Kinross Gold Corp. shareholders approved its C$7.4 billion ($7.2 billion) acquisition of Red Back Mining Inc., which will give the Canadian company mines in Mauritania and Ghana.
The deal got about 66 percent of the votes cast by the Toronto-based company’s investors at a meeting today in the city, Kinross said. Red Back investors will receive 1.778 Kinross common shares and 0.11 of a Kinross common share purchase warrant for each Red Back share. More than 99 percent of the votes cast by Red Back shareholders today approved the deal, that company said in a statement.
Kinross Chief Executive Officer Tye Burt said last week output at Vancouver-based Red Back’s Tasiast mine in Mauritania will beat mining analysts’ estimates. He spoke after RiskMetrics Group Inc., an adviser to investors, recommended Kinross shareholders vote against the deal because the company would have to achieve “significantly higher” output at Tasiast compared with the market consensus to break even.
“I think they are paying a rich premium for the acquisition,” Jorge Beristain, an analyst at Deutsche Bank AG in Greenwich, Connecticut, said in an interview before the meeting.
The Red Back transaction is Kinross’s biggest deal. When it was announced, Kinross’s bid was valued at C$30.50 a share, 17 percent more than Red Back’s previous closing share price on July 30. Kinross paid an average premium of 29 percent in about 20 deals in the past 10 years.
“This is going to be one of the great new gold mines in the world today,” Burt told reporters after the meeting. The next 12 months of drilling will show “just how transformational this deal is,” he said.
Kinross rose 48 cents, or 2.7 percent, to C$18.02 at 4:15 p.m. in Toronto Stock Exchange trading. The shares fell 6.4 percent to C$15.79 on Aug. 3, the day after the deal was announced. Red Back climbed C$1, or 3.2 percent, to C$32.32.
Kinross needs to find reserves of 35 million to 40 million ounces at Tasiast compared with the 5 million ounces currently estimated, John Bridges, an analyst at JPMorgan Chase & Co. in New York, said in an Aug. 3 report.
The initial reaction to the takeover “was very negative,” said John Stephenson, who helps manage C$1.65 billion ($1.61 billion) at First Asset Investment Management Inc. in Toronto.
Kinross revised its outlook for Tasiast last week and said it has a total potential resource of 350 million to 425 million metric tons grading 1.5 to 1.8 grams per ton of gold.