Kinross announces friendly combination with Aurelian

Kinross Gold and Aurelian Resources have approved a business combination by way of a friendly offer by Kinross to acquire 100% of the outstanding common shares of Aurelian, and the Boards of Directors 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. 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.

  • 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 shares.
  • 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 shares.
  • 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.

“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 risk mitigation.”

In October 2007, Aurelian released an inferred mineral resource estimate for its Fruta del Norte (FDN) deposit of 58.9 Mt grading 7.23 g/t Au, with 13.7 Moz of contained gold and 22.4 Moz of contained silver (grade: 11.8 g/t). The FDN deposit is the most significant discovery within the Condor Project, part of more than 95,000 ha of exploration concessions that Aurelian holds in Ecuador.