Canadian miner Kinross Gold to buy Red Back Mining for $7.1b

Kinross Gold of Toronto is set to take full control of Vancouver-based Red Back Mining in a deal valued at $7.1bn, broadening Kinross’s reach to west Africa, where Red Back’s operations are focused.

Kinross said the agreed all-share acquisition would match its own high-quality mines and proven track record with Red Back’s early-stage projects and potential for expansion.

According to Kinross, analysts expect the combined company’s annual gold production to reach about 3.9m ounces after Red Back’s two key projects in Ghana and Mauritania come on stream in 2015.

In comparison, Barrick Gold, the world’s biggest producer, estimated last week that its output would total between 7.6m and 8.1m ounces this year.

The acquisition follows a well-worn pattern in the gold mining industry in which entrepreneurial exploration companies seek capital and expertise from more seasoned operators to develop their mineral deposits. Kinross took a 9.4 per cent stake in Red Back earlier this year.

Tye Burt, chief executive of Kinross, said that “the significant upside in reserves that we believe exists at Red Back, and Kinross’s ability to accelerate that potential, makes this an outstanding prospect for shareholders of both companies”.

Kinross currently has operating mines and exploration projects in Canada, the US, Brazil, Chile, Ecuador and Russia.

Under the proposed deal, Red Back shareholders will receive 1.778 Kinross common shares and 0.110 of a Kinross common share purchase warrant for each Red Back share. Current Kinross shareholders will own about 63 per cent of the combined company.

Lukas Lundin, Red Back’s chairman, and Richard Clark, chief executive, will join the Kinross board.

Source: The Financial Times