TORONTO (miningweekly.com) – Golcorp will sell its Escobal silver project in Guatemala for $505-million to Tahoe Resources, a private company headed by former president and CEO Kevin McArthur.

Goldcorp will receive shares equal to 40% of Tahoe, which is planning an initial public offering in Canada, and the balance in cash of at least $230-million, depending on the results of the offering. The deal should close by June 8, the firm said.

Tahoe said separately that it has filed a preliminary prospectus for the IPO, and will use the proceeds to cover the cash portion of the Escobal acquisition, and for engineering studies and continuing exploration of the Escobal project.

The Escobal deposit was discovered by Goldcorp in 2007 and the company has since outlined an indicated resource of 130,1-million ounces, plus 187,5-million ounces in inferred resources. It also contains some gold, lead and zinc.

CEO Chuck Jeannes, who replaced McArthur as chief executive at the end of 2008, said previously that the company was considering a number of options for the project, including selling the asset, developing it itself or spinning the project out into a new primary silver producer.

“This transaction enables our shareholders to realise full value for a grass-roots Goldcorp discovery that has grown into a world-class silver deposit," Jeannes said on Monday.

"Goldcorp's continued focus on simplifying and strengthening our gold portfolio through the sale of non-core assets has allowed us to fund our peer-leading suite of growth projects without dilution to our shareholders. The sale of Escobal is the latest example of that strategy."

The sale has been approved by Goldcorp's board, but remains conditional on Tahoe completing its IPO. The larger company will have the right to appoint three directors to Tahoe's board, and to maintain its 40% holding as long as its stake in the smaller firm remains above 20%.

Goldcorp has mines in Canada, Argentina, the US, Mexico, Honduras and Guatemala, and said in January it expects output to rise about 50% over the next five years, to some 3,8-million ounces by 2014.

Tahoe is a "start-up company that intends to acquire, explore and develop precious metals resource properties in the Americas", according to a statement from the firm.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.