Toronto-based gold miner Kinross Gold Corp. (TSX:K) is acquiring Vancouver's Red Back Mining Inc. (TSX:RBI) for US$7.1 billion.
It is the latest in a string of recent Vancouver-based acquisitions made by Kinross.
It acquired, via private placement, a $600 million stake in Red Back on May 4 (See “Kinross takes $600 million stake in Red Back Mining ” – BIV Daily, May 5) and it acquired Vancouver’s Underworld Resources Inc. (TSX-V:UW) for $139.2 million in July.
Also in July, B2Gold Corp. (TSX:BTO), sold its right to acquire an interest in two prospective Russian precious metals deposits to Kinross for US$33 million in cash up front, plus contingent payments of US$15 million for each million ounces of gold Kinross finds in the licence areas. (See “B2Gold sells Russian mining licences to Kinross ” – BIV Daily, July 23)
In its latest deal, Kinross is offering to buy each Red Back common share for $30.50, a premium of approximately 21% based on Red Back shares’ volume-weighted average price in the last 20 trading days.
Red Back shareholders are to receive 1.778 Kinross common shares, plus 0.110 of a Kinross common share purchase warrant for each Red Back common share held. Kinross expects to issue 425 million Kinross common shares and 26 million Kinross common share purchase warrants.
Following the deal’s completion, current Kinross shareholders will hold roughly 63% of the combined company, while current Red Back shareholders will hold the remainder.
The warrants are expected to be listed on the TSX and be exercisable for a four-year term at an exercise price of US$21.30, a 30% premium to the July 30 closing price of US$16.39 for Kinross common shares.
Kinross and Red Back said in a joint release that, based on analyst consensus production estimates, forecast pro forma gold production for the combined company would be approximately 3.9 million ounces in 2015.
The companies said the friendly merger gives Kinross a strong position in West Africa, where Red Back has two established mines. The merged company will have 10 mines and four development projects operating in eight countries.
Kinross president and CEO Tye Burt said, “The significant upside in reserves that we believe exists at Red Back, and Kinross' ability to accelerate that potential, makes this an outstanding prospect for shareholders of both companies.”
The deal is expected to close in mid-September, pending shareholder approval.
Red Back’s share price rose 5% to $27.45 on Tuesday, the first trading day following the deal’s announcement.
Red Back’s share price range during the past week: between $24.76 and $27.45; 52-week high: $28.94; 52-week low: $9.65.