UPDATE 2-Osisko strikes deal with Yamana to foil hostile Goldcorp bid

(Adds analyst comment, details on deal, share price move)

TORONTO, April 2 (Reuters) - Osisko Mining Corp said on Wednesday that Yamana Gold Inc would buy a 50 percent stake in its mining and exploration assets for C$930 million ($843 million), a deal that potentially thwarts a hostile bid from rival Goldcorp Inc.

The deal, which would give Latin America-focused Yamana its first major asset in Canada, gives the Toronto-based miner an equal partnership in all Osisko's mining and exploration assets.

The battle to acquire Osisko marks the first major takeover tussle in the Canadian gold space in over a year, as deals had dried up after several miners wrote down billions of dollars of assets bought at sky-high prices as the bullion price ran up in the last decade.

Both Yamana and Goldcorp are vying for Osisko because of its huge Canadian Malartic gold mine in the province of Quebec - a mine widely viewed within the industry as a good asset in a relatively stable mining jurisdiction.

Some analysts though were skeptical about Yamana effectively paying a premium without gaining a controlling interest in the asset itself.

"Our initial take is skeptical that this will provide net value per share to Yamana shareholders," said Cowen & Co analyst Adam Graf. "We see the valuation of Osisko as rich based on our models of the assets at the current forward curves for metal prices."

In a note to clients, Graf said he approved of the deal as it would help generate some tax savings for Yamana in Canada, but he doubts the savings will offset the negative impact of the purchase premium being paid by the miner.

Yamana shares, which initially rose in early trading after the transaction was announced, were down 1.1 percent at C$9.60 in midday trading on the Toronto Stock Exchange.


The complex deal structure calls for the exchange of each Osisko share for C$2.194 in cash, 0.2119 of a Yamana common share and a new common share of Osisko. Based on Tuesday's closing prices, that would value Osisko at C$7.60 per share.

Osisko shares were up 9 percent at C$7.49 in midday trading on the TSX, while those in Goldcorp rose 2.3 percent to C$27.70.

Vancouver-based Goldcorp launched a C$2.6 billion cash and stock bid for Osisko in January. Osisko rejected Goldcorp's unsolicited bid as too low.

Montreal-based Osisko said it would continue to operate its flagship Canadian Malartic mine and all other projects under the guidance of a joint committee. It will also maintain its head office in Montreal.

Osisko's board has unanimously approved the deal with Yamana, and the company said it would hold a special meeting next month for shareholders to vote on the transaction.

Osisko has also reached separate deals with the two large Canadian pension funds - Canada Pension Plan Investment Board (CPPIB) and Quebec pension fund Caisse de depot et placement du Quebec, conditional on the Yamana deal's closing.

CPPIB has agreed to increase its C$150 million credit facility to C$275 million, as part of the deal, while the Caisse has agreed to buy a gold stream from Canadian Malartic, under which it would pay a C$275 million deposit. The stream will see the Caisse buy 37,500 ounces of gold per year from Osisko for 42 percent of the spot gold price.

The two side deals would generate C$550 million of the C$1 billion in cash set to be distributed to Osisko's shareholders. Yamana itself is paying about C$442 million in cash along with 95.7 million common shares of its shares to fund the deal.

($1 = 1.1029 Canadian dollars)

(Additional reporting by Nicole Mordant; Editing by Bernadette Baum, Lisa Von Ahn and Bernard Orr)