Kinross Gold Corp.’s planned acquisition of Great Bear Resources Ltd. has landed with a thud, over widespread concern from investors that it may be overpaying for a development company with no gold reserves, and could even be opening itself up to a hostile takeover.
Toronto-based Kinross said in a news release late Wednesday that it had reached a friendly arrangement to acquire Great Bear for $29 a share in cash and stock, a 26.5-per-cent premium to its market price, in a transaction worth $1.8-billion.
Kinross is Canada’s second-biggest gold company by production, with annual output of more than two million ounces. The Great Bear acquisition would help Kinross reduce its exposure to politically problematic Russia and West Africa, and increase its weighting toward Canada, one of the safest mining jurisdictions.
Vancouver-based Great Bear has been one of the best-performing junior gold stocks in the world over the past few years, owing to promising drilling results at its Dixie gold project in Red Lake, in northwestern Ontario. Some analysts have speculated that Dixie could contain as much as 20 million ounces of gold, which would put it on par with Canada’s biggest gold mines.