Aurelian shareholders receive 63% premium
Kinross to acquire major growth asset
Kinross committed to continue responsible development in Ecuador
TORONTO, July 24 /CNW/ - Kinross Gold Corporation (TSX:K; NYSE: KGC) and
Aurelian Resources Inc. (TSX:ARU) announced today that their respective Boards
of Directors have approved a business combination by way of a friendly offer
by Kinross to acquire 100% of the outstanding common shares of Aurelian, and
that they have signed a Support Agreement pursuant to which Aurelian's Board
of Directors has unanimously agreed to support the Kinross offer. The total
value of the offer is approximately $1.2 billion.
Highlights of the Transaction
- For each Aurelian common share, Kinross will offer 0.317 of a Kinross
common share, plus 0.1429 of a warrant, with each warrant entitling
the holder to acquire one Kinross common share. The Kinross warrants
have an exercise price of $32.00 per Kinross common share and will
expire five years after the date on which Kinross first pays for
Aurelian common shares tendered to the offer. Kinross expects to issue
approximately 47 million common shares pursuant to the transaction
(assuming exercise of all in-the-money Aurelian options and excluding
any shares issuable upon exercise of the Kinross warrants),
representing approximately 8% of Kinross' current outstanding common
- Based on the preceding 20-day volume-weighted average price of
Kinross' common shares on the TSX (and assuming a value of $0.92 per
fractional warrant), the value of the offer is $8.20 per Aurelian
common share, which represents a premium of approximately 63% over
the preceding 20-day volume-weighted average price of Aurelian common
- The Board of Directors of Aurelian, after receiving the recommendation
of a special committee of independent directors created by Aurelian
to oversee the transaction process, has unanimously determined that
the Kinross offer is in the best interests of Aurelian's shareholders,
and unanimously recommends that the Aurelian shareholders tender their
common shares to the offer. The directors and senior officers of
Aurelian have entered into lock-up agreements with Kinross and have
agreed to tender all of their Aurelian common shares to the offer.
- BMO Capital Markets and Dundee Securities Corporation, Aurelian's
financial advisors, have provided oral opinions to the Aurelian Board
of Directors that the consideration offered is fair, from a financial
point of view, to Aurelian's shareholders.
The combination will add a major gold deposit to Kinross' development
portfolio, while providing Aurelian shareholders with a substantial premium on
their shares and the additional opportunity to participate in Kinross'
outstanding prospects for near- and long-term growth. The transaction is
expected to be accretive to Kinross on a net asset value basis.
"Kinross is committed to responsible mining and has an excellent track
record of working cooperatively with governments and communities wherever we
operate. This particular combination creates value for both Aurelian and
Kinross shareholders, and provides a strong partner for local employees and
communities in Ecuador to develop this asset in a responsible manner, which
will generate significant economic benefits for the country," said Kinross
President and CEO Tye W. Burt.
"For Kinross, the combination demonstrates our continued commitment to
long-term, disciplined growth through maintaining a pipeline of high-quality
development projects. This deposit will add significantly to our mineral
resource base. We intend to pursue a focused strategy to further define the
deposit, and believe that this combination can make an important contribution
to our future," he added.
"The transaction also plays to Kinross' proven strengths in successfully
bringing new development projects into production, which we are demonstrating
this year with our projects at Kupol, Paracatu and Buckhorn," he said. Kinross
expects that the three major growth projects scheduled to come onstream this
year will increase the company's production by approximately 60% above 2007
levels by 2009.
Patrick F.N. Anderson, Aurelian President and CEO said, "The combination
of Aurelian and Kinross illustrates our commitment to responsible development
at Fruta del Norte as well as to the best interests of our investors. In the
short-term, Aurelian shareholders will be receiving an attractive premium
above current market price. In the long-term, our shareholders will also have
the opportunity to participate in Kinross' upside as our Condor Project
contributes to Kinross' industry-leading growth plans. We have been impressed
by the Kinross team's capabilities and track record in bringing projects into
production, particularly their strength in government and community relations.
Joining a larger pipeline of development and production projects around the
world also benefits Aurelian shareholders through asset diversification and
In October 2007, Aurelian released an inferred mineral resource estimate
for its Fruta del Norte (FDN) deposit of 58.9 million tonnes grading 7.23 g/t
of gold, resulting in 13.7 million oz. of contained gold and 22.4 million oz.
of contained silver (grade: 11.8 g/t)(1). The FDN deposit is the most
significant discovery within the Condor Project, part of more than
95,000 hectares of exploration concessions that Aurelian holds in Ecuador.
Kinross and Aurelian are of the view that recent initiatives by the
government of Ecuador, including public statements by President Correa, and
the Ministry of Mines and Petroleum, indicate that Ecuador is becoming
increasingly open to responsible mining.
"The government of Ecuador has indicated that it is interested in
attracting responsible mining companies prepared to invest in creating new
economic opportunities in the country. We have been working in Ecuador for two
years, doing our research and building relationships. We believe that the
government will welcome the positive approach we plan to take to advance the
development of the FDN project in a way that benefits the people of Ecuador
and respects local social and economic priorities," said Mr. Burt.
"Kinross has a strong history in South America and elsewhere as a
socially and environmentally responsible company, and we have demonstrated our
commitment to our employees, to strong community partnerships and to building
economic capacity in the jurisdictions where we operate around the world," he
(1) For further information, please refer to Aurelian's news release
dated October 4, 2007 and the Report entitled "A Mineral Resource
Estimate for the Fruta del Norte Deposit, Cordillera del Condor
Project, Zamora-Chinchipe Province, Ecuador" prepared by Micon
International Limited and dated November 15, 2007, both of which can
be found on Aurelian's website at www.aurelian.ca
Other Terms of the Support Agreement
The Support Agreement provides that the Board of Directors of Aurelian
may under certain circumstances terminate the agreement in favour of an
unsolicited superior proposal, subject to payment of a termination payment of
$42 million and subject to a right by Kinross to match the superior proposal
Full details of the Kinross offer will be included in the takeover bid
circular that is expected to be mailed to Aurelian shareholders shortly.
Kinross' obligation to acquire shares pursuant to the offer will be subject to
certain customary conditions, including there having been validly deposited
and not withdrawn at the expiry of the offer that number of Aurelian shares
which, together with any Aurelian shares directly or indirectly owned by
Kinross, constitutes at least 66 2/3% of the outstanding common shares of
Aurelian on a fully-diluted basis at the expiry time.
Kinross has also agreed to purchase 15 million common shares of Aurelian
on a private placement basis, at a price of $4.75 per share for total
subscription proceeds of approximately $71 million, to assist with the
development of FDN and for general corporate purposes. The private placement
is not conditional on completion of the offer. The private placement as well
as the issuance of the Kinross common shares and warrants pursuant to the
offer are subject to TSX approval.
Advisors and Counsel
Kinross' financial advisors are Scotia Capital Inc. (lead), Rothschild
Inc. and CIBC World Markets Inc. and its legal counsel are Osler, Hoskin &
Harcourt LLP and Perez, Bustamante & Ponce with regard to Ecuadorian law
matters. Aurelian's financial advisors are BMO Capital Markets and Dundee
Securities Corporation and its legal counsel is Cassels Brock & Blackwell LLP.
A special committee of Aurelian's Board of Directors is receiving financial
advice from BMO Capital Markets and Dundee Securities Corporation and its
legal counsel is Stikeman Elliott LLP.
Kinross is a Canadian-based gold mining company with mines in the United
States, Brazil, Russia and Chile, and employs approximately 5,000 people
worldwide. Kinross' strategic focus is to maximize net asset value and cash
flow per share through a four-point plan built on: generating 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).
Aurelian Resources Inc. is a publicly-listed (TSX:ARU) company engaged in
exploring, discovering and developing mineral wealth in Ecuador. The Fruta del
Norte (FDN) discovery lies at the heart of the Condor Project, located in
south-eastern Ecuador. The initial Inferred Resource for FDN was released in
October 2007 and included 58.9 million tonnes grading 7.23 g/t gold and
11.8 g/t silver for 13.7 million ounces of contained gold and 22.4 million
ounces of contained silver (Report titled "A Mineral Resource Estimate for the
Fruta del Norte Deposit, Cordillera del Condor Project, Zamora-Chinchipe
Province, Ecuador" and dated November 15, 2007 filed on www.sedar.com).
Aurelian is committed to working with the government and people of Ecuador to
achieve a modern, sustainable mining industry, which will play an important
role in the future growth of the country. Visit www.aurelian.ca for more
All dollar amounts in this news release are expressed in Canadian
dollars, unless otherwise noted.
Kinross and Aurelian will host a conference call and webcast to discuss
this announcement on Thursday, July 24, 2008 at 9:00 a.m. To access the call,
Canada & US toll-free - 1-800-319-4610
Outside of Canada & US - 1-604-638-5340
Replay (available up to 14 days after the call):
Canada & US toll-free - 1-800-319-6413; Passcode - 3315 followed by
the number sign.
Toll free in North America - 1-604-638-9010; Passcode - 3315 followed
by the number sign.
You may also access the conference call on a listen-only basis via
webcast at the Kinross website at www.kinross.com or the Aurelian website at
www.aurelian.ca. The audio webcast will be archived on www.kinross.com and on
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
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 and in Kinross' take-over bid circular prepared and to be filed in
accordance with applicable securities laws in Canada and the United States as
well as: (1) that Kinross will complete the acquisition of Aurelian in
accordance with the terms and conditions of the Support Agreement; (2) the
accuracy of Kinross and Aurelian's mineral reserve and mineral resource
estimates; (3) the viability of the FDN project area and permitting the
development and expansion of FDN on a basis consistent with Kinross and
Aurelian's current expectations; (4) the trading price of Kinross and
Aurelian's common shares; (5) there being no significant political
developments, whether generally or in respect of the mining industry
specifically, in Ecuador not consistent with Kinross and Aurelian's current
expectations; (6) there being no significant disruptions affecting Kinross'
operations, whether due to labour disruptions, supply disruptions, power
disruptions, damage to equipment or otherwise; (7) permitting Kinross to
undertake certain measures regarding FDN, and in particular with respect to
certain employment initiatives; (8) that the exchange rate between the
Canadian dollar, Brazilian real, Chilean peso, Russian ruble and the U.S.
dollar will be approximately consistent with current levels or as set out in
this news release; (9) certain price assumptions for gold and silver;
(10) prices for natural gas, fuel oil, electricity and other key supplies
remaining consistent with current levels; (11) production forecasts meet
expectations; (12) labour and materials costs increasing on a basis consistent
with Kinross' current expectations; (13) 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 acquisition of Aurelian 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
our 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.
Where we say "we", "us", "our", the "Company", or "Kinross" in this news
release, we mean Kinross and/or its subsidiaries, as may be applicable.
This news release does not constitute an offer to buy or an invitation to
sell, or the solicitation of an offer to buy or invitation to sell, any of the
securities of Kinross or Aurelian. Such an offer may only be made pursuant to
an offer and take-over bid circular filed with the securities regulatory
authorities in Canada. Kinross plans to file an offer and take-over bid
circular with Canadian provincial securities regulators. Kinross also intends
to file with the U.S. Securities and Exchange Commission a Registration
Statement on Form F-8 which will include the offer and take-over bid circular.
Investors and security holders are urged to read the offer and take-over bid
circular regarding the proposed transaction referred to in these documents
when they become available, because they will contain important information.
Investors may obtain a free copy of the offer and take-over bid circular when
they become available and other documents filed by Kinross with the Canadian
provincial securities regulators on SEDAR at www.sedar.com, and with the SEC
at the SEC's website at www.sec.gov. The offer and take-over bid circular and
these other documents may also be obtained for free, once they have been
mailed, on Kinross' website.
For further information:
For further information: Kinross contacts: Media: Steve Mitchell,
Director, Corporate Communications, (416) 365-2726; Investor relations: Erwyn
Naidoo, Vice-President, Investor Relations, (416) 365-2744; Aurelian contacts:
Patrick Anderson, Chief Executive Officer, (416) 868-9100; Marla Gale,
Director of Investor Relations, (416) 868-9100