Goldcorp’s Cerro Negro mine in Argentina. Source: Goldcorp Inc.
Goldcorp Inc. [G-TSX; GG-NYSE] has ceased mining at its Cerro Negro mine in Argentina as a result of an illegal work stoppage by the AOMA mining union, the company said in a press release, Tuesday March 12.
“All mining ceased when the work stoppage began late on March 9, 2019, and processing activities have now been discontinued with the exhaustion of surface stockpiles,” the company said.
Situated on a remote mine site on the low Patagonian plains in southern Argentina, Cerro Negro was expected to produce 490,000 ounces of gold in 2018 at an all-in sustaining cost of US$600 an ounce.
In 2017, Cerro Negro accounted for 14% of Goldcorp’s total production and 18% of revenue.
News of the illegal work stoppage comes as Goldcorp is being swept up on a wave of gold mining industry consolidation. On March 11, 2019, Barrick Gold Corp. [ABX-TSX, NYSE] said it had abandoned its hostile bid for Newmont Mining Corp. [NEM-NYSE] and will instead create a joint venture that will combine the two companies’ Nevada gold mining operations.
The agreement allows Newmont to complete a friendly merger with Goldcorp that was announced on January 14, 2019.
On Monday evening, Newmont filed its definitive proxy statement and scheduled a special meeting of stockholders to vote on the pending merger with Goldcorp on April 11, 2019 in Denver, Colorado.
However, in an investment newsletter, Scotiabank expressed the view that the Newmont/Goldcorp merger is still not a sure thing even though Barrick has dropped its hostile bid for Newmont.
“In our view, Barrick dropping its hostile bid improves the chances of the Newmont/Goldcorp merger moving forward, however obstacles still remain, most notably, obtaining Newmont shareholder approval,” Scotiabank said.
If the deal does proceed, Goldcorp Chairman Ian Telfer will be entitled to receive a lump sum payment retirement allowance from Goldcorp equal to approximately US$12 million. That marks an increase from his current entitlement of approximately US$4.5 million.
The increased amount of the retiring allowance was recommended by the Human Resources and Compensation Committee, reviewed and considered by the Goldcorp special committee, and approved by the Goldcorp board on the basis of Telfer’s role as founder and strategic leader of Goldcorp subsequent to the acquisition of Glamis Gold Ltd. in November, 2006.
Meanwhile, Goldcorp said mining and processing could be safely restarted immediately following the return of the workforce at Cerro Negro.
“The company is actively working along with the Union and relevant Government Authorities to work towards a resolution and restart the operation,” Goldcorp said.
On Tuesday, Goldcorp shares rose 2.26% or 32 cents to $14.89 on volume of 2.7 million. The shares trade in a 52-week range of $18.78 and $11.00.