Kinross Gold announces acquisition of Bema Gold
Monday November 6, 10:44 am ET
US$3.1 billion transaction aligns with Kinross' four point strategy, expands reserve base and creates shareholder value
TORONTO and VANCOUVER, Nov. 6 /PRNewswire-FirstCall/ - Kinross Gold Corporation ("Kinross") (TSX: K, NYSE: KGC) and Bema Gold Corporation ("Bema") (TSX/NYSE: BGO, AIM: BAU) are pleased to announce that their Boards of Directors have unanimously approved Kinross' acquisition of Bema in a US$3.1 billion transaction to create a US$7.9 billion major gold producer.
Highlights
Bema shareholders will vote at a meeting, expected to be held in mid-January 2007, to approve the acquisition. Upon successful completion of the transaction, on a pro forma basis Kinross will have the following attributes:
- Mineral reserves and resources of 50 million ounces of gold;
80 million ounces of silver and 2.9 billion pounds of copper
- Nine mines, in five countries, on three continents, with
4,700 employees globally
- Excellent pipeline of major construction and future projects
including Paracatu in Brazil, Kupol in Russia and Cerro Casale
in Chile
- Participation in exploration joint venture to drive new Russian
growth opportunities
- 2006 estimated production of 1.8 million gold equivalent ounces;
growing 56 per cent to approximately 2.8 million ounces in 2009
- Estimated 2009 cost of sales per gold equivalent ounce at Kupol of
approximately US$130 will lower an already competitive cost profile
- Consolidated ownership of Refugio mine in Chile
- Cash of approximately US$350 million
- Immediate synergies
- Led by Kinross management team
"This acquisition will create exceptional value for shareholders," said Tye W. Burt, President and Chief Executive Officer of Kinross. "By combining our assets, operations and expertise, we have dramatically increased our gold reserve and resource base to more than 50 million ounces. We will have a well-balanced gold reserve profile with 39 per cent in Chile, 37 per cent in Brazil, 16 per cent in North America and 8 per cent in Russia. These reserves, coupled with our enhanced exploration pipeline, will put Kinross in a unique position to take advantage of the robust gold price and provide investors with an excellent portfolio of world-class assets."
"The Bema Board of Directors unanimously approved this transaction and an independent advisor has provided an opinion that the transaction consideration to be received by Bema shareholders is fair from a financial point of view. We believe that our companies are a great fit due to complementary strengths, geographic synergies and similar growth profiles," said Clive T. Johnson, Chairman, President and Chief Executive Officer of Bema. "Bema shareholders are getting an attractive premium to become part of a stronger company that will create near- and long-term value for all shareholders. Further, we expect that the combined Company will be re-rated in the market once the transaction is complete."
This acquisition of Bema consolidates Kinross' ownership of Refugio and increases its reserves in Chile and Russia. District exploration and operating synergies will be realized by substantially increasing Kinross' position in the Maricunga region in Chile and adding the Chukotka region in Russia.
"The addition of Russian operations and exploration opportunities through the acquisition is a natural fit with our proven track record and expertise mining in the country," said Burt. "Bema's Kupol project will be a cornerstone growth asset that is expected to begin production in 2008. Kupol is fully financed and will continue to be staffed by Bema's Russian management and construction development team."
"This acquisition aligns perfectly with our strategic plan by increasing our core asset base, adding exploration reach and increasing our growth from 2006 through 2009," said Burt. "This acquisition creates an even stronger Canadian-based gold company that fortifies Canada's dominant position in the global gold mining arena."
With a successful track record, Clive Johnson will lead a new company focused on exploration and development ("NewCo"). Kinross will participate as an equity investor and have a right of joint venture opportunities in Russia.
Summary of the Transaction
The acquisition will be completed by way of a shareholder-approved plan of arrangement whereby each Bema common share will be exchanged for 0.441 of a Kinross common share representing a 34 per cent premium to the 20-day volume weighted average price of Bema common shares on the TSX. Upon completion of this transaction, 61 per cent of Kinross will be held by existing Kinross shareholders and 39 per cent by existing Bema shareholders.
Following completion of the transaction, all outstanding options and warrants of Bema will be exercisable to acquire that number of common shares of Kinross determined by reference to the share exchange ratio.
Other terms of the transaction include an agreement by Bema to pay a break fee to Kinross under certain circumstances in the amount of C$79 million. Bema has also provided Kinross with certain other customary rights, including a right to match competing offers.
The acquisition of Bema is subject to the parties completing due diligence and entering into a further definitive agreement providing for the specific mechanics for completing the transaction. The Board of Directors of Bema has unanimously recommended the transaction to shareholders and will sign support agreements in favour of the transaction. The Board of Directors has also received an opinion from financial advisors to the effect that the consideration to be received by Bema shareholders is fair from a financial point of view. The acquisition is subject to all requisite regulatory approvals, third party consents and other conditions customary in transactions of this nature. The acquisition is expected to require the approval of (i) at least two-thirds of the votes cast by Bema shareholders present in person or by proxy at a meeting expected to be held in January 2007; and (ii) a majority of the votes cast by Bema shareholders present in person or by proxy at such meeting, excluding votes cast by those Bema shareholders required to be excluded pursuant to the minority approval provisions of Ontario Securities Commission rule 61-501 and Regulation Q-27 of the Autorite des marches financiers. A proxy circular, setting out details of the transaction and voting procedures, is expected to be mailed to Bema shareholders in December 2006.
In connection with the transaction, NewCo will purchase certain Bema assets for aggregate consideration of US$20 million, including:
- An exploration alliance in Chukotka aimed at developing future gold
opportunities
- An exploration joint venture in northern Colombia with AngloGold
Ashanti Limited
- All of the shares of Petrex (Proprietary) Ltd.
Kinross will have a right to maintain a 9.9 per cent equity interest in NewCo and an option to acquire up to 19.9 per cent of NewCo in any initial public offering.
Board of Directors
Kinross will select one Bema nominee to be included in Kinross' management slate of directors to be nominated for election at Kinross' next annual shareholders' meeting. Until such time, the Bema nominee shall sit as an observer on the Kinross board.
Advisors and Counsel
Kinross' Financial Advisor is Scotia Capital Inc. Strategic Advisors include Rothschild Inc., GMP Securities LP and UBS Canada Securities Inc. and its legal counsel are Blake, Cassels & Graydon LLP and Chadbourne & Parke LLP with regard to Russian law matters. Bema's Financial Advisor is Genuity Capital Markets and its legal counsel is Stikeman Elliott LLP. A special committee of Bema's Board of Directors is receiving financial advice from BMO Capital Markets and its legal counsel is Bennett Jones LLP.
Kinross Today
Kinross, a Canadian-based gold mining company, is the fourth largest primary gold producer in North America and the eighth largest in the world. With eight mines in Canada, the United States, Brazil and Chile, Kinross employs more than 3,700 people. Kinross maintains a strong balance sheet and a no gold hedging policy. Kinross is focused on the strategic objective maximizing net asset value and cash flow per share through a four-point plan built on growth from core operations; expanding capacity for the future; attracting and retaining the best people in the industry; and driving new opportunities through exploration and acquisition. Kinross maintains listings on the Toronto Stock Exchange (symbol: K) and the New York Stock Exchange (symbol: KGC).
Bema Today
Bema Gold Corporation is one of the world's fastest growing intermediate gold producers with operating mines and development projects on three continents. Bema is projected to produce one million ounces of gold annually by the year 2009. Bema is listed on the Toronto Stock Exchange and the New York Stock Exchange (symbol: BGO) and on the AIM Exchange in London (symbol: BAU).
Conference Call
Kinross and Bema will hold a joint conference call with simultaneous web cast presentation at 11 a.m. EST on November 6, 2006 to discuss this transaction.
Conference call details:
To access the conference call, dial:
In Toronto: 416-644-3420
In Vancouver: 604-677-8677
In North America (toll free): 1-866-250-4892
The presentation slide show will be available in PDF format for download from the Kinross website at www.kinross.com in advance of the conference call.
A replay will be available after 2 p.m. until November 20, 2006. The replay number is 416-640-1917 and the North American toll free number is 1-877-289-8525. To access the recording, please enter access code 21209025 followed by the number sign.
Bema's Third Quarter conference call and webcast has been rescheduled to Tuesday November 14, 2006 at 2 p.m. PST. To access the call, please dial 1-416-695-5261 or toll free 1-877-888-3490. A playback will be available for one week after the call by dialing 1-416-695-5275 or toll free 1-888-509-0081, pass code: 632675. For more information, visit Bema's website at www.bema.com.
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