Shares of Kinross Gold Corp. (KGC) were off by 9 percent Tuesday morning, the most intraday since May 19, after the Canadian gold producer said it agreed to acquire Red Back Mining Inc. in a transaction valued at $7.1 billion, on a fully-diluted basis.
Under the terms of the deal, Red Back shareholders will receive 1.778 Kinross shares, plus 0.110 of a Kinross common share purchase warrant for each Red Back common share held. At Monday’s closing share price, the value of the deal amounts to 30.50 Canadian dollars per Red Back share, or $29.81, representing a premium of 15 percent from Friday’s close of Red Back shares on the Toronto Stock Exchange.
Based on analyst consensus the combined company’s gold production would be about 3.9 million ounces in 2015.
“By combining Kinross’ world-class mines, growth projects and proven ability in mine development with the potential of Red Back’s assets, we are creating a gold growth powerhouse,” Tye Burt, Kinross’s chief executive, said in a statement.
Kinross lost $0.87, or 5.32 percent, to $15.47 at 12:04 ET in NYSE trading. Red Back (RBI.CN) advanced C$1.88, or 7.23 percent, to $27.90.