Gold miners engage in risky asset swap

Two of the largest gold producers in the world, Goldcorp and Kinross, have announces an asset swap aiming to consolidate individual holdings of each in Canada and Chile.

The two Canadian companies announced a binding agreement between them, allowing Goldcorp to take possession of Kinross' 49 per cent share in the Porcupine gold mine, as well as a 39 per cent share in the Musselwhite gold mine.

Meanwhile, Kinross will gain Goldcorp's stake in the Chilean La Coipa silver-gold mine as well as $200 million compensation in cash to offset the shares it is offering Goldcorp in the two Ontario mines.

It is reported that a similarity in business models has facilitated the asset swap, with both firms hoping to gain in efficiency, but Reuters cited USB analyst Tom Lesiak's observation of potential negatives to come out of the deal.

Mr Lesiak is reported to judge the streamlining to translate into less management time per ounce of gold produced, with particular production losses for Kinross.

According to the USB expert: "Kinross will produce approximately 110,000 to 120,000 ounces less gold per year and reserves and resources have declined 1.2 million ounces and 2.1 million ounces respectively with the deal."