Kinross buys Bema Gold

ANDY HOFFMAN, SINCLAIR STEWART,  Globe and Mail Update

Kinross Gold Corp. has launched a friendly $3.2-billion (U.S.) takeover bid for Bema Gold Corp.

The deal will see each Bema share exchanged for 0.441 of a Kinross common share — a 34 per cent premium to the 20-day trading price of Bema common shares on the Toronto Stock Exchange.

On completion, Kinross shareholders will hold 61 per cent of the combined company while Bema shareholders will hold 39 per cent.

The deal will give the enlarged Toronto-based Kinross 50 million ounces of gold, 80 million ounces of silver and 2.9 billion pounds of copper, as well as nine mines in five countries with 4,700 employees.

Tye Burt, president and chief executive officer of Kinross, said the agreement announced Monday substantially increases his company's reserves and project pipeline.

“Especially if you're bullish on the gold price, adding high-quality ounces like that and long-life reserves is critical to the future health of a gold company,” Mr. Burt said.

“We've already got a powerful growth profile. This adds more ounces, more reserves and more growth.”

Kinross and Bema Gold have long been considered ideal merger partners. Vancouver-based Bema has mines and projects in Russia, Chile and South Africa.

The companies have held on-again, off-again discussions for months.

In June, Kinross Mr. Burt told the Globe and Mail that he liked Bema, “but it's fully priced in the market.”

Bema CEO Clive Johnson said the companies are “a great fit” because of “complementary strengths, geographic synergies and similar growth profiles.”

He also said he likes the all-stock nature of the deal.

“If this was a cash offer I would probably have been significantly less keen, on the belief that we could be leaving a lot of value on the table,” he said.

“But I think the fact that it is a share offer it gives the Bema shareholder a very good opportunity to become part of what is a very exciting company.”

Kinross has eight mines in Canada, the United States, Brazil and Chile, and more than 3,700 employees, while Bema has the Julietta mine in Russia, and the Petrex mines in South Africa.

The deal includes a $79-million break fee, which would be paid by Bema to Kinross, and the purchase of purchase certain Bema assets for aggregate consideration of $20-million (U.S.).

Those include an exploration alliance in Chukotka aimed at developing future gold opportunities, an exploration joint venture in northern Colombia with AngloGold Ashanti Ltd., and all of the shares of Petrex Ltd.

Kinross will have a right to maintain a 9.9 per cent equity interest in the new company, and an option to acquire up to 19.9 per cent in any initial public offering.

Bema shares closed at $5.40 (Canadian) on Friday and have risen 60.2 per cent this year. Kinross closed at $14.99 and have gained 39.6 per cent this year.

Kinross is roughly the fourth-largest gold producer in North America and the eight-largest in the world.

Scotia Capital Inc. advised Kinross on the deal, while Bema retained Genuity Capital Markets.

With files from The Canadian Press.