FAC12: Chapter 1 Article #2

http://www.canada.com/Goldcorp+buys+Canplats+million/2228918/story.html

Summary

On November 6, 2009, Goldcorp announced that they will be purchasing the venture company, Canplats Resources Corp. in an all-stock deal, worth $238 million. Once Canplats Resources Corp is obtained, Goldcorp will gain control of Canplats’ Camino Rogo project. The Camino Rojo site includes a deposit, which may contain around 3, 445 00 gold ounces and 6, 708, 000 silver ounces. The acquisition of the Camino Rojo project has been said to fit very well with one of Goldcorp’s strategic goals of enhancing opportunities in and around their core assets. As part of the agreement, Goldcorp will issue around 4.3 million shares on January 2010.

Connection

"Goldcorp buys Canplats for $238 million," is an article about the business activities of the company Goldcorp. To be more specific, the article is about investing and financing activities, which is a major topic in Chapter 1 of the Financial Accounting Textbook. Investing activities are activities that company execute to accomplish their goals with funds they acquire. The investing activity talked about in the article is the purchase of Canplats Resource Corp by Goldcorp. By investing in Canplats Resource Corp, Goldcorp will be able to achieve their strategic goals of enhancing opportunities in and around their core assets. This investment will probably bring in income in the future for Goldcorp. Besides investing, the article talks about another business activity that Goldcorp executed. That business activity is financing. Financing is an activity in which funds are obtained to buy major assets. Goldcorp does financing in the way of issuing shares. By issuing more shares of their newly acquired company, Goldcorp will be able to obtain funds in order to buy major assets the company needs.

Reflection

I think that Goldcorp’s decision on buying Canplats was a smart one. Even though it cost a huge sum of $238 million, I think Goldcorp will eventually be able to earn it back because I don’t think a company like Goldcorp would invest in another company, that they did not have any confidence in. Another reason why I believe that it was a good investment is because of the fact that purchasing Canplats fits one of Goldcorp’s strategic goals very well. Although it cost a lot to obtain Canplats, I'm sure Goldcorp will eventually profit from this invesment. Besides being a good invesment, Goldcorp will be able to use Canplats to do financing activities, like issueing more shares in the future. In general, I think that the transaction that occurred was good for everyone because Goldcorp was able to obtain a company they believe would help them with their goals and shareholders of Canplats Resources Corp. got shares in a newly-incorporated company. The only downside I see in this transaction is the fact that the shareholder of Canplats Resource Corp. will now have to do reserach on the financial position of the newly-incorporated company.