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Monday, June 7, 2010

Red Back Mining (TSE:RBI) Drawing Acquisition Interest

The recent investment by Kinross Gold (NYSE: KGC) in Red Back Mining (OTC:RBIFF.PK) (TSE:RBI) has drawn the attention of industry watchers as to the possibility of Red Back being an acquisition or merger target.

Red Back produced around 340,000 ounces of gold in 2009, and estimates it'll produce about 485,000-525,000 ounces in 2010. Those production levels going forward is what makes the company attractive to potential suitors, which some analysts believe could be producing over 1 million ounces of gold by 2015.

The valuation of the company has skyrocketed, and few companies have an interest or ability to acquire the company at this time, and so may wait it out for awhile.

If someone is interested though, that could be a mistake, as it's possible it could continue rising in value going forward, and that would make it out of the price range of all but the very highest level gold miners like Barrick Gold (NYSE:ABX), Newmont (NYSE:NEM) or Goldcorp (NYSE:GG).

There are a few others who may be interested, but Red Back already has a higher valuation than they do at this time, so we'll have to see how it all plays out.

Kinross recently paid C$600 million for its 9.4 percent stake in Red Back, and they would probably do well to just get a bigger piece of them than to take it over altogether. But they have time, and if the share price of Red Back plummets, it would definitely be a buying opportunity for Kinross or others wanting a piece of them, or all of them for that matter.

Red Back's major operations are the Chirano Mine in Ghana and the Tasiast Mine in Mauritania.

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