Vancouver- Kinross Gold (K-T, KGC-N) has increased the value of its offer for Bema Gold (BGO-T, BGO-N, BAU-A) and cancelled a side deal that would have seen Bema’s stake in the Petrex Mines in South Africa bought by a Bema-led management company.
One mining analyst said the revised deal is designed to assuage Kinross investors who were discontent with the transfer of Bema’s indirect interest in Petrex, along with other assets to B2 Gold, a new private company headed by Bema Chief Executive Officer Clive Johnson.
The value of the Petrex asset, now part of Pamodzi Gold (PZGJ-J) and listed on the Johannesburg stock exchange, has increased to the point were it is too big for the spinoff company,” said Kinross spokesman James Toccacelli.
“When we did the deal originally, we’d established a price for a set of assets, now we’re getting another asset so we’ve got to revisit the price,” said James Toccacelli.
Bema holds a 29.8 percent stake in Pamodzi which is worth about $32.5 million, he said.
Because of the removal of Petrex from the group of assets being transferred, B2 will pay Kinross $15 million, instead of the originally announced $20 million.
However, B2 will still acquire a gold exploration alliance in the far northeastern Russian region of Chukotka, and an exploration joint venture in Colombia with AngloGold Ashanti (AU-N).
Investors reacted to that news by sending Kinross shares down 14 cents to $13.15 in Toronto, Dec. 22, the day the revision was announced. Bema rose 10 cents to $5.83.
Under the revised deal, Kinross is offering 0.4447 of a share plus one cent in cash for each Bema share, in increase of about $40 million from the previous 0.441 of a share.
The new offer comes about six weeks after Kinross stepped up the pace of consolidation in the North American gold mining industry by launched a friendly US$3.1 billion bid to acquire Bema.
The transaction appears to be driven by the bigger is better mantra as well as the prospect of future production from Bema’s $425 million Kupol gold project in Russia, which is headed for startup in 2008.
Kinross is currently North America’s fourth largest gold producer.
The two companies are already familiar with each other, through their joint ownership of the Refugio gold mine in northern Chile.
Kinross and Bema said they have signed a definitive arrangement agreement and certain related agreements in connection with Kinross’ acquisition of Bema.
Bema said its board of directors has unanimously approved the revised transaction, adding that the company’s independent financial advisor considers the new offer to be fair, from a financial point of view to shareholders of Bema other then Kinross.
It is expected that a proxy circular for the meeting of Bema shareholders to be held to approve the acquisition will be mailed to Bema shareholders later this month, with the Bema shareholders meeting to be held on January 30, 2007