Kinross to acquire Great Bear for $1.4-billion (U.S.)

Dec 9, 2021

2021-12-08 20:32 ET – News Release

Mr. Paul Rollinson reports

KINROSS ANNOUNCES ACQUISITION OF GREAT BEAR RESOURCES

Kinross Gold Corp. has entered into a definitive agreement with Great Bear Resources Ltd. to acquire all of the issued and outstanding shares of Great Bear through a plan of arrangement.

Through the transaction, Kinross will acquire Great Bear’s flagship Dixie project located in the renowned and prolific Red Lake mining district in Ontario, Canada. The Dixie project is one of the most exciting recent gold discoveries globally, and extensive drilling results have shown the characteristics of a top-tier deposit.

Under the terms of the transaction, Kinross has agreed to an upfront payment of approximately $1.4-billion (U.S.) (1) ($1.8-billion), representing $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 proration, up to aggregate maximums of 75 per cent cash and 40 per cent 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 0.133 of a Kinross share per Great Bear common share, providing further potential consideration of approximately $46.0-million (U.S.) (1) ($58.2-million) based on the closing price for a Kinross share on the Toronto Stock Exchange on Dec. 7, 2021. The contingent consideration will be payable in connection with Kinross’s public announcement of commercial production at the Dixie project, provided that at least 8.5 million gold ounces of measured and indicated mineral resources are disclosed.

Strategic rationale for acquisition:

The Dixie project has excellent potential to become a top-tier deposit that could support a large, long-life mine complex and bolster Kinross’s long-term production outlook:
- Kinross envisions a mine complex with an initial quality, high-grade, open-pit mine, with potential upside for a longer-term, sizeable underground operation;
Dixie has significant exploration upside potential with primary zones of mineralization remaining open along strike and at depth:
- Highly prospective, with multiple avenues to unlock potential, including the LP Fault, Hinge and Limb primary zones;
- Positive and exciting drilling results show consistently wide mineralized intercepts defining large continuous zones with predictable high-grade components;
Dixie is ideally located in a highly attractive jurisdiction and is situated in the renowned Canadian Red Lake mining district in Northern Ontario:
- The project is in a well-established mining camp close to infrastructure and skilled labour;
- The project offers the potential for long-term tax benefits given Kinross’s large Canadian tax pools;
- Power supply sources in the region are from a low-carbon energy grid, supporting the company’s greenhouse gas (GHG) emissions reduction strategy;
Kinross has been actively involved in the diligence of the Dixie property since 2018, and the asset will become a centrepiece in the company’s development portfolio:
- Extensive technical reviews, including site visits, support an exceptional outlook for the project and confirms it is a scarce, high-quality asset.

J. Paul Rollinson, Kinross’s president and chief executive officer, made the following comments in relation to the Great Bear acquisition: “The Dixie project represents an exciting opportunity to develop a potentially top-tier deposit into a large, long-life mine complex. In addition to the prospect of developing a quality, high-grade, open-pit mine, we also believe that a significant portion of the asset’s value is its longer-term potential, which includes the view of a sizeable underground operation.

“Kinross has the strong technical expertise and experience to successfully advance the project from exploration to development and unlock considerable value for our shareholders. Our extensive due diligence reinforced the scarcity of an asset of this quality and value. 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. The Dixie project is ideally located in the renowned Red Lake mining district in Northern Ontario near established infrastructure and in a province with a low-carbon energy grid. We look forward to building strong relationships with the Wabauskang and Lac Seul first nations, and will work with them to ensure that the project delivers sustainable benefits to their communities and respects their way of life.”

Chris Taylor, Great Bear’s president and CEO, said: “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. With extensive drilling now completed at Dixie, both companies have a shared vision of the clear potential for a multideposit mine complex consisting of a potential high-grade, open-pit mine and a long-life underground mine.

“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. Dixie will be a significant asset for Kinross, and the company’s strong track record, coupled with its projected production growth profile over the coming years, offers our shareholders an attractive investment in its own right.

“As Great Bear’s track record of continuous discovery shows, the Dixie project hosts a prolific gold system that remains completely unconstrained and open to extension. In the near term, with over 80 per cent of the property unexplored, our shareholders will continue to have exposure to ongoing advanced project development and extensive exploration upside in the lead-up to planned production.

“Of high importance to Great Bear is Kinross’s history of strong indigenous community relationships, and industry recognition as a leader in sustainability and environmental stewardship. Our partners at the Wabauskang and Lac Seul first nations will benefit from Kinross’s deep operational experience, excellent operational track record and headquarters in Ontario. Kinross is committed to ensuring the project provides lasting socio-economic benefits to the local area, and the shared Canadian identity and residence in the same province will help facilitate close ties between the company and the project’s local communities.”

About the Dixie project

The Dixie project is located 25 kilometres southeast of the town of Red Lake, Ont., and comprises 91 square kilometres of contiguous claims. The project is in a well-established mining camp, is close to skilled labour, and a paved highway and provincial power lines run parallel to the property. The property also hosts a network of well-maintained logging roads which facilitate year-round access to the site.

The Dixie project has significant exploration upside potential, with 80 per cent of the property unexplored. The project hosts a prolific gold system, and has high-potential mineralized zones remaining open along strike and at depth, with multiple avenues to unlock potential. To date, Great Bear has completed more than 340,000 metres of drilling in 794 drill holes and has identified five high-grade gold discoveries. Great Bear’s positive and exciting drilling results show consistently wide mineralized intercepts defining large continuous zones with predictable high-grade components.

The most significant discovery to date at Dixie is the large-scale LP Fault zone, which comprises continuous wide, moderate-grade mineralization along with subparallel high-grade gold lenses, forming a broad 200-to-400-metre-wide envelope of stacked zones, hosted in metamorphosed felsic volcanic and sedimentary units. LP Fault zone drilling has identified gold mineralization along 10.8 kilometres of strike length down to a depth of 786 metres, and remains open along strike and at depth. A subsection of the LP Fault zone measuring approximately 4.6 kilometres on strike and to a depth of 500 metres has been the focus of drilling to date at approximately 50-to-150-metre drill spacing. The LP Fault zone has similar geological features to the large Hemlo deposit, which has produced more than 20 million ounces of gold and has been operating continuously for more than 30 years.

The nearby Hinge, Limb, Midwest and Arrow gold zones are more characteristic of mineralization at mined deposits in Red Lake, and comprise high-grade gold-bearing quartz veins and silica-sulphide replacement zones hosted by metamorphosed mafic volcanic units.

Great Bear has reported that 80 per cent of its drill holes into the LP Fault, Limb and Hinge zones contain visible gold mineralization, with gold occurring mainly as free gold that is not bound to, nor within, sulphide minerals. Initial metallurgical testwork has indicated excellent recoveries at all of the mineralized zones identified which are amenable to conventional flowsheets.

Kinross next steps and financing

Upon completion of the transaction, Kinross plans to undertake a comprehensive exploration and development program at the Dixie project. The program aims to support Kinross’s vision of a large, long-life mining complex, which includes an initial quality, high-grade, open-pit mine and, potentially, a longer-term, sizeable underground mine. The company’s three-pronged plan to demonstrate the project’s overall longer-term potential and value includes:

Rapidly advancing exploration activities at the LP Fault zone, including 200,000 metres of planned drilling in 2022;
In parallel, continuing exploration outside the Central area of the LP Fault zone, which remains open along strike and at depth. Kinross plans to continue to test the depth extent of the LP Fault zone to understand its potential to support a sizeable and long-life underground operation;
At the same time, Kinross expects to opportunistically explore the Red Lake-style satellite deposits, including definition drilling at the Limb, Hinge and Midwest high-grade targets, along with high-potential new discoveries. The company also plans to maintain regional claims in good standing and elevate some areas to drill target status.

Kinross expects to finance the acquisition with existing liquidity, which at Sept. 30, 2021, included cash and cash equivalents of $586.1-million (U.S.) and a $1.5-billion (U.S.) revolving credit facility. In 2022, the company expects to enhance its total return of capital to shareholders from its current quarterly dividend and continuing share buyback program.

Sustainability and first nations

Upon closing of the transaction, Kinross will continue to honour the exploration agreements signed with the Wabauskang and Lac Seul first nations, who have traditional territorial claims in the area. Kinross had a constructive first meeting with the chiefs of both first nations, and looks forward to building positive and strong relationships with their communities through meaningful dialogue and consultation.

Kinross recognizes that respect, collaboration and consideration for first nations is central to the company’s licence to operate in the area, and will prioritize developing the project in a manner that honours indigenous rights and brings long-term socio-economic benefits to the area. Consistent with how Kinross develops all of its projects around the world, the company is committed to ensuring that its operations leave a lasting and positive legacy, and will take a life-of-mine approach to the design and planning of the project to minimize environmental impacts.

The Dixie project is located in a province with a low-carbon energy grid that supports Kinross’s goal of being a net-zero GHG (greenhouse gas) emissions company by 2050. Kinross will also plan to incorporate energy-efficient initiatives as it develops the long-term project, including evaluating electric and hydrogen fuel fleets. The company expects that the GHG emission intensity per-ounce-produced profile of a potential operation at Dixie could lower Kinross’s overall global metric.

Agreement details and timing

The transaction will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) and will require approval by 66-2/3 per cent of the votes cast by Great Bear shareholders and 66-2/3 per cent of the votes cast by Great Bear securityholders (including holders of Great Bear options, restricted share units and deferred share units) at a special meeting expected to be held in Q1 2022 and a simple majority of the votes cast by Great Bear securityholders, excluding certain persons required to be excluded in accordance with Multilateral Instrument 61-101 of the Canadian Securities Administrators.

Under the terms of the transaction, Great Bear shareholders will receive upfront consideration of $1,421.9-million (U.S.) (1) ($1,800.1-million), representing $29.00 per Great Bear common share on a fully diluted basis. Great Bear shareholders will be able to elect to receive the upfront consideration as either: (i) $29.00 in cash or (ii) 3.8564 Kinross shares per Great Bear share, both subject to proration. The upfront consideration will be subject to maximum aggregate cash consideration of $1,066.2-million (U.S.) (1) ($1,350.1-million) (representing 75 per cent of the upfront consideration) or maximum aggregate shares issuable of 95.8 million (2) (representing 40 per cent of the upfront consideration on a fully diluted basis (2)), depending on the election of Great Bear shareholders. Great Bear shareholders who do not elect cash or Kinross shares will be deemed to have elected to receive cash, subject to proration.

Great Bear shareholders will also receive one contingent value right per Great Bear common share, providing for further potential consideration equal to 0.133 of a Kinross share per Great Bear common share, which represents $46.0-million (U.S.) (1) ($58.2-million) in aggregate consideration, or $1.00 per Great Bear common share, on a partially diluted (3) basis (based upon the closing price of a Kinross share on the TSX as at Dec. 7, 2021). The contingent consideration will be payable in connection with Kinross’s public announcement of commercial production at the Dixie project, provided that at least 8.5 million gold ounces of measured and indicated mineral resources are disclosed.

The board of directors of Kinross has unanimously approved the transaction. The board of directors of Great Bear has unanimously approved the transaction, with Great Bear directors recommending that Great Bear shareholders vote in favour of the transaction.

Each of the directors and senior officers of Great Bear, and certain shareholders of Great Bear, representing in aggregate approximately 20 per cent of the issued and outstanding Great Bear common shares, have entered into voting support agreements with Kinross and have agreed to vote in favour of the transaction at the special meeting of securityholders of Great Bear to be held to consider the transaction.

In addition to Great Bear securityholder approval, the transaction is subject to normal course regulatory approvals and the satisfaction of customary closing conditions. Subject to the satisfaction of these conditions, Kinross expects that the transaction will be completed in Q1 2022.

Kinross and Great Bear have provided representations and warranties customary for a transaction of this nature, and Great Bear has provided customary interim period covenants regarding the operation of its business in the ordinary course. The agreement also provides for customary deal protection measures, including non-solicitation covenants on the part of Great Bear and a right to match in favour of Kinross. Great Bear may, under certain circumstances, terminate the agreement in favour of an unsolicited superior proposal, subject to a termination payment by Great Bear to Kinross.

Further information regarding the transaction will be contained in an information circular that Great Bear will prepare, file and mail in due course to its shareholders in connection with the Great Bear special meeting.

Details regarding these and other terms of the transaction are set out in the arrangement agreement, which will be available on SEDAR.

Advisers

Canaccord Genuity Corp. and Trinity Advisors Corp. are acting as financial advisers to Kinross, with Osler, Hoskin & Harcourt LLP acting as legal adviser.

Conference call details

A conference call and audio webcast with Kinross and Great Bear management to discuss the transaction will be held on Thursday, Dec. 9, 2021, at 8 a.m. EST, followed by a question-and-answer session. To access the call, please dial:

Canada and U.S. toll-free: 833-968-2237, passcode 8144017

Outside of Canada and United States: 825-312-2059, passcode 8144017

Replay (available up to 14 days after the call):

Canada and U.S. toll-free: 800-585-8367, passcode 8144017

Outside of Canada and U.S.: 416-621-4642, passcode 8144017

You may also access the conference call on a listen-only basis via webcast on the company’s website. The audio webcast will be archived on Kinross’s website.

About Kinross Gold Corp.

Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. The company’s focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining. Kinross maintains listings on the Toronto Stock Exchange and the New York Stock Exchange.

(1) Assumes foreign exchange rate of 1.27 Canadian dollars to the U.S. dollar.

(2) Aggregate maximum total share consideration includes 15.0 million Kinross options that will be exchanged for 3.9 million Great Bear options.

(3) Inclusive of 300,000 Great Bear restricted stock units and deferred share units.

(4) Source: Great Bear public disclosure.

(5) All figures and values based on Great Bear drill data.

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http://kinross.com/