorp by way of a plan of
arrangement, and each outstanding Company Common Share, other
than Company Common Shares held by a holder who has validly
exercised dissent rights or owned by Goldcorp or any subsidiary
of Goldcorp, will be exchanged for 1.69 common shares (the
“Exchange Ratio”) of Goldcorp (the “Goldcorp
Common Shares”).
In arriving at our opinion, we have (i) reviewed a draft
dated August 29, 2006 of the Agreement; (ii) reviewed
certain publicly available business and financial information
concerning the Company and Goldcorp and the industries in which
they operate; (iii) compared the proposed financial terms
of the Transaction with the publicly available financial terms
of certain transactions involving companies we deemed relevant
and the consideration received for such companies;
(iv) compared the financial and operating performance of
the Company and Goldcorp with publicly available information
concerning certain other companies we deemed relevant and
reviewed the current and historical market prices of the Company
Common Shares and the Goldcorp Common Shares and certain
publicly traded securities of such other companies;
(v) reviewed certain internal financial analyses and
forecasts prepared by the managements of the Company and
Goldcorp relating to their respective businesses;
(vi) reviewed historical metal commodity prices and foreign
exchange rates and considered the impact of various commodity
pricing and foreign exchange rate assumptions on the respective
businesses, prospects and financial forecasts of the Company and
Goldcorp; (vii) reviewed a certificate signed by senior
management of the Company attesting to the validity of the
information provided to us; and (viii) performed such other
financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of
this opinion.
In addition, we have held discussions with certain members of
the management of the Company and Goldcorp with respect to
certain aspects of the Transaction, and the past and current
business operations of the Company and Goldcorp, the financial
condition and future prospects and operations of the Company and
Goldcorp, the effects of the Transaction on the financial
condition and future prospects of the Company and Goldcorp, and
certain other matters we believed necessary or appropriate to
our inquiry.
In giving our opinion, we have relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with us by the Company and Goldcorp or otherwise reviewed by or
for us. We have not conducted or been provided with any
valuation or appraisal of any assets or liabilities, nor have we
evaluated the solvency of the Company or Goldcorp under any
state or federal laws relating to bankruptcy, insolvency or
similar matters. In relying on financial analyses and forecasts
provided to us, we have assumed that they have been reasonably
prepared based on assumptions reflecting the best currently
available estimates and judgments by management as to the
expected future
results of operations and financial condition of the Company and
Goldcorp to which such analyses or forecasts relate. We express
no view as to such analyses or forecasts or the assumptions on
which they were based. We have also assumed that the Transaction
will have the tax consequences described in discussions with,
and materials furnished to us by, representatives of the
Company, and that the other transactions contemplated by the
Agreement will be consummated as described in the Agreement, and
that the definitive Agreement will not differ in any material
respects from the draft thereof furnished to us.
We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel. We have further assumed that
all material governmental, regulatory or other consents and
approvals necessary for the consummation of the Transaction will
be obtained without any adverse effect on the Company or
Goldcorp or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion and that we do
not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a
financial point of view, to the holders of the Company Common
Shares of the Exchange Ratio in the proposed Transaction and we
express no opinion as to the fairness of the Transaction to, or
any consideration of, the holders of any other class of
securities, creditors or other constituencies of the Company or
as to the underlying decision by the Company to engage in the
Transaction. We are expressing no opinion herein as to the price
at which the Company Common Shares or the Goldcorp Common Shares
will trade at any future time.
In addition, we were not requested to and did not provide advice
concerning the structure, the specific Exchange Ratio, or any
other aspects of the Transaction, or to provide services other
than the delivery of this opinion. We were not authorized to and
did not solicit any expressions of interest from any other
parties with respect to the sale of all or any part of the
Company or any other alternative transaction. We also note that
we did not participate in negotiations with respect to the terms
of the Transaction and related transactions.
We will receive a fee from the Company for the delivery of this
opinion and an additional fee if the proposed Transaction is
consummated. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. Please be
advised that we or our affiliates are participants in
Goldcorp’s credit facility but have no other material
investment banking relationships with the Company or Goldcorp.
In the ordinary course of our businesses, we and our affiliates
may actively trade the debt and equity securities of the Company
or Goldcorp for our own account or for the accounts of customers
and, accordingly, we may at any time hold long or short
positions in such securities.
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the Exchange Ratio in the proposed
Transaction is fair, from a financial point of view, to the
holders of the Company Common Shares.
This letter is provided to the Board of Directors of the Company
in connection with and for the purposes of its evaluation of the
Transaction. This opinion does not constitute a recommendation
to any shareholder of the Company as to how such shareholder
should vote with respect to the Transaction or any other matter.
This opinion may not be disclosed, referred to, or communicated
(in whole or in part) to any third party for any purpose
whatsoever except with our prior written approval. This opinion
may be reproduced in full in any proxy or information statement
mailed to shareholders of the Company but may not otherwise be
disclosed publicly in any manner without our prior written
approval.
IN THE MATTER OF SECTION 288 OF THE BUSINESS CORPORATIONS ACT,
S.B.C. 2002, C.57 AS AMENDED
AND
IN THE MATTER OF A PROPOSED PLAN OF ARRANGEMENT
INVOLVING
GLAMIS GOLD LTD., ITS SHAREHOLDERS
AND GOLDCORP INC.
INTERIM ORDER
BEFORE
)
MONDAY, THE 25TH DAY OF
)
MASTER DONALDSON
)
SEPTEMBER, 2006
THE APPLICATION WITHOUT NOTICE of Glamis Gold Ltd. (“Glamis”), coming on for hearing at
Vancouver, British Columbia on Monday, the 25th day of September, 2006 and on hearing
R. Jennifer Smith, counsel for the Petitioner, and S.A. Dawson, counsel for Goldcorp Inc.
THIS COURT ORDERS THAT:
THE MEETING
A. Glamis Gold Ltd. (“Glamis”) is authorized and directed to call, hold and conduct a
special meeting (the “Meeting”) of the common shareholders of Glamis (the “Glamis Shareholders”) to
be held at 9:30 a.m. on October 26, 2006, at the Fairmont Waterfront Hotel, 900 Canada Place Way,
Vancouver, British Columbia or at such other location in Vancouver, British Columbia to be
determined by Glamis.
B. At the Meeting, Glamis Shareholders will, inter alia, consider, and if deemed
advisable, approve a special resolution (the “Arrangement Resolution”) adopting, with or
without amendment, the arrangement (the “Arrangement”) involving Glamis, the Glamis Shareholders
and Goldcorp Inc. (“Goldcorp”) set forth in the plan of arrangement (the “Plan of Arrangement”), a
copy of which is attached as Appendix “C” to the Information Circular (the “Information Circular”)
attached as Exhibit “A” to the Affidavit #1 of Charles A. Jeannes sworn September 22, 2006 and filed
herein.
C. The Meeting will be called, held and conducted in accordance with the notice of Meeting to
be delivered in substantially the form attached to and forming part of the Information Circular,
and in accordance with the applicable provisions of the Business
Corporations Act, (British
Columbia), S.B.C. 2002, c.57, as amended (the “BCBCA”), the
Articles of Glamis, the Securities Act
(British Columbia), R.S.B.C. 1996, c. 418, as amended (the
“Securities Act”), and related rules and
policies, the terms of this Order (the “Interim Order”) and any further Order of this Court, the
rulings and directions of the Chairman of the Meeting, and, to the extent of any inconsistency or
discrepancy between this Order and the terms of any of the foregoing, this Order will govern.
RECORD DATE FOR NOTICE
D. The Record Date for determination of the Glamis Shareholders entitled to receive the notice of
the Meeting, Information Circular and proxy (together, the “Meeting Materials”) will be the close
of business on September 26,2006 (the “Record Date’’) or such other date as the directors of Glamis
may determine in accordance with the Articles of Glamis, the BCBCA
and the Securities Act, and
disclosed in the Meeting Materials.
NOTICE OF MEETING
E. The Meeting Materials, with such amendments or additional documents as counsel for Glamis
may advise are necessary or desirable, and that are not inconsistent with the terms of this Order,
and a copy of this Order, will be sent, at least 21 clear days before the date of the Meeting, to
the Glamis Shareholders who are shareholders on the Record Date and to brokerage intermediaries on
behalf of beneficial Glamis Shareholders where applicable and, in the case of Glamis Shareholders
who are registered Glamis Shareholders, by prepaid ordinary
mail addressed to each registered Glamis Shareholder at his or her address as maintained by
the registrar and transfer agent of Glamis or delivery of same by courier service or by facsimile
transmission or e-mail transmission to any such Glamis Shareholder who identifies himself or
herself to the satisfaction of Glamis and who requests such facsimile or e-mail transmission and,
in the case of beneficial Glamis Shareholders, in the manner contemplated by National Instrument
54-101 adopted pursuant to the Securities Act and that compliance with this paragraph will
constitute good and sufficient notice of the Meeting and delivery of the Meeting Materials.
F. The Meeting Materials, with such amendments or additional documents as counsel for Glamis may
advise are necessary or desirable shall be sent to the holders of share
purchase options of Glamis (“Glamis Option Holders”) by
pre-paid ordinary mail, at least 21 clear
days before the date of the Meeting at the addresses of the Glamis Option Holders as they appear
on the books and records of Glamis as of the record date.
G. The accidental omission to give notice of the Meeting or non-receipt of such notice will
not invalidate any resolution passed or taken at the Meeting provided quorum
requirements are met.
DEEMED RECEIPT OF MEETING MATERIALS
H. The Meeting Materials will be deemed, for the purposes of this Order, to have been received
by the Glamis Shareholders:
(a) in the case of mailing to registered shareholders or, in the case of delivery by
courier of materials to brokerage intermediaries, five days after delivery thereof to the
post office or acceptance by the courier service, respectively; and
(b) in the case of delivery by courier, facsimile transmission or e-mail transmission
directly to a registered holder, the business day after such delivery or transmission of
same.
I. The persons entitled to attend the Meeting will be the registered and beneficial Glamis
Shareholders, the officers, directors, and advisors of Glamis, representatives of Goldcorp, and
such other persons who receive the consent of the Chairman of the Meeting. The only persons
permitted to vote at the Meeting will be the registered and known beneficial Glamis Shareholders as
of the close of business on the Record Date and their valid proxy holders as described in the
Information Circular and as determined by the Chairman of the Meeting upon consultation with the
Scrutineer (as hereinafter defined) and legal counsel to Glamis.
VOTING AT MEETING
J. The requisite approval for the Arrangement Resolution will be two-thirds of the votes cast on the resolution by the Glamis Shareholders present in person or by proxy
at the Meeting. Each common share of Glamis voted will carry one vote.
K. A quorum for the Meeting will be not less than two persons being present in person or
represented by proxy, holding not less than one-twentieth of the issued common shares of Glamis.
L. In all other respects, the terms, restrictions and conditions of the constating
documents of Glamis will apply in respect of the Meeting.
ADJOURNMENT OF MEETING
M. If Glamis deems advisable, Glamis is specifically authorized to adjourn or postpone the
Meeting on one or more occasions without the necessity of first convening the Meeting or first
obtaining any vote of the Glamis Shareholders respecting the adjournment or postponement and
without the need for approval of the Court.
N. The record date for Glamis Shareholders entitled to notice of and to vote at the
Meeting will not change in respect of adjournments of the Meeting.
O. Glamis is authorized to make such amendments, revisions or supplements to the
Plan of Arrangement as it may determine, provided it has obtained any required consents, and the
Plan of Arrangement as so amended, revised or supplemented will be the Plan of Arrangement which is
submitted to the Meeting and which will thereby become the subject of the Arrangement Resolution.
SCRUTINEER
P. A representative of Glamis’s registrar and transfer agent (or any agent thereof)
(the “Scrutineer”), will be authorized to act as scrutineer for the Meeting.
PROXY SOLICITATION
Q. Glamis
is authorized to permit the Glamis Shareholders to vote by proxy using a form of proxy
that complies with the Articles of Glamis and the provisions of the BCBCA and
the Securities Act relating to the form and content of proxies, and Glamis may in its discretion
waive generally the time limits for deposit of proxies by Glamis Shareholders if Glamis deems it
reasonable to do so.
DISSENT RIGHTS
R. The Glamis Shareholders will, as set out in the Plan of Arrangement, be permitted to dissent
from the Arrangement Resolution in accordance with the dissent procedures set forth in Division 2
of Part 8 of the BCBCA, strictly applied as modified by the Plan of Arrangement.
DELIVERY OF COURT MATERIALS
S. Glamis will include in the Meeting Materials a copy of this Order and Notice of Hearing of
Petition and will make available to any Glamis Shareholder requesting same, a copy of each of the
Petition herein and the accompanying Affidavit #1 of Charles A. Jeannes (collectively the “Court
Materials”).
T. Delivery of the Court Materials given in accordance with this Order will constitute good and
sufficient service of such Court Materials upon all persons who are entitled to receive the Court
Materials pursuant to this Order and no other form of service need be made and no other material
need to be served on such persons in respect of these proceedings.
FINAL APPROVAL HEARING
U. Upon the approval of the Glamis Shareholders of the Plan of Arrangement in the matter set
forth in this Order, Glamis may apply for an order of this Court approving the Plan of Arrangement
(the “Final Order”), on October 27, 2006 or such later date as counsel for Glamis may be heard.
V. Any Glamis Shareholder has the right to appear (either in person or by counsel) and make
submissions at the hearing of the application for the Final Order provided that such Glamis
Shareholder shall file an Appearance, in the form prescribed by the Rules of Court of the Supreme
Court of British Columbia, with this Court and deliver a copy of the filed Appearance together with
a copy of all materials on which such Glamis Shareholder intends to rely at the application for the
Final Order, including an outline of such Glamis Shareholder’s proposed
submissions to the solicitors for the Petitioner at Lang Michener LLP, Barristers &
Solicitors, 1500 – 1055 W. Georgia Street, Vancouver, B.C. V6E 4N7, Attention: Peter J. Reardon at
or before 12 p.m. on October 20, 2006, subject to the direction of the Court.
W. If the application for the Final Order is adjourned, only those persons who have filed and
delivered an Appearance, in accordance with the preceding paragraph
of this Interim Order, need to be served with notice of the adjourned date.
X. The Final Order will provide the basis for Goldcorp to rely on the exemption from
registration provided in Section 3(a)(10) of the Securities
Act of 1933 (United States).
Y. The Petitioner shall not be required to comply with Rules 44 and 51A in relation
to the hearing for the Final Order approving the Plan of Arrangement.
Z. Glamis is at liberty to apply to this Honourable Court to vary this Order or for
advice and direction with respect to the Plan of Arrangement or any of the matters related
to this Order.
TAKE NOTICE that the application of the Petitioner, Glamis Gold
Ltd. dated September 25, 2006 will be heard in chambers at
the courthouse at 800 Smithe Street, in the City of Vancouver,
in the Province of British Columbia, on October 27, 2006,
at the hour of 9:45 a.m.
This matter will not be opposed.
It is estimated that the hearing will take 15 minutes.
The parties have been unable to agree as to the date of the
hearing.
The parties have been unable to agree as to how long the hearing
will take and
(a)
the time estimate of the applicant is 15 minutes, and
(b)
no respondent has given a time estimate.
This matter is not within the jurisdiction of a master because a
final order is being sought.
This NOTICE OF HEARING OF PETITION is prepared and delivered by
Peter J. Reardon of the firm of Lang Michener
llp, solicitor for
the Petitioner, whose place of business and address for delivery
is 1500 – 1055 West Georgia Street, P.O. Box 11117,
Vancouver, B.C., V6E 4N7, Telephone (604) 689-9111; Fax
(604) 685-7084.
On completion of the Arrangement, Glamis Shareholders will
become shareholders of Goldcorp. Since Goldcorp is an Ontario
corporation, the rights of the shareholders of Goldcorp are
governed by the applicable laws of Ontario, including the OBCA,
and by Goldcorp’s articles of incorporation and
by-laws. Since Glamis
is a British Columbia corporation, the rights of Glamis
Shareholders are governed by the BCBCA and by Glamis’
notice of articles and articles.
The following is a summary comparison of certain of the current
rights of Glamis Shareholders under the BCBCA and the Glamis
notice of articles and articles, and the rights that Glamis
Shareholders will have as Goldcorp Shareholders under the OBCA
and the Goldcorp articles and
by-laws upon completion
of the Arrangement.
The statements in this section are qualified in their entirety
by reference to, and are subject to, the detailed provisions of
the BCBCA, the OBCA, Glamis’ notice of articles,
Glamis’ articles, Goldcorp’s articles of incorporation
and Goldcorp’s
by-laws.
Corporate Governance
Glamis. The rights of Glamis Shareholders are governed by
British Columbia corporate law and the notice of articles and
articles of Glamis.
Goldcorp. The rights of Goldcorp Shareholders are
governed by Ontario corporate law and the articles of
incorporation and
by-laws of Goldcorp.
Authorized Share Capital
Glamis. The BCBCA permits shares with or without par
value.
Goldcorp. The OBCA does not permit shares with par value.
The authorized share capital of Goldcorp currently consists of
an unlimited number of common shares. As of September 25,2006, there were issued and outstanding 418,440,849 Goldcorp
Shares, and options and warrants to acquire 20,390,876 Goldcorp
Shares.
Number, Classification and Election of the Board of
Directors
Glamis. Glamis’ articles provide that the directors
will determine the size of the board of directors with each
director elected for a term expiring at the next succeeding
annual meeting of shareholders after his or her election. The
Glamis Board currently consists of seven directors.
The Glamis Board is not divided into separate classes of
directors. The Glamis articles do not permit cumulative voting
for the election of directors.
Goldcorp. Goldcorp’s articles of incorporation
provide that the number of directors of the corporation shall
consist of a minimum of three and a maximum of 10 members. The
number of directors may be fixed by the board of directors
within this range from time to time. As of the date of this
Circular, the Goldcorp Board consists of ten directors.
The Goldcorp Board is not divided into separate classes of
directors and neither Goldcorp’s articles nor
by-laws permit
cumulative voting for the election of directors. Upon completion
of the Arrangement, the Goldcorp Board will consist of ten
directors, six of which will be Goldcorp nominees and four of
which will be Glamis nominees.
Director Qualifications
Glamis. Neither the articles of Glamis nor the BCBCA
place any residency restrictions on the Glamis Board.
Goldcorp. A majority of the directors of a corporation
governed by the OBCA generally must be resident Canadians. The
OBCA also requires that at least one-third of the directors of a
corporation whose securities are publicly traded not be officers
or employees of the company or any of its affiliates.
Glamis. The BCBCA provides that the shareholders of a
corporation may remove one or more directors by a special
resolution or by any other method specified in the articles. If
holders of a class or series of shares have the exclusive right
to elect or appoint one or more directors, a director so elected
or appointed may only be removed by a separate special
resolution of the shareholders of that class or series or by any
other method specified in the articles. Glamis’ articles
also provide that the directors may remove a director if that
director is convicted of an indictable offence, or if the
director ceases to be qualified to act as a director and does
not promptly resign.
Goldcorp. Under the OBCA, provided that articles of the
corporation do not provide for cumulative voting, shareholders
of a corporation may by ordinary resolution at an annual or
special meeting, remove any director or directors from office.
If holders of a class or series of shares have the exclusive
right to elect one or more directors, a director so elected may
only be removed by an ordinary resolution at a meeting of the
shareholders of that class or series. Where the articles of
incorporation provide for cumulative voting, a director may not
be removed from office if the votes cast against the
director’s removal would be sufficient to elect him or her
and such votes could be voted cumulatively at an election at
which the same total number of votes were cast and the number of
directors required by the articles were then being elected.
Newly Created Directorships and Vacancies
Glamis. The BCBCA provides that, unless the articles
provide otherwise, vacancies on the board of directors resulting
from the removal of a director (other than a director elected or
appointed by holders of a class or series of shares having the
exclusive right to elect or appoint a director) may be filled by
the shareholders at the meeting at which the director is removed
or, if not filled by the shareholders at such meeting, by the
shareholders or by the remaining directors. A casual vacancy may
be filled by the remaining directors. A director elected to fill
a vacancy is elected for the unexpired term of his or her
predecessor in office. Vacancies on the board resulting from the
removal of a director elected or appointed by holders of a class
or series of shares having the exclusive right to elect or
appoint one or more directors will be filled by such
shareholders at the meeting at which the director is removed or
by those shareholders or by the remaining directors elected or
appointed by those shareholders. A casual vacancy that occurs
among directors elected or appointed by holders of a class or
series of shares having the exclusive right to elect or appoint
one or more directors may be filled by the remaining directors
elected or appointed by those shareholders, or where there are
no directors elected or appointed by those shareholders, by a
unanimous resolution or meeting of those shareholders.
Glamis’ articles provide the Glamis Board with the
authority to appoint one or more directors to fill a casual
vacancy. The directors can also appoint additional directors
between annual general meetings provided that the number of
directors so appointed does not exceed one-third of the number
of current directors.
Goldcorp. Under the OBCA, subject to the articles of the
corporation, a vacancy among the directors may generally be
filled at a meeting of shareholders or by a quorum of directors
except when the vacancy results from an increase in the number
or maximum number of directors, or from a failure to elect the
appropriate number of directors required by the articles. Each
director appointed or elected to fill a vacancy holds office for
the unexpired term of the director’s predecessor.
Meetings of the Board of Directors
Glamis. Glamis’ articles provide that a director
may, and the secretary or assistant secretary, if any, on the
request of a director must, call a meeting of the Glamis Board
at any time. Glamis’ articles provide that a quorum for
purposes of the transaction of business may be set by the
directors and, if not so set, is deemed to be a majority of the
directors.
Goldcorp. Goldcorp’s
by-laws provide that
the board, the chairman of the board, the president, executive
vice-president or a vice-president who is a director or any one
director may call a meeting of the board of directors. Under the
OBCA, subject to the articles or
by-laws of the
corporation, a majority of the number of directors or minimum
number of directors required by the articles constitutes a
quorum at any meeting of directors but in no case shall a quorum
be less than two-fifths of the number of directors or minimum
number of directors, as the case may be. Where a corporation has
fewer than three directors, all directors must be present at any
meeting of directors to constitute a quorum.
Goldcorp’s by-laws
provide that quorum for meetings of directors shall be a
majority of the directors then in office and or such greater
number of directors as the board may determine.
Meetings of Shareholders
Glamis. Under Glamis’ articles a general meeting
must be held in British Columbia, but may be held outside if
British Columbia if the location is approved by a resolution of
the directors.
Goldcorp. Subject to the articles, under the OBCA a
meeting of shareholders may be held in or outside Ontario, as
the directors determine or, in the absence of such a
determination, at the place where the registered office of the
corporation is located.
Under the OBCA, the directors of a corporation shall call an
annual meeting of shareholders not later than eighteen months
after the corporation comes into existence and subsequently not
later than fifteen months after holding the last preceding
annual meeting and may at any time call a special meeting of
shareholders. The Goldcorp
by-laws provide that
the annual meeting of shareholders shall be held no later than
the earlier of (i) six (6) months after the end of
each financial year and (ii) fifteen (15) months after
the corporation’s last annual meeting of shareholders.
Under the OBCA, the holders of not less than 5 per cent of
the issued shares of a corporation that carry the right to vote
at a meeting sought to be held may requisition the directors to
call a meeting of shareholders for the purposes stated in the
requisition. Upon meeting the technical requirements of the OBCA
for making such a requisition, the directors must call a meeting
of shareholders and if they fail to do so within twenty-one days
after receiving the requisition, any shareholder who signed the
requisition may call the meeting.
Quorum for Meetings of the Shareholders
Glamis. Glamis’ articles provide that a quorum for
the transaction of business at a general meeting of shareholders
is two persons who are, or who represent by proxy, shareholders
who in the aggregate hold not less than 5% of the issued shares
entitled to be voted at the meeting. A quorum need not be
present throughout the meeting. If a quorum is not present
within half an hour from the time appointed for a general
meeting, the meeting stands adjourned to the same day during the
next week, except that if the meeting was requisitioned by
shareholders, the meeting will be dissolved. If a quorum is not
present at the adjourned meeting, the persons present in person
or by proxy and who are entitled to vote at the meeting will
constitute quorum.
Goldcorp. Goldcorp’s
by-laws provide that
the presence of at least two voting persons representing in
person or by proxy, not less than
331/3%
of the outstanding shares entitled to vote thereat will
constitute a quorum for a meeting. Under the OBCA, if a quorum
is present at the opening of a meeting of shareholders, the
shareholders present may, unless the by-laws otherwise provide,
proceed with the business of the meeting even if a quorum is not
present throughout the meeting. If a quorum is not present at
the time appointed for a meeting of shareholders or within a
reasonable time thereafter, the shareholders present may adjourn
the meeting to a fixed time and place, but may not transact any
other business.
Certain Voting Requirements
Under the BCBCA and the OBCA, certain extraordinary corporate
actions, such as certain amalgamations (other than with a direct
or indirect wholly-owned subsidiary), continuances, and sales,
leases or exchanges of all or substantially all the property of
a corporation other than in the ordinary course of business, and
other extraordinary corporate actions such as liquidations
(winding-ups), dissolutions (under the OBCA only) and
arrangements, require approval by special resolution. The BCBCA
permits amalgamations with foreign corporations, but the OBCA
does not.
In certain cases, a special resolution to approve an
extraordinary corporate action is also required to be approved
separately by the holders of a class or series of shares,
including in certain cases a class or series of shares not
otherwise carrying voting rights.
Glamis. Under the BCBCA, a resolution passed by a special
majority at a general meeting for which proper notice has been
provided constitutes a special resolution. A special majority is
a majority of votes, as specified by the articles, that is not
less than
662/3%
and not more than 75% of the votes cast on the resolution. Where
the articles do not specify the percentage required for a
special majority, a special majority is
662/3%
of the votes cast on the resolution. A resolution consented to
in writing by all of the shareholders holding shares that carry
the right to vote at general meetings also constitutes a special
resolution. The BCBCA permits a company to alter its articles to
require certain
Glamis. Under Glamis’ articles, certain amendments
to the notice of articles require approval by ordinary
resolution.
Goldcorp. Under the OBCA, any amendment to the articles
generally requires approval by special resolution, being a
resolution passed at a special meeting of the shareholders by at
least
662/3%
of the votes cast.
Glamis. Under the BCBCA, except where otherwise specified
in the BCBCA, a company may alter its articles by the type of
resolution (special resolution or otherwise) specified by its
articles. Where neither the BCBCA nor the company’s
articles specify the type of resolution, the articles may be
altered by special resolution.
Goldcorp. The OBCA provides that, unless the articles or
by-laws otherwise
provide, the directors may, by resolution, make, amend or repeal
any by-law that
regulates the business or affairs of a corporation. Where the
directors make, amend or repeal a
by-law, they are
required under the OBCA to submit the
by-law, amendment or
repeal to the shareholders at the next meeting of shareholders,
and the shareholders may confirm, reject or amend the
by-law, amendment or
repeal by an ordinary resolution, which is a resolution passed
by a majority of the votes cast by shareholders who voted in
respect of the resolution. If the directors of a corporation do
not submit a by-law, an
amendment or a repeal to the shareholders at the next meeting of
shareholders, the
by-law, amendment or
repeal will cease to be effective on the date of the meeting of
shareholders at which it should have been submitted, and no
subsequent resolution of the directors to adopt, amend or repeal
a by-law having
substantially the same purpose and effect is effective until it
is confirmed or confirmed as amended by the shareholders.
Oppression Remedy
Glamis. Under the BCBCA, a shareholder has the right to
apply to court on the ground (a) that the affairs of the
company are being or have been conducted, or that the powers of
the directors are being or have been exercised, in a manner
oppressive to one or more shareholders, or (b) that some
act of the company has been done or is threatened, or that some
resolution of shareholders has been passed or is proposed, that
is unfairly prejudicial to one or more shareholders. The court
may make such order as it sees fit.
Goldcorp. Under the OBCA, the right to bring an
oppression action extends to shareholders and former
shareholders of a corporation or any of its affiliates,
directors, officers or former directors or officers of a
corporation or of any of its affiliates, and any person who, in
the discretion of the court, is a proper person to make an
application to court to bring such an action and, in the case of
an offering corporation, the Ontario Securities Commission.
Such parties may apply to court for an order to rectify the
matters complained of where, in respect of a corporation or any
of its affiliates, (a) any act or omission of the
corporation or its affiliates effects or threatens to effect a
result, (b) the business or affairs of the corporation or
its affiliates are or have been or are threatened to be carried
on or conducted in a manner, or (c) the powers of the
directors of the corporation or any of its affiliates are, have
been or are threatened to be exercised in a manner that is
oppressive or unfairly prejudicial to, or that unfairly
disregards the interests of, any security holder, creditor,
director or officer.
Glamis. Under the BCBCA, a shareholder or director of a
company may, with leave of the court, prosecute or defend an
action in the name and on behalf of the company.
Goldcorp. Under the OBCA, the right to bring an action in
the name and on behalf of a corporation or any of its
subsidiaries or intervene in an action to which any such
corporation is a party extends to shareholders and former
shareholders of a corporation or any of its affiliates,
directors, officers or former directors or officers of a
corporation or of any of its affiliates, and any person who, in
the discretion of the court, is a proper person to make an
application to court to bring such an action.
Indemnification of Officers and Directors
Glamis. Under the BCBCA, current or former directors or
officers of a company or an associated corporation, or any of
their heirs and personal or other legal representatives, are
eligible to be indemnified by the company (“eligible
party”).
A company may indemnify an eligible party against a judgment,
penalty or fine awarded or imposed in, or an amount paid in
settlement of certain proceedings incurred in connection with
eligible proceedings and certain associated reasonable expenses.
In certain circumstances, a company may advance expenses.
A company must not indemnify an eligible party in certain
circumstances, including where the eligible party did not act
honestly and in good faith with a view to the best interests of
the company or the associated corporation, or where, in
proceedings other than civil proceedings, the eligible party did
not have reasonable grounds for believing that the eligible
party’s conduct was lawful. In addition, a company must not
indemnify an eligible party in proceedings brought against the
eligible party by or on behalf of the company or an associated
corporation.
Goldcorp. Under the OBCA, a corporation may indemnify a
director or officer, a former director or officer or a person
who acts or acted at the corporation’s request as a
director or officer of a body corporate of which the corporation
is or was a shareholder or creditor, and his or her heirs and
legal representatives (“indemnifiable person”),
against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably
incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is made a
party by reason of being or having been a director or officer of
such corporation or such body corporate, if: (i) he or she
acted honestly and in good faith with a view to the best
interests of such corporation; and (ii) in the case of a
criminal or administrative action or proceeding that is enforced
by a monetary penalty, he or she had reasonable grounds for
believing that his or her conduct was lawful.
An indemnifiable person is entitled to indemnification from the
corporation under the OBCA if he or she was substantially
successful on the merits in his or her defense of the action or
proceeding and fulfills the conditions set out in (i) and
(ii) above. With court approval a corporation may also
indemnify an indemnifiable person in respect of an action by or
on behalf of the corporation or body corporate to procure a
judgment in its favour, to which such person is made a party by
reason of being or having been a director or an officer of the
corporation or body corporate, if he or she fulfills the
conditions set forth in (i) and (ii), above.
“dissenter” means a shareholder who, being
entitled to do so, sends written notice of dissent when and as
required by section 242;
“notice shares” means, in relation to a notice
of dissent, the shares in respect of which dissent is being
exercised under the notice of dissent;
“payout value” means,
(a)
in the case of a dissent in respect of a resolution, the fair
value that the notice shares had immediately before the passing
of the resolution,
(b)
in the case of a dissent in respect of an arrangement approved
by a court order made under section 291 (2) (c) that
permits dissent, the fair value that the notice shares had
immediately before the passing of the resolution adopting the
arrangement, or
(c)
in the case of a dissent in respect of a matter approved or
authorized by any other court order that permits dissent, the
fair value that the notice shares had at the time specified by
the court order, excluding any appreciation or depreciation in
anticipation of the corporate action approved or authorized by
the resolution or court order unless exclusion would be
inequitable.
(2)
This Division applies to any right of dissent exercisable by a
shareholder except to the extent that
(a)
the court orders otherwise, or
(b)
in the case of a right of dissent authorized by a resolution
referred to in section 238 (1) (g), the court orders otherwise
or the resolution provides otherwise.
Right to dissent
238 (1) A shareholder of a
company, whether or not the shareholder’s shares carry the
right to vote, is entitled to dissent as follows:
(a)
under section 260, in respect of a resolution to alter the
articles to alter restrictions on the powers of the company or
on the business it is permitted to carry on;
(b)
under section 272, in respect of a resolution to adopt an
amalgamation agreement;
(c)
under section 287, in respect of a resolution to approve an
amalgamation under Division 4 of Part 9;
(d)
in respect of a resolution to approve an arrangement, the terms
of which arrangement permit dissent;
(e)
under section 301 (5), in respect of a resolution to authorize
or ratify the sale, lease or other disposition of all or
substantially all of the company’s undertaking;
(f)
under section 309, in respect of a resolution to authorize the
continuation of the company into a jurisdiction other than
British Columbia;
(g)
in respect of any other resolution, if dissent is authorized by
the resolution;
(h)
in respect of any court order that permits dissent.
(2)
A shareholder wishing to dissent must
(a)
prepare a separate notice of dissent under section 242 for
(i)
the shareholder, if the shareholder is dissenting on the
shareholder’s own behalf, and
(ii)
each other person who beneficially owns shares registered in the
shareholder’s name and on whose behalf the shareholder is
dissenting,
identify in each notice of dissent, in accordance with
section 242 (4), the person on whose behalf dissent is
being exercised in that notice of dissent, and
(c)
dissent with respect to all of the shares, registered in the
shareholder’s name, of which the person identified under
paragraph (b) of this subsection is the beneficial owner.
(3)
Without limiting subsection (2), a person who wishes to have
dissent exercised with respect to shares of which the person is
the beneficial owner must
(a)
dissent with respect to all of the shares, if any, of which the
person is both the registered owner and the beneficial
owner, and
(b)
cause each shareholder who is a registered owner of any other
shares of which the person is the beneficial owner to dissent
with respect to all of those shares.
Waiver of right to dissent
239 (1) A shareholder may
not waive generally a right to dissent but may, in writing,
waive the right to dissent with respect to a particular
corporate action.
(2) A shareholder wishing to waive
a right of dissent with respect to a particular corporate action
must
the shareholder, if the shareholder is providing a waiver on the
shareholder’s own behalf, and
(ii)
each other person who beneficially owns shares registered in the
shareholder’s name and on whose behalf the shareholder is
providing a waiver, and
(b)
identify in each waiver the person on whose behalf the waiver is
made.
(3) If a shareholder waives a right
of dissent with respect to a particular corporate action and
indicates in the waiver that the right to dissent is being
waived on the shareholder’s own behalf, the
shareholder’s right to dissent with respect to the
particular corporate action terminates in respect of the shares
of which the shareholder is both the registered owner and the
beneficial owner, and this Division ceases to apply to
(a)
the shareholder in respect of the shares of which the
shareholder is both the registered owner and the beneficial
owner, and
(b)
any other shareholders, who are registered owners of shares
beneficially owned by the first mentioned shareholder, in
respect of the shares that are beneficially owned by the first
mentioned shareholder.
(4) If a shareholder waives a right
of dissent with respect to a particular corporate action and
indicates in the waiver that the right to dissent is being
waived on behalf of a specified person who beneficially owns
shares registered in the name of the shareholder, the right of
shareholders who are registered owners of shares beneficially
owned by that specified person to dissent on behalf of that
specified person with respect to the particular corporate action
terminates and this Division ceases to apply to those
shareholders in respect of the shares that are beneficially
owned by that specified person.
Notice of resolution
240 (1) If a resolution in
respect of which a shareholder is entitled to dissent is to be
considered at a meeting of shareholders, the company must, at
least the prescribed number of days before the date of the
proposed meeting, send to each of its shareholders, whether or
not their shares carry the right to vote,
(a)
a copy of the proposed resolution, and
(b)
a notice of the meeting that specifies the date of the meeting,
and contains a statement advising of the right to send a notice
of dissent.
(2) If a resolution in respect of
which a shareholder is entitled to dissent is to be passed as a
consent resolution of shareholders or as a resolution of
directors and the earliest date on which that resolution can be
passed is specified in the resolution or in the statement
referred to in paragraph (b), the company may, at least
21 days before that specified date, send to each of its
shareholders, whether or not their shares carry the right to
vote,
(a)
a copy of the proposed resolution, and
(b)
a statement advising of the right to send a notice of dissent.
(3) If a resolution in respect of
which a shareholder is entitled to dissent was or is to be
passed as a resolution of shareholders without the company
complying with subsection (1) or (2), or was or is to
be passed as a directors’ resolution without the company
complying with subsection (2), the company must, before or
within 14 days after the passing of the resolution, send to
each of its shareholders who has not, on behalf of every person
who beneficially owns shares registered in the name of the
shareholder, consented to the resolution or voted in favour of
the resolution, whether or not their shares carry the right to
vote,
(a)
a copy of the resolution,
(b)
a statement advising of the right to send a notice of dissent,
and
(c)
if the resolution has passed, notification of that fact and the
date on which it was passed.
(4) Nothing in subsection (1),
(2) or (3) gives a shareholder a right to vote in a
meeting at which, or on a resolution on which, the shareholder
would not otherwise be entitled to vote.
Notice of court orders
241 If a court order
provides for a right of dissent, the company must, not later
than 14 days after the date on which the company receives a
copy of the entered order, send to each shareholder who is
entitled to exercise that right of dissent
(a)
a copy of the entered order, and
(b)
a statement advising of the right to send a notice of dissent.
Notice of dissent
242 (1) A shareholder
intending to dissent in respect of a resolution referred to in
section 238 (1) (a), (b), (c), (d), (e) or
(f) must,
(a)
if the company has complied with section 240 (1)
or (2), send written notice of dissent to the company at
least 2 days before the date on which the resolution is to
be passed or can be passed, as the case may be,
(b)
if the company has complied with section 240 (3), send
written notice of dissent to the company not more than
14 days after receiving the records referred to in that
section, or
(c)
if the company has not complied with section 240 (1),
(2) or (3), send written notice of dissent to the company
not more than 14 days after the later of
(i)
the date on which the shareholder learns that the resolution was
passed, and
(ii)
the date on which the shareholder learns that the shareholder is
entitled to dissent.
(2) A shareholder intending to
dissent in respect of a resolution referred to in section 238
(1) (g) must send written notice of dissent to the company
(a)
on or before the date specified by the resolution or in the
statement referred to in section 240 (2) (b) or
(3) (b) as the last date by which notice of dissent must be
sent, or
(b)
if the resolution or statement does not specify a date, in
accordance with subsection (1) of this section.
(3) A shareholder intending to
dissent under section 238 (1) (h) in respect of a
court order that permits dissent must send written notice of
dissent to the company
(a)
within the number of days, specified by the court order, after
the shareholder receives the records referred to in
section 241, or
(b)
if the court order does not specify the number of days referred
to in paragraph (a) of this subsection, within 14 days
after the shareholder receives the records referred to in
section 241.
(4) A notice of dissent sent under
this section must set out the number, and the class and series,
if applicable, of the notice shares, and must set out whichever
of the following is applicable:
(a)
if the notice shares constitute all of the shares of which the
shareholder is both the registered owner and beneficial owner
and the shareholder owns no other shares of the company as
beneficial owner, a statement to that effect;
if the notice shares constitute all of the shares of which the
shareholder is both the registered owner and beneficial owner
but the shareholder owns other shares of the company as
beneficial owner, a statement to that effect and
(i)
the names of the registered owners of those other shares,
(ii)
the number, and the class and series, if applicable, of those
other shares that are held by each of those registered owners,
and
(iii)
a statement that notices of dissent are being, or have been,
sent in respect of all of those other shares;
(c)
if dissent is being exercised by the shareholder on behalf of a
beneficial owner who is not the dissenting shareholder, a
statement to that effect and
(i)
the name and address of the beneficial owner, and
(ii)
a statement that the shareholder is dissenting in relation to
all of the shares beneficially owned by the beneficial owner
that are registered in the shareholder’s name.
(5) The right of a shareholder to
dissent on behalf of a beneficial owner of shares, including the
shareholder, terminates and this Division ceases to apply to the
shareholder in respect of that beneficial owner if
subsections (1) to (4) of this section, as those
subsections pertain to that beneficial owner, are not complied
with.
Notice of intention to proceed
243 (1) A company that
receives a notice of dissent under section 242 from a dissenter
must,
(a)
if the company intends to act on the authority of the resolution
or court order in respect of which the notice of dissent was
sent, send a notice to the dissenter promptly after the later of
(i)
the date on which the company forms the intention to proceed, and
(ii)
the date on which the notice of dissent was received, or
(b)
if the company has acted on the authority of that resolution or
court order, promptly send a notice to the dissenter.
(2) A notice sent under
subsection (1) (a) or (b) of this section must
(a)
be dated not earlier than the date on which the notice is sent,
(b)
state that the company intends to act, or has acted, as the case
may be, on the authority of the resolution or court
order, and
(c)
advise the dissenter of the manner in which dissent is to be
completed under section 244.
Completion of dissent
244 (1) A dissenter who
receives a notice under section 243 must, if the dissenter
wishes to proceed with the dissent, send to the company or its
transfer agent for the notice shares, within one month after the
date of the notice,
(a)
a written statement that the dissenter requires the company to
purchase all of the notice shares,
(b)
the certificates, if any, representing the notice
shares, and
(c)
if section 242 (4) (c) applies, a written
statement that complies with subsection (2) of this section.
(2) The written statement referred
to in subsection (1) (c) must
(a)
be signed by the beneficial owner on whose behalf dissent is
being exercised, and
(b)
set out whether or not the beneficial owner is the beneficial
owner of other shares of the company and, if so, set out
(i)
the names of the registered owners of those other shares,
(ii)
the number, and the class and series, if applicable, of those
other shares that are held by each of those registered
owners, and
(iii)
that dissent is being exercised in respect of all of those other
shares.
(3) After the dissenter has
complied with subsection (1),
(a)
the dissenter is deemed to have sold to the company the notice
shares, and
(b)
the company is deemed to have purchased those shares, and must
comply with section 245, whether or not it is authorized to do
so by, and despite any restriction in, its memorandum or
articles.
(4) Unless the court orders
otherwise, if the dissenter fails to comply with subsection
(1) of this section in relation to notice shares, the right
of the dissenter to dissent with respect to those notice shares
terminates and this Division, other than section 247, ceases to
apply to the dissenter with respect to those notice shares.
(5) Unless the court orders
otherwise, if a person on whose behalf dissent is being
exercised in relation to a particular corporate action fails to
ensure that every shareholder who is a registered owner of any
of the shares beneficially owned by that person complies with
subsection (1) of this section, the right of shareholders
who are registered owners of shares beneficially owned by that
person to dissent on behalf of that person with respect to that
corporate action terminates and this Division, other than
section 247, ceases to apply to those shareholders in respect of
the shares that are beneficially owned by that person.
(6) A dissenter who has complied
with subsection (1) of this section may not vote, or
exercise or assert any rights of a shareholder, in respect of
the notice shares, other than under this Division.
Payment for notice shares
245 (1) A company and a
dissenter who has complied with section 244 (1) may agree
on the amount of the payout value of the notice shares and, in
that event, the company must
(a)
promptly pay that amount to the dissenter, or
(b)
if subsection (5) of this section applies, promptly send a
notice to the dissenter that the company is unable lawfully to
pay dissenters for their shares.
(2) A dissenter who has not entered
into an agreement with the company under subsection (1) or
the company may apply to the court and the court may
(a)
determine the payout value of the notice shares of those
dissenters who have not entered into an agreement with the
company under subsection (1), or order that the payout
value of those notice shares be established by arbitration or by
reference to the registrar, or a referee, of the court,
(b)
join in the application each dissenter, other than a dissenter
who has entered into an agreement with the company under
subsection (1), who has complied with
section 244 (1), and
(c)
make consequential orders and give directions it considers
appropriate.
(3) Promptly after a determination
of the payout value for notice shares has been made under
subsection (2) (a) of this section, the company
must
(a)
pay to each dissenter who has complied with
section 244 (1) in relation to those notice
shares, other than a dissenter who has entered into an agreement
with the company under subsection (1) of this section,
the payout value applicable to that dissenter’s notice
shares, or
(b)
if subsection (5) applies, promptly send a notice to the
dissenter that the company is unable lawfully to pay dissenters
for their shares.
(4) If a dissenter receives a
notice under subsection (1) (b) or (3) (b),
(a)
the dissenter may, within 30 days after receipt, withdraw
the dissenter’s notice of dissent, in which case the
company is deemed to consent to the withdrawal and this
Division, other than section 247, ceases to apply to the
dissenter with respect to the notice shares, or
(b)
if the dissenter does not withdraw the notice of dissent in
accordance with paragraph (a) of this subsection, the
dissenter retains a status as a claimant against the company, to
be paid as soon as the company is lawfully able to do so or, in
a liquidation, to be ranked subordinate to the rights of
creditors of the company but in priority to its shareholders.
246 The right of a dissenter
to dissent with respect to notice shares terminates and this
Division, other than section 247, ceases to apply to the
dissenter with respect to those notice shares, if, before
payment is made to the dissenter of the full amount of money to
which the dissenter is entitled under section 245 in relation to
those notice shares, any of the following events occur:
(a)
the corporate action approved or authorized, or to be approved
or authorized, by the resolution or court order in respect of
which the notice of dissent was sent is abandoned;
(b)
the resolution in respect of which the notice of dissent was
sent does not pass;
(c)
the resolution in respect of which the notice of dissent was
sent is revoked before the corporate action approved or
authorized by that resolution is taken;
(d)
the notice of dissent was sent in respect of a resolution
adopting an amalgamation agreement and the amalgamation is
abandoned or, by the terms of the agreement, will not proceed;
(e)
the arrangement in respect of which the notice of dissent was
sent is abandoned or by its terms will not proceed;
(f)
a court permanently enjoins or sets aside the corporate action
approved or authorized by the resolution or court order in
respect of which the notice of dissent was sent;
(g)
with respect to the notice shares, the dissenter consents to, or
votes in favour of, the resolution in respect of which the
notice of dissent was sent;
(h)
the notice of dissent is withdrawn with the written consent of
the company;
(i)
the court determines that the dissenter is not entitled to
dissent under this Division or that the dissenter is not
entitled to dissent with respect to the notice shares under this
Division.
Shareholders entitled to return of shares and rights
247 If, under
section 244 (4) or (5), 245 (4) (a) or
246, this Division, other than this section, ceases to apply to
a dissenter with respect to notice shares,
(a)
the company must return to the dissenter each of the applicable
share certificates, if any, sent under section
244 (1) (b) or, if those share certificates are
unavailable, replacements for those share certificates,
(b)
the dissenter regains any ability lost under
section 244 (6) to vote, or exercise or assert any
rights of a shareholder, in respect of the notice
shares, and
(c)
the dissenter must return any money that the company paid to the
dissenter in respect of the notice shares under, or in purported
compliance with, this Division.
We have audited the consolidated balance sheet of Goldcorp Inc.
as at December 31, 2005 and the consolidated statements of
earnings, shareholders’ equity and cash flows for the year
then ended. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at December 31, 2005 and the results of its
operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting
principles.
The consolidated financial statements of the Company for the
year ended December 31, 2004 were audited by other auditors
whose report, dated February 7, 2005, expressed an
unqualified opinion on those statements.
We have audited the consolidated balance sheet of Goldcorp Inc.
as at December 31, 2004 and the consolidated statements of
earnings, shareholders’ equity and cash flows for the year
then ended. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at December 31, 2004 and the results of its
operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting
principles.
(in United States dollars, except where noted, tabular amounts
in thousands)
1.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Goldcorp Inc (“Goldcorp” or “the Company”)
is a leading gold producer engaged in gold mining and related
activities including exploration, extraction, processing and
reclamation. As a result of the successful acquisition of
Wheaton River Minerals Ltd (“Wheaton”) during the year
(note 3), the Company’s assets are comprised of
the Red Lake gold mine in Canada, a 37.5% interest in the
Alumbrera gold/copper mine in Argentina, the Luismin gold/silver
mines in Mexico, the Peak gold mine in Australia, and the Wharf
gold mine in the United States. Significant development projects
include the expansion of the existing Red Lake mine, the Los
Filos/ Bermejal gold project in Mexico and the Amapari gold
project in northern Brazil. Goldcorp also owns a 59% interest in
Silver Wheaton Corp (“Silver Wheaton”), a publicly
traded silver mining company.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by
the Company in accordance with Canadian generally accepted
accounting principles (“Canadian GAAP”) using the
following significant accounting policies.
(a) Basis
of presentation and principles of consolidation
These consolidated financial statements include the accounts of
the Company and all of its subsidiaries and investments. The
principal mining properties of Goldcorp are listed below:
Ownership
Operations and development
Mining properties
Location
interest
Status
projects owned
Red Lake mine (“Red Lake”)
Canada
100%
Consolidated
Red Lake mine
Minera Alumbrera Ltd
(“Alumbrera”) (1)
Argentina
37.5%
Proportionately consolidated (note 2(d))
Alumbrera mine
Luismin SA de CV
(“Luismin”) (1)
Mexico
100%
Consolidated
San Dimas, San Martin and Nukay mines and Los Filos/ Bermejal
development project
Peak Gold Mines Pty Ltd
(“Peak”) (1)
Australia
100%
Consolidated
Peak mine
Wharf gold mine (“Wharf”)
United States
100%
Consolidated
Wharf mine
Mineração Pedra Branco do Amapari Ltda
(“Amapari”) (1)
The results of Goldcorp include an 82% interest in the
subsidiaries and investments of Wheaton from February 15 to
April 15, 2005 and 100% thereafter (note 3).
All intercompany transactions and balances have been eliminated.
(b) Use
of estimates
The preparation of consolidated financial statements in
conformity with Canadian GAAP requires the Company’s
management to make estimates and assumptions about future events
that affect the amounts reported in the consolidated financial
statements and related notes to the financial statements. Actual
results may differ from those estimates.
Significant estimates used in the preparation of these
consolidated financial statements include, but are not limited
to, the recoverability of accounts receivable and investments,
the quantities of material on leach pads and in circuit, the
proven and probable ore reserves and resources and the related
depletion and amortization, the estimated tonnes of waste
material to be mined and the estimated recoverable tonnes of ore
from each mine area, the estimated net realizable value of
inventories, the accounting for stock-based compensation, the
provision for income and mining taxes and composition of future
income and mining tax assets and liabilities, the expected
economic lives of and the estimated future operating results and
net cash flows from mining interests, the anticipated costs of
reclamation and closure cost obligations, and the fair value of
assets and liabilities acquired in business combinations.
(c) Revenue
recognition
Revenue from the sale of metals is recognized in the accounts
when persuasive evidence of an arrangement exists, title and
risk passes to the buyer, collection is reasonably assured and
the price is reasonably determinable. Revenue from the sale of
metals in concentrate may be subject to adjustment upon final
settlement of estimated metal prices, weights and assays.
Adjustments to revenue for metal prices are recorded monthly and
other adjustments are recorded on final settlement. Refining and
treatment charges are netted against revenue for sales of metal
concentrate.
The Company has joint control over Alumbrera through certain
matters requiring unanimous consent in the shareholders’
agreement and, therefore, has proportionately consolidated its
37.5% share of the financial statements of Alumbrera from
February 15, 2005. On this basis, the Company records its
37.5% share of the assets, liabilities, revenues and expenses of
Alumbrera in these consolidated financial statements.
(e) Cash
and cash equivalents
Cash and cash equivalents include cash, and those short-term
money market instruments that are readily convertible to cash
with an original term of less than 90 days.
(f) Marketable
securities
Marketable securities are carried at the lower of cost or market
value.
(g) Inventories
and stockpiled ore
Work-in-process inventories, stockpiled ore and finished goods
are valued at the lower of average production cost or net
realizable value. Production costs include the cost of raw
materials, direct labour, mine-site overhead expenses and
depreciation and depletion of mining interests. Supplies are
valued at the lower of average cost or replacement cost.
(h) Mining
interests
Mining interests represent capitalized expenditures related to
the exploration and development of mining properties and related
plant and equipment. Capitalized costs are depreciated and
depleted using either a unit-of-production method over the
estimated economic life of the mine to which they relate, or
using the straight-line method over their estimated useful lives.
The costs associated with mining properties are separately
allocated to reserves, resources and exploration potential, and
include acquired interests in production, development and
exploration stage properties representing the fair value at the
time they were acquired. The value allocated to reserves is
depreciated on a unit-of-production method over the estimated
recoverable proven and probable reserves at the mine. The
reserve value is noted as depletable mining properties in
Note 9. The resource value represents the property
interests that are believed to potentially contain economic
mineralized material such as inferred material within pits;
measured, indicated, and inferred resources with insufficient
drill spacing to qualify as proven and probable reserves; and
inferred resources in close proximity to proven and probable
reserves. Exploration potential represents the estimated
mineralized material contained within (i) areas adjacent to
existing reserves and mineralization located within the
immediate mine area; (ii) areas outside of immediate mine
areas that are not part of measured, indicated, or inferred
resources; and (iii) greenfields exploration potential that is
not associated with any other production, development, or
exploration stage property, as described above. Resource value
and exploration potential value is noted as non-depletable
mining properties in Note 9. At least annually or when
otherwise appropriate, value from the non-depletable category is
transferred to the depletable category as a result of an
analysis of the conversion of resources or exploration potential
into reserves.
Costs related to property acquisitions are capitalized until the
viability of the mineral property is determined. When it is
determined that a property is not economically viable the
capitalized costs are written-off.
Exploration costs incurred to the date of establishing that a
property is economically recoverable are charged to operations.
Further development expenditures are capitalized to the property.
Mining expenditures incurred either to develop new ore bodies or
to develop mine areas in advance of current production are
capitalized. Commercial production is deemed to have commenced
when management determines that the completion of operational
commissioning of major mine and plant components is completed,
operating results are being achieved consistently for a period
of time and that there are indicators that these operating
results will be continued. Mine development costs incurred to
maintain current production are included in operations.
Upon sale or abandonment the cost of the property and equipment,
and related accumulated depreciation or depletion, are removed
from the accounts and any gains or losses thereon are included
in operations.
The Company reviews and evaluates its mining properties for
impairment at least annually or when events or changes in
circumstances indicate that the related carrying amounts may not
be recoverable. Impairment is considered to exist if the total
estimated future undiscounted cash flows are less than the
carrying amount of the assets. An impairment loss is measured
and recorded based on discounted estimated future cash flows.
Future cash flows are estimated based on expected future
production, commodity prices, operating costs and capital costs.
(i) Goodwill
Acquisitions are accounted for using the purchase method whereby
assets and liabilities acquired are recorded at their fair
values as of the date of acquisition and any excess of the
purchase price over such fair value is recorded as goodwill.
Goodwill is identified and allocated to reporting units by
preparing estimates of the fair value of each reporting unit and
comparing this amount to the fair value of assets and
liabilities in the reporting unit. Goodwill is not amortized.
The Company evaluates, on at least an annual basis, the carrying
amount of goodwill to determine whether current events and
circumstances indicate that such carrying amount may no longer
be recoverable. To accomplish this, the Company compares the
fair value of its reporting units to their carrying amounts. If
the carrying value of a reporting unit exceeds its fair value,
the Company compares the
implied fair value of the reporting unit’s goodwill to its
carrying amount, and any excess of the carrying value over the
fair value is charged to operations. Assumptions underlying fair
value estimates are subject to significant risks and
uncertainties.
Contracts for which settlement is called for in silver are
recorded at cost. The cost of this asset is separately allocated
to reserves, resources and exploration potential. The value
allocated to reserves is depreciated on a unit-of-sale basis
over the estimated recoverable reserves at the mine
corresponding to the specific contract.
Evaluations of the carrying values of each contract are
undertaken at least annually to determine if estimated
undiscounted future net cash flows are less than the carrying
value. Estimated undiscounted future net cash flows are
calculated using estimated production, sales prices and purchase
costs. If it is determined that the undiscounted future net cash
flows from an operation are less than the carrying value then a
write-down to fair value is recorded with a charge to operations.
(k) Long-term
investments
Long-term investments are carried at cost. When a decline in
market value that is other than temporary has occurred, these
investments are written down to provide for the loss.
(l) Income
and mining taxes
The Company uses the liability method of accounting for income
and mining taxes. Under the liability method, future tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and for tax losses and other deductions
carried forward. Upon business acquisitions, the liability
method results in a gross up of mining interests to reflect the
recognition of the future tax liabilities for the tax effect of
such differences.
Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply when the asset
is realized or the liability settled. A reduction in respect of
the benefit of a future tax asset (a valuation allowance) is
recorded against any future tax asset if it is not likely to be
realized. The effect on future tax assets and liabilities of a
change in tax rates is recognized in income in the period in
which the change is substantively enacted.
(m) Reclamation
and closure cost obligations
The Company’s mining and exploration activities are subject
to various governmental laws and regulations relating to the
protection of the environment. These environmental regulations
are continually changing and are generally becoming more
restrictive. The Company has made, and intends to make in the
future, expenditures to comply with such laws and regulations.
The Company has recorded a liability and corresponding asset for
the estimated future cost of reclamation and closure, including
site rehabilitation and long-term treatment and monitoring
costs, discounted to net present value. Such estimates are,
however, subject to change based on negotiations with regulatory
authorities, or changes in laws and regulations. A change in
estimated discount rates is reviewed annually or as new
information becomes available.
(n) Non-controlling
interests
Non-controlling interests exist on less than wholly-owned
subsidiaries of the Company and represent the outside
interest’s share of the carrying values of the
subsidiaries. When the subsidiary company issues its own shares
to outside interests, a dilution gain or loss arises as a result
of the difference between the Company’s share of the
proceeds and the carrying value of the underlying equity.
(o) Foreign
currency translation
Prior to April 1, 2005, the Canadian dollar was determined
to be the measurement currency of the Company’s Canadian
operations and these operations have been translated into United
States dollars up until this date using the current rate method
as follows: all assets and liabilities are translated into
United States dollars at the exchange rate prevailing at the
balance sheet date; all revenue and expense items are translated
at the average rate of exchange for the period; and the
resulting translation adjustment is recorded as a cumulative
translation adjustment (“CTA”), a separate component
of shareholders’ equity. Subsequent to the change in
measurement currency described below, the CTA balance will
remain the same until reporting units which gave rise to the CTA
balance is disposed of or retired. In addition, unrealized gains
and losses due to movements in exchange rates on cash balances
held in foreign currencies are shown separately on the
Consolidated Statements of Cash Flows.
Due to the Wheaton acquisition and related changes, including
holding a greater proportion of the Company’s cash in
United States dollars, it has been determined that as of
April 1, 2005, the United States dollar is the reporting
and measurement currency of the Company’s Canadian
operations and therefore these operations have been translated
using the temporal method from that date onward. All operations
outside of Canada, including those of Wheaton, previously
applied the United States dollar as their reporting and
measurement currency and therefore translated their operating
results using the temporal method. Under this method, foreign
currency monetary assets and liabilities are translated into
United States dollars at the exchange rates prevailing at the
balance sheet date; non-monetary assets denominated in foreign
currencies are translated using the rate of exchange at the
transaction date; and foreign exchange gains and losses are
included in the determination of earnings.
(p) Earnings
per share
Earnings per share calculations are based on the weighted
average number of common shares and common share equivalents
issued and outstanding during the year. Diluted earnings per
share are calculated using the treasury method which requires
the calculation of diluted
earnings per share by assuming that outstanding stock options,
warrants, and restricted share units with an average market
price that exceeds the average exercise prices of the options
and warrants for the year, are exercised and the assumed
proceeds are used to repurchase shares of the Company at the
average market price of the common shares for the year.
(q) Stock-based
compensation
The Company applies the fair value method of accounting for all
stock option awards. Under this method the Company recognizes a
compensation expense for all stock options awarded to employees
since January 1, 2003, based on the fair value of the
options on the date of grant which is determined by using an
option pricing model. The fair value of the options is expensed
over the vesting period of the options. Stock options issued to
employees before January 1, 2003 were accounted for using
the settlement method and accordingly, no compensation expense
has been recorded for those options.
(r) Financial
instruments
The Company’s financial instruments comprise, primarily,
cash and cash equivalents, accounts receivable, marketable
securities and accounts payable. The fair value of the financial
instruments approximates their carrying values due primarily to
their immediate or short-term maturity.
The Company employs, from time to time, interest rate and
Canadian dollar forward and option contracts to manage exposure
to fluctuations in interest rates and foreign currency exchange
rates.
(s) Comparative
amounts
Certain comparative information has been reclassified to conform
to the current year’s presentation.
3.
BUSINESS COMBINATION
On December 6, 2004, Goldcorp and Wheaton announced a
proposed transaction which provided for Goldcorp to make a
take-over bid for Wheaton on the basis of one Goldcorp share for
every four Wheaton shares. On December 29, 2004, Goldcorp
mailed the Goldcorp Take-over Bid Circular to the Wheaton
shareholders.
On February 8, 2005, Goldcorp announced a special $0.50 per
share cash dividend would be payable to existing Goldcorp
shareholders should shareholders approve by majority
Goldcorp’s take-over bid for Wheaton and Wheaton
shareholders tender the minimum two-thirds bid requirement. The
payment of the special dividend also resulted in an adjustment
to the exchange ratio of Goldcorp’s outstanding
warrants — an increase in entitlement from 2.0 to 2.08
Goldcorp shares per warrant.
On February 10, 2005, at a special meeting, Goldcorp
shareholders approved the issuance of additional Goldcorp common
shares to effect the acquisition of Wheaton. As of
February 14, 2005, the effective date of acquisition,
approximately 70% of the outstanding Wheaton common shares were
tendered to Goldcorp’s offer, satisfying the minimum
two-thirds bid requirement under the terms of the Goldcorp
offer. With conditions met, the special $0.50 per share cash
dividend, totaling approximately $95 million, was paid on
February 28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of
the outstanding Wheaton common shares and by April 15,2005, 100% had been acquired. In addition, each Wheaton warrant
or stock option, which gave the holder the right to acquire
common shares of Wheaton, was exchanged for a warrant or stock
option of Goldcorp, giving the holder the right to acquire
common shares of Goldcorp on the same basis as the exchange of
Wheaton common shares for Goldcorp common shares.
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Wheaton as the acquiree in accordance with CICA Handbook
Section 1581 “Business Combinations”.
These consolidated financial statements include 82% of
Wheaton’s operating results for the period February 15 to
April 15, 2005, and 100% of the results thereafter. The
allocation of the purchase price of the shares of Wheaton is
summarized in the following table:
Purchase price
Common shares of Goldcorp issued to acquire 100% of Wheaton
(143.8 million shares)
$
1,887,431
Share purchase warrants of Goldcorp issued in exchange for those
of Wheaton (174.8 million warrants)
290,839
Stock options of Goldcorp issued in exchange for those of
Wheaton (4.9 million options)
Non-controlling interest in Silver Wheaton (35%)
(note 13)
(54,908
)
Net identifiable assets
2,085,771
Residual purchase price allocated to goodwill
(note 9)
149,252
$
2,235,023
A total of 143.8 million Goldcorp shares were issued to
acquire a 100% interest in the shares of Wheaton at a price of
$13.13 per share. This issue price is the five-day average share
price of Goldcorp common shares at February 8, 2005,
reduced by the amount of the special dividend. Share purchase
warrants and stock options have been valued using Black-Scholes
option pricing models and market prices for listed share
purchase warrants. Cash and cash equivalents received on the
acquisition of Wheaton are net of acquisition costs and other
non-operating liabilities incurred by Wheaton and directly
related to the acquisition.
For the purposes of these consolidated financial statements, the
purchase consideration has been allocated to the fair value of
assets acquired and liabilities assumed, with goodwill assigned
to specific reporting units, based on management’s best
estimates and taking into account all available information at
the time of acquisition as well as applicable information at the
time these consolidated financial statements were prepared. This
process was performed in accordance with recent accounting
pronouncements relating to “Mining Assets and Business
Combinations” (CICA Emerging Issues Committee Abstract
152). The amount allocated to goodwill is not deductible for tax
purposes.
An independent valuation of the significant assets acquired was
completed in February, 2006, supporting management’s
allocation of the purchase consideration.
4.
ACQUISITION
On March 31, 2005, Goldcorp completed the acquisition of
the Bermejal gold deposit in Mexico for cash consideration of
$70 million from a joint venture of Industrias Peñoles
SA de CV and Newmont Mining Corporation. The Bermejal gold
deposit is located two kilometres south of Goldcorp’s Los
Filos gold deposit. The Company plans to develop the two
deposits as a single project, the Los Filos/ Bermejal project,
and a detailed engineering study for the combined project is
scheduled to be completed in March, 2006.
Silver Wheaton has an agreement to purchase all of the silver
produced by Lundin Mining Corporation’s Zinkgruvan mine in
Sweden for a per ounce cash payment of the lesser of $3.90 and
the prevailing market price, subject to adjustment. The carrying
value of the silver contract at December 31, 2005 is
$74,639,000 which is being amortized to operations on a
unit-of-sale basis.
6.
CORPORATE TRANSACTION COSTS
Certain costs associated with the restructuring of
Goldcorp’s Toronto office, following the acquisition of
Wheaton, including severance and restructuring of insurance
policies, may not be capitalized as acquisition costs under
current accounting standards. These costs have been expensed in
the amount of $3,592,000 for the year ended December 31,2005.
Income tax expense differs from the amount that would result
from applying the Canadian federal and provincial income tax
rates to earnings before income taxes. These differences result
from the following items:
2005
2004
Earnings before income taxes
$
440,258
$
81,438
Canadian federal and provincial income tax rates
38.5%
40.0%
Income tax expense based on above rates
169,450
32,575
Increase (decrease) due to:
Provincial mining taxes
20,695
7,460
Non-deductible expenditures
6,197
2,016
Resource allowance
(17,480
)
(9,009
)
Lower statutory tax rates on earnings of foreign subsidiaries
(15,627
)
(191
)
Dilution gain not subject to tax
(7,210
)
—
Foreign exchange and other permanent differences
(6,543
)
—
Mining duties deduction
(2,343
)
(1,468
)
Non-taxable portion of realized capital (gains) losses
(2,618
)
1,787
Canadian exploration expenses recognized
(1,715
)
—
Realization of future tax asset not previously recognized
(1,357
)
(920
)
Other
921
(2,159
)
$
142,370
$
30,091
The components of future income taxes are as follows:
2005
2004
Future income and mining tax assets
Non-capital losses
$
13,216
$
111
Deductible temporary differences and other
49,818
22,202
Value of future income tax and mining assets
63,034
22,313
Recoverable asset taxes
1,491
—
Valuation allowance
(14,557
)
(12,032
)
49,968
10,281
Future income and mining tax liabilities
Total taxable temporary differences
(751,489
)
(82,040
)
Future income and mining tax liabilities, net
$
(701,521
)
$
(71,759
)
Presented on the Consolidated Balance Sheets as:
Future income and mining tax assets
$
26,558
$
—
Future income and mining tax liabilities
(728,079
)
(71,759
)
Future income and mining tax liabilities, net
$
(701,521
)
$
(71,759
)
Tax Loss Carry
Forwards
At December 31, 2005, the Company had non-capital losses
available for tax purposes in foreign jurisdictions of
$37,527,000 net of valuation allowance that expire from 2006 to
2015.
Non-current stockpiled ore is comprised of lower grade ore at
Alumbrera, which will be processed later in the mine life.
9.
MINING INTERESTS
2005
2004
Accumulated
Accumulated
depreciation
depreciation
Cost
and depletion
Net
Cost
and depletion
Net
Mining properties
$
2,532,984
$
205,223
$
2,327,761
$
287,715
$
134,429
$
153,286
Plant and equipment
794,895
141,894
653,001
223,662
111,999
111,663
$
3,327,879
$
347,117
$
2,980,762
$
511,377
$
246,428
$
264,949
A summary by property of the net book value is as follows:
Mining properties
Plant and
Total
Total
Depletable
Non-depletable
Total
equipment
2005
2004
Red Lake mine, Canada
$
184,218
$
—
$
184,218
$
105,274
$
289,492
$
252,149
Alumbrera mine, Argentina
420,425
35,456
455,881
268,782
724,663
—
Luismin mines,
Mexico (i)
148,436
613,886
762,322
80,348
842,670
—
Peak mine, Australia
33,358
109,609
142,967
26,058
169,025
—
Amapari project, Brazil
—
183,714
183,714
85,018
268,732
—
Los Filos/ Bermejal project, Mexico
—
337,386
337,386
84,434
421,820
—
El Limón and other projects, Mexico
—
254,217
254,217
1,995
256,212
—
Wharf mine, United States
6,098
—
6,098
87
6,185
7,897
Corporate and other
958
—
958
1,005
1,963
4,903
$
793,493
$
1,534,268
$
2,327,761
$
653,001
$
2,980,762
$
264,949
(i)
Included in the carrying value of Luismin mines is the value of
mining properties attributable to the Silver Wheaton silver
contract of the following amounts:
Mining properties
Plant and
Total
Total
Depletable
Non-depletable
Total
equipment
2005
2004
Silver interests
$
32,872
$
167,149
$
200,021
$
—
$
200,021
$
—
The goodwill allocated to the Company’s reporting units and
included in the respective operating segment assets is shown
below:
December 31
Dilution of
December 31
2004
Additions
ownership
2005
Luismin
$
—
$
74,252
$
—
$
74,252
Silver Wheaton
—
75,000
(6,598
)
68,402
$
—
$
149,252
$
(6,598
)
$
142,654
10.
BANK CREDIT FACILITIES
(a)
The Company has an Aus$5,000,000 ($3,668,000), unsecured,
revolving working capital facility for its Peak mine operations
of which $nil was drawn down at December 31, 2005. The loan
bears interest related to the Australian Treasury Bill rate plus
1.5% per annum.
(b)
During 2005, the Company cancelled a $300 million
acquisition facility and a $75 million revolving working
capital facility, both of which were undrawn.
(c)
On July 29, 2005, Goldcorp entered into a $500 million
revolving credit facility with a syndicate of five lenders. The
facility is unsecured and available to finance acquisitions and
for general corporate purposes. Amounts drawn incur interest at
LIBOR plus 0.625% to 1.125% per annum dependent upon the
Company’s leverage ratio, increasing by an additional
0.125% per annum if the total amount drawn under this facility
exceeds $250 million. Undrawn amounts are subject to a
0.15% to 0.25% per annum commitment fee dependent on the
Company’s leverage ratio. All amounts drawn are required to
be refinanced or repaid by July 29, 2010. The facility is
undrawn as at December 31, 2005.
11.
RECLAMATION AND CLOSURE COST OBLIGATIONS
The Company’s asset retirement obligations consist of
reclamation and closure costs for both active and inactive
mines. The present value of obligations relating to active mines
is currently estimated at $49,890,000 (2004 —
$21,204,000) reflecting payments for approximately the next
55 years. The present value of obligations relating to
inactive mines is currently estimated at $7,834,000
(2004 — $5,199,000) reflecting payments for
approximately the next 10 years. Significant reclamation
and closure activities include land rehabilitation, demolition
of buildings and mine facilities, ongoing care and maintenance
and other costs.
The liability for reclamation and closure cost obligations at
December 31, 2005 is $57,724,000 (2004 —
$26,403,000). The undiscounted value of this liability is
$78,227,000 (2004 — $39,399,000). An inflation rate
assumption of 2% has been used. An accretion expense component
of $8,149,000 (2004 — $1,329,000) has been charged to
operations in 2005 to reflect an increase in the carrying amount
of the asset retirement obligation which has been determined
using a discount rate of 5%. Changes to the reclamation and
closure cost balance during the year are as follows:
2005
2004
Reclamation and closure cost obligations — January 1
$
26,403
$
21,850
Arising on acquisition of Wheaton (note 3)
24,457
—
Reclamation expenditures
(3,598
)
(744
)
Accretion expense
8,149
1,329
Revisions in estimates and liabilities incurred
2,313
3,968
Reclamation and closure cost obligations — December 31
$
57,724
$
26,403
12.
FUTURE EMPLOYEE BENEFITS AND OTHER
Future employee benefits and other consist of a defined benefit
pension plan for certain Mexican employees and certain future
employee benefits for Australian and Mexican employees.
13.
NON-CONTROLLING INTERESTS
On February 14, 2005, Goldcorp acquired an 82% interest in
Wheaton (note 3) which resulted in the recording of
an 18% non-controlling interest of $141,850,000. During the
period February 15 to April 15, 2005, the non-controlling
interest’s share of Wheaton’s net earnings was
$3,548,000. During the same period, Wheaton issued common shares
to non-controlling interests from the exercise of stock options
and warrants in the amount of $3,255,000. Goldcorp acquired the
remaining 18% non-controlling interest’s share of Wheaton
on April 15, 2005.
A further non-controlling interest arose as a result of the
Wheaton acquisition with respect to Wheaton’s 65% ownership
of its subsidiary, Silver Wheaton. This interest decreased to
59% during the year following the issuance of additional shares
by Silver Wheaton to non-controlling interests. This dilution of
the Company’s interest gave rise to a gain of $18,732,000
which has been recognized in operations for the current year.
The detail of this non-controlling interest in Silver Wheaton is
as follows:
Subsequent to December 31, 2005, the Company’s
ownership interest in Silver Wheaton will increase to 62%
following the issuance to the Company of 18 million common
shares and a $20 million promissory note
(note 19).
Total non-controlling interest for the year on the statement of
earnings is comprised of $8,642,000 related to Silver Wheaton
and $3,548,000 related to Wheaton for the period February 15 to
April 15, 2005.
14.
SHAREHOLDERS’ EQUITY
2005
2004
Common shares
$
2,322,491
$
363,246
Share purchase
warrants (a)
286,828
16,110
Stock
options (b)
44,432
7,347
$
2,653,751
$
386,703
At December 31, 2005, the Company had 339,642,000 common
shares outstanding (December 31, 2004 —
189,980,000). Refer to the Consolidated Statements of
Shareholders’ Equity for movement in capital stock.
(a) Share
Purchase Warrants
The payment of a special dividend (note 3) during
February 2005 resulted in an adjustment to the exchange ratio of
Goldcorp’s warrants outstanding prior to the acquisition of
Wheaton — an increase in entitlement from 2.0 to 2.08
Goldcorp shares per warrant. Upon completion of the Wheaton
transaction on April 15, 2005, Goldcorp issued
174.8 million Series A, B and C share purchase
warrants to the former Wheaton share purchase warrant holders.
Each share purchase warrant is exercisable for 0.25 Goldcorp
common shares at prices ranging from C$1.65 to C$3.10 (or C$6.60
to C$12.40 for four share purchase warrants which are
exchangeable for one Goldcorp common share), with expiry dates
ranging from 2007 to 2008.
On May 15, 2005, shareholders approved the Company’s
2005 Stock Option Plan which allows for up to 12.5 million
stock options, with a maximum exercise period of ten years, to
be granted to employees, officers and consultants.
The Company recognizes a compensation expense for all stock
options awarded since January 1, 2003, based on the fair
value of the options on the date of grant which is determined by
using an option pricing model with the following assumptions:
risk-free interest rate of 3% (2004 — 4%); dividend
yield of 1% (2004 — 1%); volatility factor of the
expected market price of the Company’s common stock of 30%
(2004 — 42%); and a weighted average expected life of
the options of fours years (2004 — five years). The
fair value of the options is expensed over the vesting period of
the options. No compensation expense had been recorded for stock
options issued before January 1, 2003. As a result of the
acquisition of Wheaton, all Goldcorp stock options which existed
at December 31, 2004 became fully vested during the first
quarter of 2005 and were expensed in the amount of $5,320,000.
On April 15, 2005, as a result of the Wheaton acquisition,
Wheaton stock options with a fair value of $30,794,000 were
converted to 4.9 million Goldcorp stock options, all of
which are fully vested and are exercisable at prices ranging
from C$2.28 to C$15.68, with expiry dates ranging from 2006 to
2010.
In addition, during the year, the Company granted 5,095,000
stock options which vest over a period of three years, are
exercisable at prices ranging from C$19.23 to C$23.39 per
option, expire in 2015, and have a total fair value of
$20,338,000. Compensation expense of $7,905,000 has been
recognized during the year and the remainder will be recognized
as the stock options vest.
A summary of changes in outstanding stock options is as follows:
The following table summarizes information about the options
outstanding at December 31, 2005:
Options Outstanding
Options Exercisable
Weighted
Options
Weighted
Average
Outstanding
Average
Options
Weighted
Remaining
and
Weighted
Remaining
Outstanding
Average
Contractual
Exercisable
Average
Contractual
Exercise Prices (C$)
(000’s)
Exercise Price
Life (years)
(000’s)
Exercise Price
Life (years)
$2.05–$3.90
468
C$
3.00
2.7
468
C$
3.00
2.7
$4.40–$7.68
1,395
6.10
2.2
1,395
6.10
2.2
$11.40–$13.00
3,725
12.55
4.7
3,725
12.55
4.7
$14.80–$16.87
1,278
16.52
7.7
1,278
16.52
7.7
$17.50–$19.46
6,603
18.84
9.0
2,146
18.02
8.1
$23.39–$23.80
108
23.44
9.6
13
23.80
7.9
13,577
C$
15.08
6.8
9,025
C$
12.97
5.6
(c)
Restricted Share Units
On May 15, 2005, shareholders approved the Company’s
Restricted Share Unit Plan which allows for up to 500,000
restricted share units to be granted to employees, directors and
consultants.
On June 29, 2005, the Company granted 31,500 restricted
share units to the non-executive Directors of the Company, which
vest over a period of two years from the grant date. The Company
will record compensation expense totalling $495,000 over the two
year vesting period. Compensation expense of $227,000 has been
recognized in 2005 and the remainder will be recognized as the
restricted share units vest.
(d)
Diluted Earnings per Share
The following table sets forth the computation of diluted
earnings per share:
2005
2004
Earnings available to common shareholders
$
285,698
$
51,347
Basic weighted-average number of shares outstanding
314,292
189,723
Effect of dilutive securities:
Stock options
3,249
1,153
Warrants
27,832
2,809
Restricted share units
21
—
Diluted weighted-average number of shares outstanding
345,394
193,685
Earnings per share
Basic
$
0.91
$
0.27
Diluted
0.83
0.27
The following lists the stock options excluded from the
computation of diluted earnings per share because the exercise
prices exceeded the average fair market value of the common
shares for the year:
2005
2004
Stock options
108
1,804
(e)
Pro forma net earnings
The following is the Company’s pro forma net earnings
assuming the fair value method of accounting for stock options
had been applied to all options issued since January 1,2002:
2005
2004
Net earnings
$
285,698
$
51,347
Net additional compensation expense related to fair value of
stock options
Stock options issued in exchange for those of Wheaton
30,794
—
Operating activities included the following cash payments
Income taxes paid
$
89,872
$
39,584
Interest paid
—
—
16.
SEGMENTED INFORMATION
The Company’s reportable operating segments are summarized
in the table below.
2005
Silver
Corporate, other
Red Lake
Alumbrera
Luismin
Amapari
Peak
Wharf
Wheaton
and eliminations
Total
(note 1)
(note 1)
(note 1)
(note 1)
(note 1)
(note 1)
Revenues
$
362,026
$
299,225
$
90,696
$
—
$
58,790
$
37,057
$
65,700
$
(17,086
)
$
896,408
Depreciation and depletion
36,723
59,018
16,170
—
8,572
7,583
9,488
(2,290
)
135,264
Earnings (loss) from operations
242,906
134,459
19,743
—
16,990
3,893
19,489
(18,346
)
419,134
Expenditures for mining interests
57,915
6,597
124,801
64,077
20,229
3,349
187
355
277,510
Total assets
297,794
931,291
1,446,958
288,265
146,362
41,878
478,962
434,472
4,065,982
(1)
Includes results of operations for the period subsequent to
February 14, 2005, the date of acquisition of Wheaton.
2004
Corporate,
other and
Red Lake
Wharf
eliminations
Total
Revenues
$
152,198
$
26,121
$
12,697
$
191,016
Depreciation and depletion
14,814
6,003
570
21,387
Earnings (loss) from operations
102,673
3,584
(20,297
)
85,960
Expenditures for mining interests
49,547
6,126
452
56,125
Total assets
282,801
35,050
383,667
701,518
The geographical distribution of the above segments is as
follows:
•
Canada — Red Lake, Corporate and other
•
Argentina — Alumbrera
•
Mexico — Luismin (includes Luismin mines, Los Filos/
Bermejal project, El Limón and other projects)
•
Brazil — Amapari
•
Australia — Peak
•
United States — Wharf
•
Cayman Islands — Silver Wheaton
17.
COMMITMENTS AND CONTINGENCIES
(a)
Commitments exist at Red Lake, Alumbrera, Luismin, Amapari, and
Peak for capital expenditures of approximately
$122 million, of which $39.2 million relates to 2007
at Red Lake. The Company rents premises and leases equipment
under operating leases that expire
over the next five years.
Operating lease expense in 2005 was $7,570,000 (2004 —
$5,267,000). Following is a schedule of future minimum rental
and lease payments required:
2006
$
10,292
2007
3,676
2008
2,570
2009
559
2010
14
17,111
Thereafter
—
Total future minimum payments required
$
17,111
(b)
During the year ended December 31, 2005, Goldcorp was
served with Statements of Claim with respect to a class action
against, among others, the Company and certain of its directors.
The plaintiffs are seeking an unspecified amount of damages as a
result of stock options granted in September 2004. The claims
allege that the defendants acted on material non-public
information at the time of the option grants. The Company
believes that the allegations are unfounded and intends to
vigorously defend these claims.
(c)
Due to the size, complexity and nature of the Company’s
operations, various legal and tax matters are outstanding from
time to time. In the opinion of management, these matters will
not have a material effect on the Company’s consolidated
financial position or results of operations.
18.
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2005, Goldcorp sold its
holdings in three marketable securities to a company owned by
Mr. Robert McEwen, the former non-Executive Chairman and
CEO of Goldcorp. These were non-brokered transactions which were
executed at market value based on the average of the TSX closing
price for the ten trading days prior to the sale agreements,
resulting in gains totaling approximately $4 million.
During the year ended December 31, 2005, the Company also
sold its share ownership in Lexam Explorations Inc to a company
owned by Mr. McEwen for proceeds of $0.3 million.
19.
SUBSEQUENT EVENTS
(a)
On October 30, 2005, Goldcorp entered into an agreement
with Barrick Gold Corporation (“Barrick”) to acquire
certain of Placer Dome Inc.’s (“Placer Dome”)
Canadian and other mining assets and interests upon
Barrick’s successful acquisition of Placer Dome. On
March 15, 2006, Barrick acquired 100% of the outstanding
shares of Placer Dome for approximately $10.0 billion in
shares and cash. On May 12, 2006, Goldcorp completed the
agreement with Barrick for cash of approximately
$1.6 billion, subject to adjustment.
The acquisition was funded with a $250 million advance
payment paid in January 2006 from cash on hand. The remainder
was paid upon closing by drawing down on existing
(note 10) and new credit facilities, in the amount
of $0.5 billion and $0.3 billion respectively. On
May 12, 2006, the Company entered into two credit
facilities comprising a $550 million bridge facility and a
$350 million revolving credit facility. Both facilities are
unsecured, and amounts drawn down will incur interest at LIBOR
plus 0.625% to 1.125% per annum dependent upon the
Company’s leverage ratio, increasing by an additional
0.125% per annum if the total amount drawn under either facility
exceeds 50% of the facility amount. Undrawn amounts will be
subject to a 0.15% to 0.25% per annum commitment fee dependent
on the Company’s leverage ratio. Proceeds raised from the
early exercise of the warrants (note 19(g)) are
required to repay the $550 million bridge facility and
repayment may not be reborrowed. Amounts drawn on the
$350 million facility will be required to be refinanced or
repaid by May 11, 2008. As at September 25, 2006,
$250 million of debt is outstanding on the
$350 million credit facility. Debt of $100 million is
outstanding on the bridge facility which is required to be
repaid by May 9, 2007.
Goldcorp has acquired Placer Dome’s interests in the
Campbell (100%), Porcupine (51%) and Musselwhite (68%) gold
mines in Canada, and the La Coipa (50%) gold/silver mine in
Chile. Goldcorp has also acquired a 40% interest in the Pueblo
Viejo gold development project in the Dominican Republic,
together with Placer Dome’s interest in its Canadian
exploration properties, including the Mount Milligan copper/gold
deposit in British Columbia. On July 24, 2006, Goldcorp
sold certain of its Canadian exploration interests to Terrane
Metals Corp (note 19(h)).
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
the Placer Dome operations as the acquiree. The results of
operations of the acquired assets have been included in the
consolidated financial statements of Goldcorp from the date of
acquisition. After consummation of the proposed acquisition of
Placer Dome operations and assets, Goldcorp will complete an
exercise to value the identifiable assets and liabilities
acquired, including any goodwill that may arise in
the acquisition. The preliminary allocation of the purchase
price of the Placer Dome operations is summarized in the
following table and is subject to adjustment:
Purchase price, subject to final adjustments
Cash
$
1,589,932
Acquisition costs
9,910
$
1,599,842
Net assets acquired
Current assets
$
54,799
Other assets
13,546
Mining interest
1,389,775
Current liabilities
(56,342
)
Future income tax liabilities
(273,641
)
Reclamation and closure cost obligations
(80,690
)
Goodwill
552,395
$
1,599,842
(b)
On December 5, 2005, the Company announced that it had
entered into an agreement with Virginia Gold Mines Inc
(“Virginia”) to acquire Virginia’s
Éléonore gold project in Quebec pursuant to a plan of
arrangement involving Virginia. On March 31, 2006, the
Company completed the acquisition. Goldcorp issued
19.3 million common shares at a price of $20.63 per share.
This issue price is the five-day average share price of Goldcorp
common shares at December 5, 2005, the date of
announcement. Total value allocated to mining interests
including a future income tax adjustment, will equal
$702 million.
Under the agreement, shareholders of Virginia received 0.4 of a
Goldcorp common share and 0.5 of a share in a new public
exploration company for each issued and outstanding Virginia
share. New Virginia holds all other assets of Virginia,
including net working capital, cash to be received prior to
closing from the exercise of Virginia options and warrants, its
non-Éléonore exploration assets and a sliding scale 2%
net smelter return royalty on the Éléonore project.
(c)
On February 13, 2006, Goldcorp announced that it had agreed
to amend its existing silver purchase agreement with Silver
Wheaton, in connection with Goldcorp’s plans to
substantially increase its investment in exploration and
development at its San Dimas mine in Mexico.
Under the existing silver purchase agreement dated
October 15, 2004, Silver Wheaton is entitled to purchase
all of the silver produced by Goldcorp’s Mexican
operations, Luismin, for a per ounce cash payment of the lesser
of $3.90 and the prevailing market price (subject to an
inflationary adjustment commencing in 2007). Further, Luismin is
required to deliver a minimum of 120 million ounces over
the 25 year contract period and Silver Wheaton is obligated
to pay 50% of any capital expenditures made by Luismin at its
mining operations in excess of 110% of the projected capital
expenditures outlined in the agreement.
Goldcorp and Silver Wheaton amended the existing agreement,
increasing the minimum number of ounces of silver to be
delivered over the 25 year contract period by
100 million ounces, to 220 million ounces, and waiving
any capital expenditure contributions previously required to be
paid by Silver Wheaton. In consideration for these amendments,
Silver Wheaton issued to Goldcorp 18 million common shares
representing 9.8% of the outstanding shares of Silver Wheaton
valued at approximately $130 million, and a
$20 million promissory note for total consideration of
approximately $150 million, increasing Goldcorp’s
ownership to 62%, or 126 million common shares of Silver
Wheaton. Goldcorp does not have any present intention to acquire
ownership of, or control over, any additional securities of
Silver Wheaton.
(d)
On February 23, 2006, Silver Wheaton announced that it had
agreed to purchase 4.75 million ounces of silver per year,
for a period of 20 years, from Glencore International AG,
equivalent to the production from their Yauliyacu mining
operations in Peru. With this acquisition, Silver Wheaton is
expected to have annual silver sales of over 15 million
ounces in 2006, increasing to 20 million ounces by 2009 and
thereafter. The transaction closed on March 23, 2006.
Silver Wheaton paid an upfront payment of $285 million,
comprised of $245 million in cash and a $40 million
promissory note, and $3.90 per ounce of silver delivered under
the contract (subject to an inflationary adjustment after three
years). The $40 million promissory note to Glencore bore
interest at 3% per annum and was due on July 26, 2006. The
promissory note was repaid from the proceeds of the public
offering completed by Silver Wheaton on April 20, 2006(note 19(f)).
Yauliyacu is a low-cost silver/lead/zinc mine located in central
Peru which has been in continuous operation for more than
100 years and is expected to produce an average of
6 million ounces of silver per year during the term of the
contract. In the event that silver produced at Yauliyacu in any
year totals less than 4.75 million ounces, the amount sold
to Silver Wheaton in subsequent years will be increased to make
up for the shortfall, so long as production allows.
In order to fund the $245 million cash consideration,
Silver Wheaton used cash on hand of $120 million, together
with $125 million of bank debt.
(e)
In March 2006, Silver Wheaton entered into a credit agreement
comprising a $100 million non-revolving term loan (the
“Term Loan”) and a $25 million revolving loan
(the “Revolving Loan”). The Revolving Loan was for a
period of five years and the Term Loan was to be repaid in equal
installments over a period of four years, however, prepayments
were allowed at any time. The interest rate on each of these
loans was based on LIBOR plus a spread determined by Silver
Wheaton’s leverage ratio. Both the Term Loan and the
Revolving Loan were secured against Silver Wheaton’s assets
including the Luismin, Zinkgruvan and Yauliyacu silver purchase
contracts. The
facility was fully repaid from
the proceeds of a C$200 million public offering completed
by Silver Wheaton on April 20, 2006(note 19(f)).
(f)
On April 20, 2006, Silver
Wheaton closed a C$200 million public offering of
16.7 million common shares at a price of C$12.00 per share.
This transaction resulted in a decrease in Goldcorp’s
ownership in Silver Wheaton from 62% to 57%. This dilution of
the Company’s interest gave rise to a non-taxable dilution
gain of $61.1 million which was recognized in earnings in
the second quarter ending June 30, 2006.
(g)
On March 21, 2006, the
Company proposed the issuance of new common share purchase
warrants (“New Warrants”) in exchange for the early
exercise of the five existing series of warrants (“Existing
Warrants”). On June 12, 2006, over 92% of Existing
Warrant holders had exercised their warrants during the early
exercise period giving rise to net proceeds of
$454.9 million which were subsequently used to pay down
credit facilities drawn down to fund the previously completed
acquisition of certain assets of Placer Dome from Barrick
(note 19(a)). Pursuant to this transaction, the
remaining Existing Warrant holders had their warrants
automatically exchanged, without any further action on the part
of the warrant holder (including payment of any consideration),
for (i) a fraction of a common share equivalent in value to
the intrinsic (in-the-money) value of such Existing Warrant
calculated with reference to the price of Goldcorp common shares
for the five trading days immediately preceding the expiry of
the early exercise period, and (ii) one half of the
fraction of a New Warrant issued to holders of Existing Warrants
who exercised during the early exercise period.
Each of the 8,441,000 New Warrants issued by the Company
entitles the holder to purchase at any time one common share of
Goldcorp at an exercise price of C$45.75 until June 9,2011. The New Warrants trade on the Toronto Stock Exchange and
the New York Stock Exchange. All Existing Warrants were
de-listed from the Toronto and New York stock exchanges.
(h)
On July 24, 2006, Goldcorp completed the sale of Mt.
Milligan and certain other Canadian exploration interest to
Terrane Metals Corp. (“Terrane”, formerly Atlas
Cromwell Ltd.) for 240 million convertible preferred shares
of Terrane at a deemed price of C$0.50 per share. Goldcorp
acquired their exploration interests from Barrick in May 2006.
The preferred shares are convertible into common shares of
Terrane at the option of Goldcorp at any time without any
further consideration. On an as-converted basis, Goldcorp would
own an approximate 81% equity interest in Terrane’s issued
and outstanding shares and an approximate 75% on a fully diluted
basis. Goldcorp will be required to consolidate Terrane’s
results of operations from the date of sale.
(i)
On August 31, 2006, Goldcorp and Glamis Gold Ltd.
(“Glamis”) announced that the respective boards of
directors had agreed to combine Goldcorp and Glamis. A special
meeting of shareholders of Glamis will be held to seek
shareholder approval of the proposed transaction on
October 26, 2006. Each Glamis common share will be
exchanged for 1.69 Goldcorp common shares and C$0.0001 in cash.
All outstanding Glamis stock appreciation rights
(“SARs”) will be exercised by the holders into Glamis
shares such that holders of the SARs will receive Goldcorp
shares at the same exchange ratio. As a result of the proposed
transaction, the combined company should be held 60% by existing
Goldcorp shareholders and 40% by existing Glamis shareholders.
Each Glamis stock option which gives the holder the right to
acquire shares in the common stock of Glamis when presented for
execution will be exchanged for a stock option which will give
the holder the right to acquire shares in the common stock of
Goldcorp on the same basis as the exchange of Glamis common
shares for Goldcorp common shares.
This business combination will be accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Glamis as the acquiree. The results of operations of the
acquired assets will be included in the consolidated financial
statements of Goldcorp from the date of acquisition. After
consummation of the proposed acquisition of Glamis, Goldcorp
will complete an exercise to value the identifiable assets and
liabilities acquired, including any goodwill that may arise in
the acquisition. The preliminary allocation of the purchase
price of Glamis is summarized in the following table and is
subject to adjustment:
($million)
Purchase price
281.9 million common shares of Goldcorp and cash
$
8,092.5
0.5 million common shares of Goldcorp on exercise of Glamis
stock appreciation rights
15.0
Stock options of Goldcorp exchanged for those of Glamis
(in United States dollars, tabular amounts in thousands,
except where noted — Unaudited)
1.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Goldcorp Inc (“Goldcorp” or “the Company”)
is a leading gold producer engaged in gold mining and related
activities including exploration, extraction, processing and
reclamation. As a result of the 2005 acquisition of Wheaton
River Minerals Ltd (“Wheaton”), the Company’s
assets are comprised of the Red Lake gold mine in Canada, a
37.5% interest in the Alumbrera gold/copper mine in Argentina,
the Luismin gold/silver mines in Mexico, the Amapari gold mine
in Brazil, the Peak gold mine in Australia, and the Wharf gold
mine in the United States. Significant development projects
include the expansion of the existing Red Lake mine, Los Filos
gold project in Mexico and the Éléonore gold project
in Canada (note 3). Goldcorp also owns a 57%
interest in Silver Wheaton Corp (“Silver Wheaton”), a
publicly traded silver mining company (note 9). In
addition, on May 12, 2006, the Company acquired certain
assets from Barrick Gold Corporation (“Barrick”)
following Barrick’s acquisition of Placer Dome Inc.
(“Placer Dome”), including Placer Dome’s
interests in the Campbell, Porcupine and Musselwhite gold mines
in Canada, the La Coipa gold/silver mine in Chile, and the
Pueblo Viejo development project in Dominican Republic
(note 4).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These unaudited interim consolidated financial statements have
been prepared by the Company in accordance with Canadian
generally accepted accounting principles (“Canadian
GAAP”). The preparation of financial data is based on
accounting policies and practices consistent with those used in
the preparation of the audited annual consolidated financial
statements. The accompanying unaudited interim consolidated
financial statements should be read in conjunction with the
notes to the Company’s audited consolidated financial
statements for the year ended December 31, 2005, as they do
not contain all disclosures required by Canadian GAAP for annual
financial statements.
In the opinion of management, all adjustments (including
reclassifications and normal recurring adjustments) necessary to
present fairly the financial position, results of operations and
cash flows at June 30, 2006, and for all periods presented,
have been made. The interim results are not necessarily
indicative of results for a full year.
(a) Basis
of presentation and principles of consolidation
These unaudited interim consolidated financial statements
include the accounts of the Company and all of its subsidiaries
and investments.
The principal mining properties of Goldcorp at June 30,2006, are listed below:
Ownership
Operations and
Mining properties
Location
interest
Status
development projects owned
Red Lake mines (“Red
Lake”)(2)
Canada
100%
Consolidated
Red Lake and Campbell complexes
Minera Alumbrera Ltd
(“Alumbrera”)(1)
Argentina
37.5%
Proportionately consolidated
Alumbrera mine
Musselwhite mine (“Musselwhite”)
(2)
Canada
68%
Proportionately consolidated
Musselwhite mine
Porcupine Joint Venture
(“Porcupine”)(2)
Canada
51%
Proportionately consolidated
Porcupine mine
Luismin SA de CV
(“Luismin”)(1)
Mexico
100%
Consolidated
San Dimas, San Martin and Nukay mines and Los Filos gold project
Mineraçao Pedra Branco do Amapari Ltda
(“Amapari”)(1)
The results of Goldcorp include an 82% interest in the
subsidiaries and investments of Wheaton from February 15 to
April 15, 2005 and 100% thereafter.
(2)
The results of Goldcorp include the acquired Placer Dome assets
from Barrick from May 12, 2006 onward (note 4).
(3)
The results of Goldcorp include Éléonore gold project
from March 31, 2006, the date of acquisition, onwards
(note 3).
(4)
On April 20, 2006, Goldcorp’s interest in Silver
Wheaton was diluted to 57% upon the issuance of equity by Silver
Wheaton to non-controlling interests (note 9).
All intercompany transactions and balances have been eliminated.
Certain comparative information has been reclassified to conform
to the current period’s presentation.
3.
ASSET ACQUISITION — ÉLÉONORE GOLD
PROJECT
On March 31, 2006, the Company completed the acquisition of
the Éléonore gold project and Virginia Gold Mines Inc
(“Virginia”).
Goldcorp issued 19.3 million common shares at a price of
$20.63 per share. This issue price is the five-day average share
price of Goldcorp common shares at December 5, 2005, the
date of announcement. Total value allocated to mining interests
including a future income tax adjustment, equals
$702 million.
Under the agreement, shareholders of Virginia received 0.4 of a
Goldcorp common share and 0.5 of a share in a new public
exploration company (Virginia Mines Inc “New
Virginia”) for each issued and outstanding Virginia share.
New Virginia holds all other assets of Virginia including net
working capital, cash received prior to closing from the
exercise of Virginia options and warrants,
non-Éléonore exploration assets, and a sliding scale
2% net smelter return royalty on the Éléonore project.
4.
BUSINESS COMBINATION — PLACER DOME MINING ASSETS
On October 30, 2005, Goldcorp entered into an agreement
with Barrick to acquire certain of Placer Dome’s Canadian
and other mining assets and interests upon Barrick’s
successful acquisition of Placer Dome. On March 15, 2006,
Barrick acquired 100% of the outstanding shares of Placer Dome
for approximately $10.0 billion in shares and cash. On
May 12, 2006, Goldcorp completed the agreement with Barrick
for cash of approximately $1.6 billion. The acquisition was
funded with a $250 million advance payment paid in January
2006 from cash on hand. The remainder was paid upon closing by
drawing down on credit facilities (note 7) in the
amount of $1.3 billion and cash on hand. Goldcorp has
acquired Placer Dome’s interests in the Campbell (100%),
Porcupine (51%) and Musselwhite (68%) gold mines in Canada, and
the La Coipa (50%) gold/silver mine in Chile. Goldcorp has also
acquired a 40% interest in the Pueblo Viejo gold development
project in the Dominican Republic, together with Placer
Dome’s interests in its Canadian exploration properties,
including the Mount Milligan copper/gold deposit in British
Columbia. On July 24, 2006, Goldcorp sold certain of its
Canadian exploration interests to Terrane Metals Corp
(note 14).
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
the Placer Dome operations as the acquiree. These interim
unaudited consolidated financial statements include the Placer
Dome operating results for the period May 12, 2006 to June30, 2006. The preliminary allocation of the purchase price of
the Placer Dome operations is summarized in the following table
and is subject to adjustment:
Purchase price, subject to final adjustments
Cash
$1,589,932
Acquisition costs
9,910
$1,599,842
Net assets acquired
Current assets
$54,799
Other assets
13,546
Mining interest
1,389,775
Current liabilities
(56,342)
Future income tax liabilities
(273,641)
Reclamation and closure cost obligations
(80,690)
Goodwill
552,395
$1,599,842
For the purposes of these interim unaudited consolidated
financial statements, the purchase consideration has been
allocated on a preliminary basis to the fair value of assets
acquired and liabilities assumed, with goodwill assigned to a
specific reporting unit, based on management’s best
estimates and taking into account all available information at
the time of acquisition as well as applicable information at the
time these interim unaudited consolidated financial statements
were prepared. Goldcorp will continue to review information and
perform further analysis with respect to these assets, including
an independent valuation, prior to finalizing the allocation of
the purchase price. This process will be performed in accordance
with the recent accounting pronouncement relating to
“Mining Assets — Impairment and Business
Combination” (Emerging Issue Committee Abstract 152).
Although the results of this review are presently unknown, it is
anticipated that it may result in a change to the amount
assigned to goodwill and a change to the value attributable to
tangible assets.
A summary by property of the net book value is as follows:
Mining properties
Plant and
June 30
December 31
Depletable
Non-depletable
Total
equipment
2006
2005
Red
Lake(iii)
$
322,893
$
256,946
$
579,839
$
198,320
$
778,159
$
289,492
Alumbrera mine
412,800
—
412,800
275,953
688,753
724,663
Luismin
mines(ii)
176,380
607,198
783,578
86,765
870,343
842,670
Amapari mine
64,278
120,883
185,161
85,018
270,179
268,732
Peak mine
38,594
103,767
142,361
25,978
168,339
169,025
Los Filos project
—
367,611
367,611
118,439
486,050
421,820
El Limón and other projects, Mexico
—
254,217
254,217
1,995
256,212
256,212
Wharf mine
4,153
—
4,153
—
4,153
6,185
Éléonore gold project
—
705,113
705,113
—
705,113
—
Porcupine(iii)
6,449
25,782
32,231
97,972
130,203
—
Musselwhite(iii)
75,011
47,569
122,580
72,133
194,713
—
La
Coipa(iii)
55,709
136,760
192,469
61,690
254,159
—
Pueblo
Viejo(i,iii)
—
188,933
188,933
—
188,933
—
Canadian exploration
properties(iii)
—
161,290
161,290
—
161,290
—
Corporate and other
958
—
958
2,062
3,020
1,963
$
1,157,225
$
2,976,072
$
4,133,294
$
1,026,325
$
5,159,619
$
2,980,762
(i)
Equity investment.
(ii)
Included in the carrying value of Luismin mines is the value of
mining properties attributable to the Silver Wheaton silver
contract of the following amounts:
Mining properties
Plant and
June 30
December 31
Depletable
Non-depletable
Total
equipment
2006
2005
Silver interests (note 9)
$
56,534
$
158,787
$
215,321
—
$
215,321
$
200,021
(iii)
The net book values have been allocated on a preliminary basis
according to the fair value of the Placer Dome mining assets
acquired, which may result in a change to the amount assigned to
goodwill and a change to the value attributable to tangible
assets upon finalization of the purchase price.
The goodwill allocated to the Company’s reporting units and
included in the respective operating segment assets is shown
below:
On March 23, 2006, Silver Wheaton entered into an agreement
to purchase 4.75 million ounces of silver per year for a
period of 20 years, based on the production from Glencore
International AG’s (“Glencore”) Yauliyacu mining
operations in Peru, for an upfront payment of $285 million,
comprised of $245 million in cash and a $40 million
promissory note (note 7). In addition, a cash
payment of $3.90 per ounce of silver delivered under the
contract is due (subject to an inflationary adjustment
commencing in 2009).
(b)
Silver Wheaton has an agreement to purchase all of the silver
produced by Lundin Mining Corporation’s Zinkgruvan mine in
Sweden for a per ounce cash payment of the lesser of $3.90 and
the prevailing market price, subject to adjustment. The carrying
value of the silver contract at June 30, 2006 is
$72,991,000 which is being amortized to operations on a
unit-of-sale basis.
7.
BANK CREDIT FACILITIES AND PROMISSORY NOTES
(a)
In 2005, Goldcorp entered into a $500 million revolving
credit facility with a syndicate of five lenders. The facility
is unsecured and available to finance acquisitions and for
general corporate purposes. Amounts drawn incur interest at
LIBOR plus 0.625% to 1.125% per annum dependent upon the
Company’s leverage ratio, increasing by an additional
0.125% per annum if the total amount drawn under this
facility exceeds
$250 million. Undrawn amounts are subject to a 0.15% to
0.25% per annum commitment fee dependent on the Company’s
leverage ratio. All amounts drawn are required to be refinanced
or repaid by July 29, 2010. As at June 30, 2006, this
facility was fully drawn to fund the acquisition of certain
Placer Dome assets (note 4).
(b)
On May 12, 2006, the Company
entered into two credit facilities comprising of a
$550 million bridge facility and a $350 million
revolving credit facility. Both facilities are unsecured, and
amounts drawn down will incur interest at LIBOR plus 0.625% to
1.125% per annum dependent upon the Company’s leverage
ratio, increasing by an additional 0.125% per annum if the total
amount drawn under either facility exceeds 50% of the facility
amount. Undrawn amounts will be subject to a 0.15% to 0.25% per
annum commitment fee dependent on the Company’s leverage
ratio. Proceeds raised from the early exercise of the warrants
(note 10(a)) are required to repay the
$550 million bridge facility and repayment may not be
reborrowed. Amounts drawn on the $350 million facility will
be required to be refinanced or repaid by May 11, 2008. As
at June 30, 2006, $250 million of debt is outstanding
on the $350 million credit facility. Debt of
$100 million is outstanding on the bridge facility which is
required to be repaid by May 9, 2007.
(c)
The Company has an Aus$5,000,000
($3,711,000), unsecured, revolving working capital facility for
its Peak mine operations of which $nil was drawn down at
June 30, 2006. The loan bears interest related to the
Australian Treasury Bill rate plus 1.5% per annum.
(d)
In March 2006, Silver Wheaton
entered into a credit agreement comprising a $100 million
non-revolving term loan (the “Term Loan”) and a
$25 million revolving loan (the “Revolving
Loan”). The Revolving Loan is for a period of five years
and the Term Loan is to be repaid in equal installments over a
period of four years, however, prepayments are allowed at any
time. The interest rate on each of these loans is based on LIBOR
plus a spread determined by Silver Wheaton’s leverage
ratio. Both the Term Loan and the Revolving Loan are secured
against Silver Wheaton’s assets including the Luismin,
Zinkgruvan and Yauliyacu silver purchase contracts. The facility
was fully repaid as at June 30, 2006 from the proceeds of a
C$200 million public offering completed by Silver Wheaton
on April 20, 2006(note 9).
(e)
On March 23, 2006, as
partial consideration for entering into the Yauliyacu silver
purchase contract(note 6), Silver Wheaton issued a
$40 million promissory note to Glencore, bearing interest
at 3% per annum and due on July 21, 2006. The promissory
note was repaid from the proceeds of the public offering
completed by Silver Wheaton on April 20, 2006(note 9).
8.
DERIVATIVE INSTRUMENTS
Commencing in April 2006, the Company uses copper forward
contracts to mitigate the risk of copper price changes on copper
sales at the Alumbrera Mine. These contracts do not meet the
definition of an effective hedge and consequently changes in the
fair values of these contracts are recorded in earnings.
The Company entered into 66 million pounds of copper
forward contracts on its 2007 production at a blended rate of
$2.91 per pound and also entered into 30 million pounds of
copper forward contracts on its 2008 production at a blended
rate of $2.55 per pound. All contracts are monthly swaps, cash
settled, based on the London Metal Exchange Cash Settlement
price for the month. The fair value of these contracts resulted
in a $6,539,000 current liability and a $5,241,000 long-term
liability as at June 30, 2006. The loss in fair value of
these contracts in the amount of $11,780,000 has been recognized
in earnings during the period.
9.
NON-CONTROLLING INTERESTS
As a result of the Wheaton acquisition on February 14,2005, Goldcorp acquired Wheaton’s 65% ownership of its
subsidiary, Silver Wheaton. This interest decreased to 59% in
December 2005 following the issuance of additional shares by
Silver Wheaton to non-controlling interests. On March 30, 2006,
Goldcorp and Silver Wheaton amended the silver purchase
contract, increasing the minimum number of ounces of silver to
be delivered over the 25 year period by 100 million ounces,
to 220 million ounces, and waiving any capital expenditure
contributions previously required to be paid by Silver Wheaton.
In consideration for these amendments, Silver Wheaton issued to
Goldcorp 18 million common shares, valued at the
February 13, 2006 closing price of $6.42 per share, and a
$20 million non-interest bearing promissory note due on
March 30, 2007. As a result, at March 30, 2006,
Goldcorp owned 62% of Silver Wheaton’s common shares. This
transaction resulted in an increase to mining interests of
$46,613,000, an increase to future income tax liabilities of
$14,290,000, and an increase in non-controlling interests of
$32,323,000.
On April 20, 2006, Silver Wheaton closed a
C$200 million public offering of 16.7 million common
shares at a price of C$12.00 per share. This transaction
resulted in a decrease in Goldcorp’s ownership in Silver
Wheaton from 62% to 57%. This dilution of the Company’s
interest gave rise to an increase in non-controlling interest of
$93,305,000 and a dilution gain of $61,095,000, which has been
recognized in earnings for the current quarter.
The detail of this non-controlling interest in Silver Wheaton is
as follows:
At June 30, 2006, the Company had 418,033,000 common shares
outstanding (December 31, 2005 — 339,642,000).
Refer to the Consolidated Statements of Shareholders’
Equity for movement in capital stock.
(a)
Share Purchase Warrants
On March 21, 2006, the Company proposed the issuance of new
common share purchase warrants (“New Warrants”) in
exchange for the early exercise of the five existing series of
warrants (“Existing Warrants”). On June 12, 2006,
over 92% of Existing Warrant holders had exercised their
warrants during the early exercise period giving rise to net
proceeds of $454.9 million which were subsequently used to
pay down credit facilities drawn down to fund the previously
completed acquisition of certain assets of Placer Dome from
Barrick (note 7). Pursuant to this transaction, the
remaining Existing Warrant holders had their warrants
automatically exchanged, without any further action on the part
of the warrant holder (including payment of any consideration),
for (i) a fraction of a common share equivalent in value to
the intrinsic (in-the-money) value of such Existing Warrant
calculated with reference to the price of Goldcorp common shares
for the five trading days immediately preceding the expiry of
the early exercise period, and (ii) one half of the
fraction of a New Warrant issued to holders of Existing Warrants
who exercised during the early exercise period.
Each of the 8,441,000 New Warrants issued by the Company
entitles the holder to purchase at any time one common share of
Goldcorp at an exercise price of C$45.75 until June 9,2011. The New Warrants trade on the Toronto Stock Exchange and
the New York Stock Exchange.
All Existing Warrants were de-listed from the Toronto and New
York stock exchanges.
As at June 30, 2006, as a result of the Virginia
acquisition (note 3), there also exist 695,000
Virginia warrants convertible into 277,000 Goldcorp shares at an
average exercise price of $4.81, with expiration dates of
September 11, 2006.
(b)
Stock Options
The Company has a 2005 Stock Option Plan which allows for up to
12.5 million stock options, with a maximum exercise period
of ten years, to be granted to employees, officers and
consultants. Of the 11,967,000 outstanding stock options at
June 30, 2006, 8,113,000 relate to options granted under
the 2005 Stock Option Plan.
The Company granted 2,661,000 stock options during the three
months ended June 30, 2006, which vest over a period of
three years, are exercisable at prices ranging from C$30.95 to
C$33.60 per option, expire in 2016, and have a total fair value
of $19,868,000. During the first quarter of 2006, the Company
granted 595,000 stock options which vest over a period of three
years, are exercisable at prices ranging from C$28.84 to C$30.55
per option, expire in 2016, and have a total fair value of
$3,969,000.
The fair value of the options on the date of grant is determined
by using an option pricing model with the following weighted
average assumptions: risk-free interest rate of 4.5%, dividend
yield of <1%, volatility factor of 30%, and an expected life
of the options of four years. The fair value of the options is
expensed over the vesting period of the options.
Compensation expense of $4,231,000 has been recognized during
the quarter (six months ended June 30, 2006 —
$7,443,000). In addition stock option expense of $963,000 was
recognized by Silver Wheaton during the quarter (six months
ended June 30, 2006 — $1,074,000).
A summary of changes in outstanding stock options is as follows:
The following table summarizes information about the options
outstanding at June 30, 2006:
Options Outstanding
Options Exercisable
Weighted
Options
Weighted
Average
Outstanding
Average
Options
Weighted
Remaining
and
Weighted
Remaining
Outstanding
Average
Contractual
Exercisable
Average
Contractual
Exercise Prices (C$)
(000’s)
Exercise Price
Life (years)
(000’s)
Exercise Price
Life (years)
$2.05 – $4.98
366
C$
3.64
2.7
366
C$
3.64
2.7
$5.60 – $7.68
517
6.49
2.0
517
6.49
2.0
$11.40 – $14.80
1,781
12.95
3.1
1,781
12.95
3.1
$15.00 – $18.50
1,147
17.09
7.4
1,147
17.09
7.4
$19.06 – $19.46
4,806
19.23
9.0
2,027
19.23
9.0
$23.39 – $23.80
94
23.44
9.1
19
23.44
9.1
$28.84 – $30.95
3,006
30.71
9.9
—
30.71
9.9
$33.60
250
33.60
9.9
—
33.60
9.9
11,967
C$
20.28
7.7
5,857
C$
14.81
5.9
(c)
Restricted Share Units
The Company has a Restricted Share Unit Plan which allows for up
to 500,000 restricted share units (“RSU’s”) to be
granted to employees, directors and consultants.
A total of 61,500 RSU’s have been issued to an employee and
non-executive directors of the Company during the six months
ended June 30, 2006 (six months ended June 30,2005 — 31,500). These instruments vest over a period
of up to three years from the grant date.
The Company will record compensation expense totaling $2,151,000
over the vesting periods. Compensation expense of $606,000 has
been recognized during the second quarter (six months ended
June 30, 2006 — $682,000).
(d)
Diluted Earnings per Share
The following table sets forth the computation of diluted
earnings per share:
Three Months
Ended
Six Months Ended
June 30
June 30
June 30
June 30
2006
2005
2006
2005
Earnings available to common shareholders
$
190,409
$
98,030
$
282,810
$
127,519
Basic weighted-average number of shares outstanding
381,274
330,114
361,229
290,335
Effect of dilutive securities:
Stock options
5,013
3,117
4,492
3,106
Warrants
605
22,458
598
22,408
Restricted share units
59
32
59
32
Diluted weighted-average number of shares outstanding
386,951
355,721
366,377
315,881
Earnings per share
Basic
$
0.50
$
0.30
$
0.78
$
0.44
Diluted
$
0.49
$
0.28
$
0.77
$
0.40
In the six months ended June 30, 2006, 8,441,000 share
purchase warrants were excluded from the computation of diluted
earnings per share because the exercise prices exceeded the
average fair market value of the common shares for the period
(six months ended June 30, 2005 — 6,762,000 stock
options).
Commitments exist for capital expenditures of approximately
$148 million.
14.
SUBSEQUENT EVENTS
(a)
On July 24, 2006, Goldcorp completed the previously
announced sale of Mt. Milligan and certain other Canadian
exploration interests to Terrane Metals Corp.
(“Terrane”, formerly Atlas Cromwell Ltd.) for
240 million convertible preferred shares of Terrane at a
deemed price of C$0.50 per share. Goldcorp acquired their
exploration interests from Barrick in May 2006. The preferred
shares are convertible into common shares of Terrane at the
option of Goldcorp at any time without any further
consideration. On an as-converted basis, Goldcorp would own an
approximate 81% equity interest in Terrane’s issued and
outstanding shares and an approximate 75% on a fully diluted
basis. Goldcorp will be required to consolidate Terrane’s
results of operations from the date of sale.
(b)
On August 31, 2006, Goldcorp and Glamis Gold Ltd.
(“Glamis”) announced that the respective boards of
directors had agreed to combine Goldcorp and Glamis. A special
meeting of shareholders of Glamis will be held to seek
shareholder approval of the proposed transaction on
October 26, 2006. Each Glamis common share will be
exchanged for 1.69 Goldcorp common shares and C$0.0001 in cash.
All outstanding Glamis stock appreciation rights
(“SARs”) will be exercised by the holders into Glamis
shares such that holders of the SARs will receive Goldcorp
shares at the same exchange ratio. As a result of the proposed
transaction, the combined company should be held 60% by existing
Goldcorp shareholders and 40% by existing Glamis shareholders.
Each Glamis stock option which gives the holder the right to
acquire shares in the common stock of Glamis when presented for
execution will be exchanged for a stock option which will give
the holder the right to acquire shares in the common stock of
Goldcorp on the same basis as the exchange of Glamis common
shares for Goldcorp common shares.
This business combination will be accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Glamis at the acquiree. The results of operations of the
acquired assets will be included in the consolidated financial
statements of Goldcorp from the date of acquisition. After
consummation of the proposed acquisition of Glamis, Goldcorp
will complete an exercise to value the identifiable assets and
liabilities acquired, including any goodwill that may arise in
the acquisition. The preliminary allocation of the purchase
price of Glamis is summarized in the following table and is
subject to adjustment:
($million)
Purchase price
281.9 million common shares of Goldcorp and cash
$
8,092.5
0.5 million common shares of Goldcorp on exercise of Glamis
stock appreciation rights
15.0
Stock options of Goldcorp exchanged for those of Glamis
If you have any questions about the information contained in
this document or require assistance in completing your proxy
form, please contact Glamis’ proxy solicitation agent, at:
