Kinross and Red Back create high-growth gold producer in US$7.1bn merger

Kinross Gold Corporation and Red Back Mining today announced that their respective boards of directors have unanimously approved a friendly merger through a plan of arrangement, whereby Kinross will acquire all of the outstanding common shares of Red Back that Kinross does not already own.

The total value of the proposed transaction is approximately US$7.1 billion, on a fully-diluted basis.

Highlights

• The combination will create a pure gold senior producer with an exceptional growth profile, matching Kinross' strong base of high-jaw crusher specsquality mines, growth projects and proven track record, with Red Back's early-stage operating mines and outstanding exploration and expansion potential.


• Red Back shareholders will receive 1.778 Kinross common shares, plus 0.110 of a Kinross common share purchase warrant for each Red Back common share held. Pursuant to the transaction, Kinross expects to issue approximately 425 million Kinross common shares and approximately 26 million Kinross common share purchase warrants. Following completion of the transaction, the current Kinross shareholders will hold approximately 63%(1) of the combined company, while current shareholders of Red Back will hold approximately 37%.


• The value of the offer is C$30.50 per Red Back common share, representing a premium of approximately 21%, based on the preceding 20-day volume-weighted average price of Red Back common shares traded on the TSX and the July 30, 2010 closing price of Kinross common shares traded on the TSX. The warrants are expected to be listed on the TSX and be exercisable for a four-year term at an exercise price of US$21.30, representing an approximate 30% premium to the July 30, 2010 closing price of US$16.39 for Kinross common shares.


• Based on analyst consensus production estimates for Kinross and Red Back, forecast pro forma gold production for the combined company would be approximately 3.9 million ounces in 2015. Kinross believes there is significant upside potential for Red Back's assets beyond this estimate, based on its evaluations and the potential for exploration and production expansion.


• The combination gives Kinross a strong position in West Africa, one of the world's fastest-growing and most prospective gold regions, as well as a management team experienced in the region.


• Lukas Lundin, Chairman of the Red Back Board of Directors, and Richard Clark, CEO of Red Back, are expected to join the Kinross Board of Directors following closing of the transaction.


• Red Back shareholders will benefit from Kinross' strong operating and development experience and from diversification through exposure to Kinross' balanced portfolio of eight operating mines and future growth projects.


• The transaction provides a capital gains tax-deferred roll-over option for taxable Canadian holders of Red Back shares.


• The transaction has been unanimously approved by the board of directors of both companies. Red Back directors, senior officers and certain shareholders representing approximately 4.6% of the outstanding Red Back shares have agreed, or are expected to agree, to vote in favour of the proposed transaction. Combined with Kinross' 9.3 interest, this represents a total of approximately 14% of the outstanding Red Back shares in support of the proposed transaction at the time of announcement.

The transaction gives Kinross two well-established mines that will add immediate incremental production and growth potential. The merged company will have 10 mines and 4 development projects, operating in 8 countries. Based on Kinross' January 14, 2010 production forecast of 2.2 million attributable gold equivalent ounces for 2010, and Red Back's July 21, 2010 production forecast of 445,000-465,000 gold ounces for 2010, pro forma 2010 production for the combined company is expected to be approximately 2.6 - 2.7 million gold equivalent ounces.

Upon closing of the transaction, Kinross' Proven and Probable mineral reserves will increase to 53.2 million ounces and Measured and Indicated mineral resources will increase to 19.5 million ounces, based on the latest mineral reserve and mineral resources statements of both companies.(2)

"This is a transformational opportunity," said Kinross President and CEO Tye Burt. "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. The significant upside in reserves that we believe exists at Red Back, and Kinross' ability to accelerate that potential, makes this an outstanding prospect for shareholders of both companies."

"Kinross' record of successful project development and delivery together with the world class prospects of Tasiast is an exciting and unique combination," said Red Back President and CEO Richard Clark. "The growing underground production profile at Chirano and Red Back's prospective exploration portfolio fits neatly with the impressive asset base of Kinross. Red Back shareholders will benefit by participating in a large and well-diversified major gold producer with a core stable of high quality producing assets, significant expansion opportunities and an exciting exploration portfolio."

"Our board of directors has unanimously recommended this friendly combination to Red Back Shareholders. This is a fair offer with an attractive premium above current market price, and Kinross is a great partner," Mr. Clark added.

"We have been impressed not only by Red Back's assets but also by the experience and skill of their management team," said Mr. Burt. "They bring considerable value to this transaction, as experienced operators with a great track record in the region."

Red Back's assets in Mauritania and Ghana give Kinross a strong position in West Africa, one of the world's fastest-growing gold regions, expanding its presence in mining-friendly jurisdictions.

"Red Back has a strong record as a responsible operator," said Mr. Burt. "As Kinross, we intend to build on that reputation by bringing the same high standards for environmentally and socially responsible mining to the region that we have established in our operations around the world."