Kinross, TVX and Echo Bay in gold merger deal

A trio of Canadian mining companies Kinross Gold Corp., TVX Gold Inc. and Echo Bay Mines Ltd. are merging in a $1.95 billion all-stock deal the firms said will create the seventh-largest gold producer in the world.

The new firm which will be called Kinross will be 40.3 per cent owned by shareholders of the existing Kinross (TSX:K), 31.1 per cent by TVX (TSX:TVX)shareholders and 14 per cent per cent by Echo Bay (TSX:ECO)shareholders.

Newmont Mining will get the remaining 14 per cent of the new Kinross in a side deal that will see TVX acquire Newmont's 49.9 per cent stake in TVX Newmont Americas for $180 million US.

Under the terms of the merger, Echo Bay shareholders will get 0.52 of a Kinross share, while TVX holders will get 0.65 of a Kinross share for each of their TVX stock. Based on average trading prices over the past 30 days, Kinross will pay about $1.81 for each share of Echo Bay and $2.27 per share for TVX.

In the wake of the announcement, Kinross shares slipped almost 20 per cent, falling by 78 cents to $3.14. Echo Bay shares closed off 31 cents at $1.54.

Only TVX shares moved up on the news. The stock gained 20 cents to end the day on the TSX at $1.84.

When the merger is complete, the new company will have a market capitalization in excess of $2 billion US, putting it in the top ten in the world. The new company will also produce 2 million ounces of gold per year at a total cash cost of less than $200 US per ounce.

Kinross said the merged outfit will be the only senior North American producer with a non-hedging policy and will have less than 5 per cent of its reserves hedged.

"The combination of Kinross, Echo Bay, TVX and (TVX Newmont Americas) will create the premier North American senior gold company for those investors seeking maximum leverage to the gold price in a gold company with superb liquidity," Kinross chairman and CEO Robert Buchan said in a release.

The Canadian gold mining sector has seen a wave on consolidations in recent months. In late May, Placer Dome Inc. of Vancouver bid $1.7 billion to take over Australia's AurionGold Ltd. in a move Placer said would make it the fifth-largest gold producer in the world.