Red Back shareholders to receive 21% premium on transaction
Kinross to accelerate development program at Tasiast
Toronto, Canada, August 2, 2010 - Kinross Gold
Corporation (TSX: K, NYSE:KGC) and Red Back Mining Inc. (TSX:RBI)
today announced that their respective boards of directors have
unanimously approved a friendly merger through a plan of
arrangement, whereby Kinross will acquire all of the outstanding
common shares of Red Back that Kinross does not already own. The
total value of the proposed transaction is approximately US$7.1
billion, on a fully-diluted basis.
Highlights
- The combination will create a pure gold senior producer with an
exceptional growth profile, matching Kinross' strong base of
high-quality mines, growth projects and proven track record, with
Red Back's early-stage operating mines and outstanding exploration
and expansion potential.
- Red Back shareholders will receive 1.778 Kinross common shares,
plus 0.110 of a Kinross common share purchase warrant for each Red
Back common share held. Pursuant to the transaction, Kinross
expects to issue approximately 425 million Kinross common
shares and approximately 26 million Kinross common share purchase
warrants. Following completion of the transaction, the current
Kinross shareholders will hold approximately 63%(1) of the
combined company, while current shareholders of Red Back will hold
approximately 37%.
- The value of the offer is C$30.50 per Red Back common share,
representing a premium of approximately 21%, based on the preceding
20-day volume-weighted average price of Red Back common shares
traded on the TSX and the July 30, 2010 closing price of Kinross
common shares traded on the TSX. 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, representing an approximate 30% premium
to the July 30, 2010 closing price of US$16.39 for Kinross common
shares.
- Based on analyst consensus production estimates for Kinross and
Red Back, forecast pro forma gold production for the combined
company would be approximately 3.9 million ounces in 2015.
Kinross believes there is significant upside potential for Red
Back's assets beyond this estimate, based on its evaluations and
the potential for exploration and production expansion.
- The combination gives Kinross a strong position in West Africa,
one of the world's fastest-growing and most prospective gold
regions, as well as a management team experienced in the
region.
- Lukas Lundin, Chairman of the Red Back Board of Directors, and
Richard Clark, CEO of Red Back, are expected to join the Kinross
Board of Directors following closing of the transaction.
- Red Back shareholders will benefit from Kinross' strong operating
and development experience and from diversification through
exposure to Kinross' balanced portfolio of eight operating mines
and future growth projects.
- The transaction provides a capital gains tax-deferred roll-over
option for taxable Canadian holders of Red Back shares.
- The transaction has been unanimously approved by the board of
directors of both companies. Red Back directors, senior officers
and certain shareholders representing approximately 4.6% of the
outstanding Red Back shares have agreed, or are expected to agree,
to vote in favour of the proposed transaction. Combined with
Kinross' 9.3 interest, this represents a total of approximately 14%
of the outstanding Red Back shares in support of the proposed
transaction at the time of announcement.
The transaction gives Kinross two well-established mines that will
add immediate incremental production and growth potential. The
merged company will have 10 mines and 4 development projects,
operating in 8 countries. Based on Kinross' January 14, 2010
production forecast of 2.2 million attributable gold equivalent
ounces for 2010, and Red Back's July 21, 2010 production forecast
of 445,000-465,000 gold ounces for 2010, pro forma 2010 production
for the combined company is expected to be approximately 2.6 - 2.7
million gold equivalent ounces. Upon closing of the transaction,
Kinross' Proven and Probable mineral reserves will increase to 53.2
million ounces and Measured and Indicated mineral resources will
increase to 19.5 million ounces, based on the latest mineral
reserve and mineral resources statements of both
companies.(2)
"This is a transformational opportunity," said Kinross President
and CEO Tye 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," said Red Back President and CEO Richard
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."
"Our board of directors has unanimously recommended this friendly
combination to Red Back Shareholders. This is a fair offer with an
attractive premium above current market price, and Kinross is a
great partner," Mr. Clark added.
"We have been impressed not only by Red Back's assets but also by
the experience and skill of their management team," said Mr. Burt.
"They bring considerable value to this transaction, as experienced
operators with a great track record in the region."
Red Back's assets in Mauritania and Ghana give Kinross a strong
position in West Africa, one of the world's fastest-growing gold
regions, expanding its presence in mining-friendly
jurisdictions.
"Red Back has a strong record as a responsible operator," said Mr.
Burt. "As Kinross, we intend to build on that reputation by
bringing the same high standards for environmentally and socially
responsible mining to the region that we have established in our
operations around the world."
Summary of the transaction
On August 2, 2010, Kinross and Red Back entered into an arrangement
agreement setting out, among other things, the terms under which
the proposed business combination transaction will be undertaken.
Under the transaction, each common share of Red Back not already
owned by Kinross will be exchanged for 1.778 Kinross common shares
and 0.110 of a Kinross common share purchase warrant. The
Kinross common share purchase warrants may not be exercised by any
holder during the initial 40-day period following their date of
issuance, and thereafter may not be exercised by any holder who is
in the United States or who is a U.S. person. Pursuant to the
transaction, Kinross expects to issue approximately 425 million
common shares, on a fully-diluted basis, and approximately 26
million Kinross common share purchase warrants. Following the
completion of the transaction, the current Kinross shareholders
will hold approximately 63%1 of the combined company, while current
shareholders of Red Back will hold approximately 37%.
The transaction will be carried out by way of a court-approved plan
of arrangement and will require the approval of at least 66 2/3 %
of the votes cast by the shareholders of Red Back at a special
meeting of Red Back shareholders expected to take place in
mid-September 2010. It is expected that the transaction will be
exempt from the registration requirements of the U.S. Securities
Act of 1933, as amended, pursuant to the court approval exemption
afforded by section 3(a)(10) under that Act. The transaction is
also subject to obtaining the approval of a majority of the votes
cast by the shareholders of Kinross at a special meeting of Kinross
shareholders expected to take place the same date as the Red Back
meeting. In addition to shareholder and court approvals, the
transaction is subject to applicable regulatory approvals and the
satisfaction of certain other closing conditions customary in
transactions of this nature.
The transaction has been unanimously approved by the boards of
directors of each of Kinross and Red Back. The boards of directors
of each of Kinross and Redback have approved the transaction and
are expected to provide written recommendations that holders of
Kinross common shares and Red Back common shares vote in favour of
the transaction in the information circulars to be mailed in
connection with their respective special meetings of
shareholders. Each of Kinross' financial advisors, BMO
Capital Markets, GMP Securities L.P., and N M Rothschild & Sons
have provided an opinion to the Kinross board of directors that the
consideration to be paid by Kinross under the transaction is fair,
from a financial point of view, to Kinross. In addition, an
independent fairness opinion was provided to Kinross by Morgan
Stanley Canada Limited. The financial advisor for Red Back, Scotia
Capital Inc., has provided an opinion to the Red Back board of
directors that the consideration to be received by the Red Back
shareholders under the transaction is fair, from a financial point
of view, to the Red Back shareholders, other than Kinross. In
addition, CIBC World Markets Inc. provided a fairness opinion to a
special committee of independent directors of Red Back. Kinross'
legal counsel is Osler, Hoskin & Harcourt LLP and Red Back's
legal counsel is Blake, Cassels & Graydon LLP. BMO Capital
Markets acted as Senior Financial Advisor to Kinross.
Each of the directors and senior officers of Red Back, and
certain shareholders of Red Back representing approximately 4.6% of
the issued and outstanding Red Back common shares, have entered
into, or are expected to enter into, voting agreements with Kinross
and have agreed, or are expected to agree, to vote in favour of the
transaction at the special meeting of Red Back shareholders to be
held to consider the transaction. Kinross, which currently holds
9.3% of the issued and outstanding Red Back common shares, will
also vote in favour of the transaction.
The arrangement agreement provides that the boards of directors of
each of Kinross and Red Back may, under certain circumstances,
terminate the agreement in favour of an unsolicited superior
proposal, subject to payment of a termination payment of C$250
million, in the case of Kinross, and C$217 million, in the case of
Red Back, and subject to a right by each party to match the
superior proposal in question.
Further information regarding the transaction will be contained in
an information circular that each of Kinross and Red Back will
prepare, file and mail in due course to their respective
shareholders in connection with the special meetings of each of the
Kinross and Red Back shareholders to be held to consider the
transaction. All shareholders are urged to read the
information circulars once they become available as they will
contain additional important information concerning the
transaction.
Details regarding these and other terms of the transaction are set
out in the arrangement agreement, which is available on SEDAR at
www.sedar.com.
(1) On a fully-diluted, in-the-money basis, excluding the warrant
consideration, based on shares, warrants and options,
outstanding as of June 30, 2010 with respect of Kinross, and
as of August 2, 2010 with respect of Red Back.
(2) In respect of information relating to Kinross, see Kinross'
Mineral Reserve and Mineral Resource Statement at December 31,
2009, contained in the Kinross news release dated January 28, 2010,
which is available on our website at www.kinross.com. Reserve
and resource figures for Cerro Casale have been adjusted to reflect
the sale of half of Kinross' 50% interest to Barrick Gold
Corporation in Q1, 2010. In respect of information relating
to Red Back, see the reserve and resource statement located on the
Red Back website at
http://www.redbackmining.com/s/ResourcesReserves.asp.
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 as well as: (1) that Kinross will complete the proposed business combination transaction with Red Back in accordance with the terms and conditions of the arrangement agreement; (2) the accuracy of management’s assessment of the effects of the successful completion of the proposed transaction; (3) the accuracy of Kinross and Red Back’s mineral reserve and mineral resource estimates; (4) that the acquisition of the Dvoinoye deposit will be completed, consistent with management’s expectations; (5) that production at the Dvoinoye deposit will commence in 2013, consistent with management’s expectations; (6) that production at each of the Cerro Casale, Fruta del Norte and Lobo Marte properties will commence in 2014, consistent with management’s expectations; (7) the viability of the Tasiast and Chirano mines, and the development and expansion of the Tasiast and Chirano mines on a basis consistent with Kinross and Red Back’s current expectations; (8) the trading price of Kinross and Red Back’s common shares; (9) there being no significant political developments, whether generally or in respect of the mining industry specifically, in either Ghana or Mauritania not consistent with Kinross and Red Back’s current expectations; (10) there being no significant disruptions affecting Kinross’ operations, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment or otherwise; (11) that the exchange rate between the Canadian dollar, Brazilian real, Chilean peso, Russian rouble and the U.S. dollar will be approximately consistent with current levels or as set out in this news release; (12) certain price assumptions for gold and silver; (13) prices for natural gas, fuel oil, electricity and other key supplies remaining consistent with current levels; (14) production forecasts meet expectations; (15) labour and materials costs increasing on a basis consistent with Kinross’ current expectations; and (16) 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 proposed business combination transaction with Red Back 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 Kinross’ 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 “Kinross” appears in this news release, its means Kinross and/or its subsidiaries, as may be applicable.
All dollar amounts in this news release are expressed in Canadian dollars, unless otherwise noted.
This news release does not constitute an offer of any securities for sale.
About Kinross
Kinross is a Canadian-based gold mining company with mines and projects in Canada, the United States, Brazil, Chile, Ecuador and Russia, employing approximately 5,500 people worldwide. Kinross' strategic focus is to maximize net asset value and cash flow per share through a four-point plan built on: delivering mine and financial performance; attracting and retaining the best people in the industry; achieving operating excellence through the "Kinross Way"; and delivering future value through profitable growth opportunities. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).
About Red Back
Red Back is an un-hedged African-focused gold producer. It owns and operates the Chirano Gold Mine in Ghana and the Tasiast Gold Mine in Mauritania. Aggressive exploration programs aimed at increasing the Company's resource and reserve base at both Chirano and Tasiast are ongoing.
Kinross Gold Corporation
Media
Steve Mitchell
Vice President, Corporate Communications
416-365-2726
steve.mitchell@kinross.com
Investor Relations
Erwyn Naidoo
Vice-President, Investor Relations
416-365-2744
erwyn.naidoo@kinross.com
Red Back Mining
Investor Relations
Simon Jackson
Vice-President, Corporate Development
604-689-7842
sjackson@redbackmining.com