Aurelian shareholders receive 63% premium; Kinross to acquire major growth asset
Kinross committed to continue responsible development in Ecuador
Toronto, Ontario, July 24, 2008 - Kinross Gold
Corporation (TSX:K; NYSE:KGC) and Aurelian Resources Inc. (TSX:ARU)
announced today that their respective Boards of Directors have
approved a business combination by way of a friendly offer by
Kinross to acquire 100% of the outstanding common shares of
Aurelian, and that they have signed a Support Agreement pursuant to
which Aurelian's Board of Directors has unanimously agreed to
support the Kinross offer. The total value of the offer is
approximately $1.2 billion.
Highlights of the Transaction
• For each Aurelian common share, Kinross will offer 0.317
of a Kinross common share, plus 0.1429 of a warrant, with each
warrant entitling the holder to acquire one Kinross common share.
The Kinross warrants have an exercise price of $32.00 per Kinross
common share and will expire five years after the date on which
Kinross first pays for Aurelian common shares tendered to the
offer. Kinross expects to issue approximately 47 million common
shares pursuant to the transaction (assuming exercise of all
in-the-money Aurelian options and excluding any shares issuable
upon exercise of the Kinross warrants), representing approximately
8% of Kinross' current outstanding common shares.
• Based on the preceding 20-day volume-weighted average price
of Kinross' common shares on the TSX (and assuming a value of $0.92
per fractional warrant), the value of the offer is $8.20 per
Aurelian common share, which represents a premium of approximately
63% over the preceding 20-day volume-weighted average price of
Aurelian common shares.
• The Board of Directors of Aurelian, after receiving the
recommendation of a special committee of independent directors
created by Aurelian to oversee the transaction process, has
unanimously determined that the Kinross offer is in the best
interests of Aurelian's shareholders, and unanimously recommends
that the Aurelian shareholders tender their common shares to the
offer. The directors and senior officers of Aurelian have entered
into lock-up agreements with Kinross and have agreed to tender all
of their Aurelian common shares to the offer.
• BMO Capital Markets and Dundee Securities Corporation,
Aurelian's financial advisors, have provided oral opinions to the
Aurelian Board of Directors that the consideration offered is fair,
from a financial point of view, to Aurelian's shareholders.
Compelling Combination
The combination will add a major gold deposit to Kinross'
development portfolio, while providing Aurelian shareholders with a
substantial premium on their shares and the additional opportunity
to participate in Kinross' outstanding prospects for near- and
long-term growth. The transaction is expected to be accretive to
Kinross on a net asset value basis.
"Kinross is committed to responsible mining and has an excellent
track record of working cooperatively with governments and
communities wherever we operate. This particular combination
creates value for both Aurelian and Kinross shareholders, and
provides a strong partner for local employees and communities in
Ecuador to develop this asset in a responsible manner, which will
generate significant economic benefits for the country," said
Kinross President and CEO Tye W. Burt.
"For Kinross, the combination demonstrates our continued
commitment to long-term, disciplined growth through maintaining a
pipeline of high-quality development projects. This deposit will
add significantly to our mineral resource base. We intend to pursue
a focused strategy to further define the deposit, and believe that
this combination can make an important contribution to our future,"
he added.
"The transaction also plays to Kinross' proven strengths in
successfully bringing new development projects into production,
which we are demonstrating this year with our projects at Kupol,
Paracatu and Buckhorn," he said. Kinross expects that the three
major growth projects scheduled to come onstream this year will
increase the company's production by approximately 60% above 2007
levels by 2009.
Patrick F.N. Anderson, Aurelian President and CEO said, "The
combination of Aurelian and Kinross illustrates our commitment to
responsible development at Fruta del Norte as well as to the best
interests of our investors. In the short-term, Aurelian
shareholders will be receiving an attractive premium above current
market price. In the long-term, our shareholders will also have the
opportunity to participate in Kinross' upside as our Condor Project
contributes to Kinross' industry-leading growth plans. We have been
impressed by the Kinross team's capabilities and track record in
bringing projects into production, particularly their strength in
government and community relations. Joining a larger pipeline of
development and production projects around the world also benefits
Aurelian shareholders through asset diversification and risk
mitigation."
In October 2007, Aurelian released an inferred mineral resource
estimate for its Fruta del Norte (FDN) deposit of 58.9 million
tonnes grading 7.23 g/t of gold, resulting in 13.7 million oz. of
contained gold and 22.4 million oz. of contained silver (grade:
11.8 g/t).(1) The FDN deposit is the most significant
discovery within the Condor Project, part of more than 95,000
hectares of exploration concessions that Aurelian holds in
Ecuador.
(1) For further information, please refer to Aurelian's news
release dated October 4, 2007 and the Report entitled "A Mineral
Resource Estimate for the Fruta del Norte Deposit, Cordillera del
Condor Project, Zamora-Chinchipe Province, Ecuador" prepared by
Micon International Limited and dated November 15, 2007, both of
which can be found on Aurelian's website at
www.aurelian.ca
Kinross and Aurelian are of the view that recent initiatives by
the government of Ecuador, including public statements by President
Correa, and the Ministry of Mines and Petroleum, indicate that
Ecuador is becoming increasingly open to responsible mining.
"The government of Ecuador has indicated that it is interested
in attracting responsible mining companies prepared to invest in
creating new economic opportunities in the country. We have been
working in Ecuador for two years, doing our research and building
relationships. We believe that the government will welcome the
positive approach we plan to take to advance the development of the
FDN project in a way that benefits the people of Ecuador and
respects local social and economic priorities," said Mr. Burt.
"Kinross has a strong history in South America and elsewhere as
a socially and environmentally responsible company, and we have
demonstrated our commitment to our employees, to strong community
partnerships and to building economic capacity in the jurisdictions
where we operate around the world," he added.
Other Terms of the Support Agreement
The Support Agreement provides that the Board of Directors of
Aurelian may under certain circumstances terminate the agreement in
favour of an unsolicited superior proposal, subject to payment of a
termination payment of $42 million and subject to a right by
Kinross to match the superior proposal in question.
Full details of the Kinross offer will be included in the
takeover bid circular that is expected to be mailed to Aurelian
shareholders shortly. Kinross' obligation to acquire shares
pursuant to the offer will be subject to certain customary
conditions, including there having been validly deposited and not
withdrawn at the expiry of the offer that number of Aurelian shares
which, together with any Aurelian shares directly or indirectly
owned by Kinross, constitutes at least
66 2/3% of the outstanding common shares of Aurelian on a
fully-diluted basis at the expiry time.
Private Placement
Kinross has also agreed to purchase 15 million common shares of
Aurelian on a private placement basis, at a price of $4.75 per
share for total subscription proceeds of approximately $71 million,
to assist with the development of FDN and for general corporate
purposes. The private placement is not conditional on completion of
the offer. The private placement as well as the issuance of the
Kinross common shares and warrants pursuant to the offer are
subject to TSX approval.
Advisors and Counsel
Kinross' financial advisors are Scotia Capital Inc. (lead),
Rothschild Inc. and CIBC World Markets Inc. and its legal counsel
are Osler, Hoskin & Harcourt LLP and Perez, Bustamante &
Ponce with regard to Ecuadorian law matters. Aurelian's financial
advisors are BMO Capital Markets and Dundee Securities Corporation
and its legal counsel is Cassels Brock & Blackwell LLP. A
special committee of Aurelian's Board of Directors is receiving
financial advice from BMO Capital Markets and Dundee Securities
Corporation and its legal counsel is Stikeman Elliott LLP.
All dollar amounts in this news release are expressed in
Canadian dollars, unless otherwise noted.
Cautionary Statement on Forward-Looking Information
All statements, other than statements of historical fact, contained in this news release, including any information as to the future financial or operating performance of Kinross, constitute “forward looking information” or “forward-looking statements” within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and the “safe harbour” provisions under the United States Private Securities Litigation Reform Act of 1995 and are based on the expectations, estimates and projections of management as of the date of this news release unless otherwise stated.
Forward looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kinross as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates and assumptions of Kinross contained in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in Kinross’ take-over bid circular prepared and to be filed in accordance with applicable securities laws in Canada and the United States as well as: (1) that Kinross will complete the acquisition of Aurelian in accordance with the terms and conditions of the Support Agreement; (2) the accuracy of Kinross and Aurelian’s mineral reserve and mineral resource estimates; (3) the viability of the FDN project area and permitting the development and expansion of FDN on a basis consistent with Kinross and Aurelian’s current expectations; (4) the trading price of Kinross and Aurelian’s common shares; (5) there being no significant political developments, whether generally or in respect of the mining industry specifically, in Ecuador not consistent with Kinross and Aurelian’s current expectations; (6) there being no significant disruptions affecting Kinross’ operations, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; (7) permitting Kinross to undertake certain measures regarding FDN, and in particular with respect to certain employment initiatives; (8) that the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian ruble and the U.S. dollar will be approximately consistent with current levels or as set out in this news release; (9) certain price assumptions for gold and silver; (10) prices for natural gas, fuel oil, electricity and other key supplies remaining consistent with current levels; (11) production forecasts meet expectations; (12) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; (13) permitting, development and expansion at Kinross’ existing properties, including the preparation of any feasibility studies, on a basis consistent with our current expectations.
The forward-looking information set forth in this news release is subject to various risks and other factors which could cause actual results to differ materially from those expressed or implied in the forward-looking information, including the risk that the acquisition of Aurelian will not be completed for any reason. Certain of these risks, factors, estimates and assumptions are described in more detail in Kinross’ most recently filed Annual Information Form in the section entitled “Risk Factors” and the “Risk Analysis” section of our most recently filed Management’s Discussion and Analysis, to which readers are referred and which are incorporated by reference in this news release. In addition, all forward looking statements made in this news release are qualified by the full “Cautionary Statement” in such Annual Information Form and the “Cautionary Statement on Forward Looking Information” in such Management’s Discussion and Analysis. These risks, factors, estimates and assumptions are not exhaustive. Kinross disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward looking statements, except to the extent required by applicable law.
Other Information
Where we say “we”, “us”, “our”, the “Company”, or “Kinross” in this news release, we mean Kinross and/or its subsidiaries, as may be applicable.
This news release does not constitute an offer to buy or an invitation to sell, or the solicitation of an offer to buy or invitation to sell, any of the securities of Kinross or Aurelian. Such an offer may only be made pursuant to an offer and take-over bid circular filed with the securities regulatory authorities in Canada. Kinross plans to file an offer and take-over bid circular with Canadian provincial securities regulators. Kinross also intends to file with the U.S. Securities and Exchange Commission a Registration Statement on Form F-8 which will include the offer and take-over bid circular. Investors and security holders are urged to read the offer and take-over bid circular regarding the proposed transaction referred to in these documents when they become available, because they will contain important information. Investors may obtain a free copy of the offer and take-over bid circular when they become available and other documents filed by Kinross with the Canadian provincial securities regulators on SEDAR at www.sedar.com, and with the SEC at the SEC’s website at www.sec.gov. The offer and take-over bid circular and these other documents may also be obtained for free, once they have been mailed, on Kinross’ website.