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Kinross Gold Corporation has confirmed that is going to buy Canada’s Great Bear Resources (TSX-V:GBR), including its flagship Dixie project, which is located in Ontario’s Red Lake mining district. Dixie is one of the most exciting recent gold discoveries and is showing all the characteristics of a top tier gold deposit.

The Dixie project is the big selling point here – it has the potential to become a large, long-life mine complex and could bolster the Kinross long term production outlook. It has significant exploration upside potential including primary zones of mineralisation remaining open along strike and at depth.

Dixie is located in the Red Lake mining district in northern Ontario in a well-established mining camp close to infrastructure and skilled labour. Kinross said the project would become a centrepiece in its development portfolio.

“Kinross first set foot on the Dixie property three years ago, and has closely monitored the discovery and growth of each successive gold discovery Great Bear has made,” said Chris Taylor, President and CEO of Great Bear. “With extensive drilling now completed at Dixie, both companies have a shared vision of the clear potential for a multi-deposit mine complex consisting of a potential high-grade open-pit mine and a long-life underground mine.”

Why Kinross Gold could be onto a winner

Dixie’s closest geological analogue, the large Hemlo gold mine, was historically operated by three separate companies prior to its consolidation, and has produced over 20 million ounces of gold in more than 30 continuous years of operation. Great Bear shareholders will now be in a unique position to benefit from the potential of the top tier Dixie project under one company and will maintain strong exposure to the project through their Kinross shares.

Keen-eyed Armchair Trader readers will also recognise Chris Taylor as the chairman and a founder of copper exploration company Kodiak Copper (CVE:KDK). His geological expertise was behind the discovery at Great Bear’s Dixie Lake. He similarly targeted the MPD project which Kodiak is currently exploring. Taylor chairs the copper explorer which is managed by CEO Claudia Tornquist, a Rio Tinto alumnus who led the sale of Kennady Diamonds to Mountain Province.

Great Bear was trading at C$0.25 three years ago, demonstrating just how Taylor has been able to add enormous shareholder value with the company. He is a geologist who should be monitored closely by investors.

Terms of the deal

Under the terms of the transaction, Kinross has agreed to an upfront payment of approximately US$1.4 billion, representing C$29.00 per Great Bear common share on a fully-diluted basis. The upfront payment will be payable at the election of Great Bear shareholders in cash and Kinross common shares, subject to a pro-ration, up to aggregate maximums of 75% cash and 40% Kinross shares on a fully-diluted basis.

The agreement also includes a payment of contingent consideration in the form of contingent value rights that may be exchanged for 0.1330 of a Kinross share per Great Bear common share, providing further potential consideration of approximately US$46.0 million based on the closing price for a Kinross share on the Toronto Stock Exchange on December 7, 2021.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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