In a deal worth US$1.7 billion, Kinross Gold, a Toronto gold mining company, plans to acquire all remaining common shares in Red Back Mining. The all-share deal between the two companies will result in the fourth largest gold mining company in terms of market capitalization. Shareholders of the Vancouver-based Red Back will receive common shares and common share purchase warrants in Kinross.
Prior to this deal, Kinross held 9.3 percent of the common shares of Red Back, purchased in May for the price of C$600 million. When the merger is complete, 63 percent of combined company shares will be owned by Kinross shareholders and the remaining 37 percent will be owned by Red Back shareholders. The deal will first need to be approved by 66 2/3 percent of Red Back shareholders during a special meeting planned for mid-September.
There is not anticipated to be any problem with the merger because it is supported by the boards of directors for both Kinross and Red Back. Both the Chairman and CEO of Red Back plan to join the board of directors at Kinross. They will help drive the direction of the combined company, which forecasts 3.9 million ounces of pro forma gold production by the year 2015.
The merger will result in an increase in the probable and proven reserves of Kinross, as well as increasing the indicated mineral resources of the company. It will also give Kinross two well-established West African gold mines. The Ghana’s Chirano mine and the Tasiast mine located in Mauritania are currently operated by Red Back. The company is also engaged in exploration projects in both countries.
After the merger, the combined company will have four development projects and ten mines spanning eight countries. Kinross recently sold Harry Winston its interest in the Diavik Diamond Mines partnership the two companies had. It also sold its shares in Harry Winston Diamond Corp to several financial institutions. Analysts believe that US$400 million was generated by these transactions and used to fund the merger with Red Back.
Source: Kosich, Dorothy. Mineweb.com. Kinross Gold to acquire 100% of Red Back Mining for US$7.1bn.
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