Tuesday, August 3, 2010

Kinross (NYSE:KGC) Acquires Rest of Red Back (TSE:RBI)

Kinross Gold Corporation (TSX:K)(NYSE:KGC) announced late Monday that they'll be acquiring the rest of the common shares they don't already own in Red Back Mining Inc. (TSX:RBI).

On a fully diluted basis, the deal is valued at $7.1 billion.

Shareholders in Red Back, per terms of the deal, will receive 1.778 Kinross common shares, plus 0.110 of a Kinross common share purchase warrant for each Red Back common share held.

After the deal is completely, shareholders in Kinross will hold about 63 percent of the newly-merged company, while Red Back shareholders will own close to 37 percent.

The combined gold production estimates for the new company by 2015 will be an estimated 3.9 million ounces, according to analysts' estimates. Kinross has stated they think those estimates could be far below the potential assets coming with Red Back.

In 2010, pro forma gold production is expected to reach 2.6 million to 2.7 million gold equivalent ounces.

After the deal the company will have a total of 10 mines and 4 development projects, with operations in 8 countries.

Proven and Probable mineral reserves in the merged company will surge to 53.2 million ounces, while Measured and Indicated mineral resources will increase to 19.5 million ounces.

Kinross CEO Tye Burt and Red Back CEO Richard Clark said this in a press release:

"This is a transformational opportunity," said Burt. "By combining Kinross' world-class mines, growth projects and proven ability in mine development with the potential of Red Back's assets, we are creating a gold growth powerhouse. 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."

"Kinross' record of successful project development and delivery together with the world class prospects of Tasiast is an exciting and unique combination," added Clark. "The growing underground production profile at Chirano and Red Back's prospective exploration portfolio fits neatly with the impressive asset base of Kinross. Red Back shareholders will benefit by participating in a large and well-diversified major gold producer with a core stable of high quality producing assets, significant expansion opportunities and an exciting exploration portfolio."

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