This WSJ news item provides some additional info on the deal:
From The Wall Street Journal
TORONTO -- Kinross Gold Corp. and Amax Gold Inc. agreed to combine in a $467 million two-step transaction aimed at propping up the gold-mining companies' cash flow amid weak gold prices.
The merged company, to be called Kinross Gold, will be North America's fifth-largest gold producer with annual production of about 1.2 million ounces of gold from 12 mines around the world.
The companies said the merged concern will be about equally owned by the current shareholders of each company, after Amax Gold's 59% owner, Cyprus Amax Minerals Co., contributes $135 million to Kinross in exchange for 35 million Kinross shares. Kinross will then issue 0.8 share for every share of Amax gold.
Cyprus Amax, Denver, had long been seeking a buyer for its stake in Amax Gold, Englewood, Colo., while Kinross has said it was seeking ways to combat low gold prices. The merger is aimed at "fixing the balance sheet" of the combined company, said Kinross Chief Executive Officer Robert Buchan, noting that Amax has been seen as having "an uncomfortable level of debt." Under a planned series of transactions, about $335 million of Amax Gold debt will be eliminated, the companies said. No mines will be closed and no layoffs are planned, Mr. Buchan said.
In recent years, Kinross's plans to increase gold production have been hampered by falling gold prices and operational problems at its Macassa mine in Ontario. At year-end 1997, the company recorded several write-downs related to mine properties. Last year, Kinross produced 499,025 ounces of gold and gold equivalent, which includes other metal production expressed in gold terms, at an operating cost of $268 an ounce.
Amax Gold, while remaking itself into a low-cost gold producer in recent years, took on high levels of debt to make that change. Its shares have substantially underperformed both the market and other gold-sector stocks for a decade. The company recently closed or disposed of many of its highest-cost operations, and brought on-line three promising gold mines.
Kinross's Mr. Buchan said the combined company will have proven gold reserves of about 10.1 million ounces and mine gold at a cost of about $210 an ounce in 1998. Mr. Buchan will remain chairman and chief executive.
To slash $335 million of Amax's debt, Kinross will use the $135 million of proceeds from Cyprus Amax, draw about $100 million of Kinross's cash and raise $120 million from an issue of rights to an underwriting syndicate led by CIBC Wood Gundy Securities Inc., Toronto.
(END) DOW JONES NEWS 02-09-98
08:46 PM |
