Great Bear Resources (TSX-V:GBR) Ltd is to be acquired by Canadian mining major Kinross Gold in a premium deal worth around C$1.8 billion, or C$29 per share, which will see the company's exciting Dixie gold discovery in Red Lake, Ontario, developed into a potential top tier, long-life mine.
The acquisition price represents a premium of 40% to Great Bear's volume-weighted average price (VWAP) for the 20 days to December 7, 2021.
Notably, Great Bear shareholders will also receive a contingent consideration in connection with Kinross' public announcement of commercial production from the gold project. On closing, it is expected that Great Bear shareholders will own around 7% of Kinross on a fully diluted basis, assuming a full take-up of shares.
"The transaction delivers a compelling premium for Great Bear's shareholders, reflecting the top tier nature of the Dixie project, while offering beneficial exposure as Kinross shareholders to a high-quality operating portfolio and growing production base," Chris Taylor, the CEO of Great Bear, told investors.
READ: Great Bear Resources discovers 'Midwest' zone at flagship Red Lake project; unveils new LP fault drill results
"Kinross' Canadian identity and headquarters in Ontario will facilitate close ties between the company and the Dixie project's local communities, which will help to maximize benefits to the area, including employment and training. As a senior gold producer, Kinross has the financial strength, technical expertise, and commitment to the highest ESG practices to advance the Dixie project at the pace and scale that this industry-leading discovery deserves," Taylor added.
J. Paul Rollinson, CEO of Kinross Gold commented: "The Dixie project has multiple high-potential mineralized zones which remain open along strike and at depth, and we are confident that the asset has strong untapped upside with numerous avenues for growth. We are pleased to achieve our goal of adding a high-quality asset in our home jurisdiction that further bolsters our global portfolio and can potentially provide long-term tax benefits."
Under the terms of the binding deal, Great Bear shareholders can receive the upfront consideration as either C$29.00 in cash or 3.8564 Kinross shares per Great Bear share, both subject to proration.
The upfront consideration will be subject to a maximum aggregate cash consideration of around C$1.4 billion.
Shareholders will also receive so-called contingent value rights (CVRs) providing for further potential consideration equal to 0.1330 of a Kinross share per Great Bear common share which represents around C$58.2 million in total consideration, or C$1 per Great Bear common share, on a partially diluted basis.
This contingent consideration will be payable when Kinross publicly declares commercial production at the Dixie project, provided that at least 8.5 million gold ounces of measured and indicated mineral resources have been disclosed.
The Great Bear board will recommend that its shareholders vote in favour of the deal.
Noble rates Great Bear stock 'Outperform'
Following the news, Noble Capital analysts rated Great Bear Resources (TSX-V:GBR) 'Outperform', targeting C$28 a share (current price: C$28.53, up over 24%).
"We think the transaction is a win for both companies who have a shared vision of the potential for a multi-deposit mine complex at Dixie, including a potential high-grade open-pit mine and a long-life underground mine," the analysts wrote in a note.
"The transaction is expected to be completed in the first quarter of 2022, subject to approval by Great Bear shareholders, receipt of court and regulatory approvals, and satisfaction of certain closing conditions," they added.
---Updates for analyst comment, share price---
Contact the author at giles@proactiveinvestors.com