Flush Kinross strikes deal for Bema Offers $3.5 billion in stock for rival
Could herald new wave of takeovers Nov. 7, 2006. 06:55 AM LISA WRIGHT BUSINESS REPORTER
Toronto-based Kinross Gold Corp. has jumped on the consolidation bandwagon with a friendly $3.5 billion bid to scoop up Vancouver rival Bema Gold Corp. in a move that heralds a new wave of takeovers among mid-tier bullion miners in the midst of a bull market for precious metals.
Long-rumoured to be a target, fast-growing Bema is the latest mining company set to be taken out of the gold sector in an all-stock deal that veteran firm Kinross boasts will nearly double its market value to $9 billion and also give it more solid footing in Russia.
"It's a momentous day in the history of our companies," Kinross chief executive Tye Burt said during a conference call yesterday. "By combining our assets, operations and expertise, we have dramatically increased our gold reserve and resource base to more than 50 million ounces."
The announcement follows a slew of takeover activity in Canada's gold mining sector this year, starting with high-profile seniors Barrick Gold Corp. and Placer Dome Inc. getting together in March to create the world's largest gold miner. And Vancouver-based Goldcorp Inc. finalized its friendly takeover of Nevada's Glamis Gold Ltd. last weekend.
Observers say the latest round of mergers to watch for in the sector are among intermediate players looking to take advantage of the rising gold price, which reached a 26-year high in May. It closed at $625.80 (U.S.) an ounce yesterday, off $1.10.
"It wasn't completely unexpected. A lot of rumours have been flying around" about both Kinross and Bema, said analyst Haytham Hodaly of Salman Partners.
He noted one of Bema's big draws is its Kupol project in Russia, where Kinross's Kubaka project is currently winding down.
Canada's third-largest miner will also get control of the Refugio mine in Chile, which the two miners now equally own, along with Bema's stake in the large Cerro Casale project in the South American country.
The Bema acquisition will boost Kinross's reserves by 68 per cent and increase its gold resources by 38 per cent.
"We will have the strongest growth profile of any of the major gold companies," said Burt.
"We look forward to building the next big thing in the gold business," he added.
The boards of both companies have approved the deal, which Bema shareholders will vote on in mid-January. It requires two-thirds support.
Kinross, which will remain the world's eighth-largest gold miner, is offering 0.441 of a share for every Bema share, which values the offer at $6.61 a share based on Friday's closing price.
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