Last Updated : 03 September 2010 at 06:45 IST

Kinross looks for Tasiast Gold Reserves to increase substantially

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By Allen Sykora of Kitco News
“We believe it’s going to be substantially bigger than it is today,” says Kinross Gold Corp. President and CEO Tye Burt about Red Back Mining's Tasiast mine.

Kinross Gold Corp. anticipates that future gold discoveries at the Tasiast mine in the African nation of Mauritania could be even greater than many analysts expect, providing motivation for its proposed friendly takeover of Red Back Mining Inc., says Kinross' chief executive.

Furthermore, Kinross intends to build a new mill to increase the ore-handling capacity at Tasiast by roughly six times.

The Kinross and Red Back boards of directors unanimously approved a $7.1 billion merger. As of the Aug. 2 announcement, the value of the offer was put at C$30.50 per Red Back common share. This was a premium of approximately 21% based on the preceding 20-day volume-weighted average price of Red Back common shares traded on the Toronto Stock Exchange (C$25.21) and the July 30 closing price for Kinross (C$16.87).

However, premium is a "relative term," said Tye Burt, president and chief executive officer of Kinross (TSX: K, NYSE: KGC), based in Toronto. He pointed out that a premium can also reflect value that the market doesn't fully recognize yet.

"We think this is one of those deals," he said in an interview with Kitco News.

Much of the focus is on Tasiast, which Burt described as a “world-class, once-in-a-lifetime” asset. “We believe it’s going to be substantially bigger than it is today,” he said.

The merger also adds Red Back’s Chirano mine in Ghana to Kinross’ portfolio of eight mines in the U.S., Chile, Brazil and Russia.

“The companies complement each other,” Burt said. “From Kinross, you get a big development pipeline, experienced mine developers, a big operating team and a lot of capital, which is going to be required.”

Meanwhile, there is growth potential for the properties of Vancouver-based Red Back (TSX: RBI), particularly Tasiast.

“Of course…Kinross, the bigger company, is paying a slight premium to market for Red Back,” Burt said. “That’s to be expected in any kind of control change.”

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