The New Kid on the Block
It’s hard to argue with success. Ten years ago, with impetus provided by Ned Goodman’s investment bank, Dundee Bancorp, Kinross Gold Corp. was formed by pushing together the assets of three smaller companies–Plexus Resources Corp., CMP Corp. and a private company. Dundee Bancorp had a 25.3% interest, and Placer Dome Inc. held 17.2%.
The new company had a bit of property in the western United States and Cdn$14 million in cash. Its executives were drawn from the merged companies including Bob Buchans, a mining engineer and former analyst who has been CEO of Kinross since the start.
The company had something else: a strong will to grow. It would quickly gain a reputation for shrewd shopping, fast decisions and tight fiscal management–in short, for being “entrepreneurial”.
Base metal miners were divesting their non-core assets at the time, which meant that some better precious metal properties were available. Kinross did not hesitate. Within three weeks, the first purchase was announced: two gold-silver mines in the western United States. Later the same year Kinross bought the controlling interest in Falconbridge Gold from Falconbridge Ltd. In all, the company spent Cdn$70 million on new assets before the year was out.
As the time chart shows (page 12), Kinross has continued to acquire ever-more-choice properties including the assets of Amax Gold in 1998 and the Timmins assets of Royal Oak Mines in 1999.
In 2002 Kinross concluded an innovative agreement with Placer Dome. The two companies combined all their Timmins-area producing mines, mills and exploration properties into the Porcupine joint venture (51% Placer Dome, which is the operator; 49% Kinross). This agreement places most of the potential of the prolific Timmins-Porcupine gold belt into the hands of a single exploration team.
Then came the biggest acquisition to date, when on June 10, 2002, Kinross entered into a deal to take over Echo Bay Mines Ltd. and TVX Gold Inc. for 177.8 million common shares with an aggregate fair value of US$1.3 billion. At the same time Kinross purchased Newmont’s 50% interest in the TVX Newmont Americas joint venture for US$180 million. The deals were concluded on Jan. 31 of this year. Major shareholders of the merged company are Newmont Mining Corp. of Canada (13.7%) and Fidelity Management & Research Co. (11.7%). See the chart on page 16 for the mines held by the new Kinross.
Through this deal, Kinross has almost doubled its gold production to an estimated 1,700,000 oz in 2003, at a higher total cash cost of US$215-220/oz. Thus has the company vaulted into the land of the majors, becoming the third largest gold miner in Canada (behind Barrick Gold Corp. and Placer Dome Inc.) and seventh largest in the world. The timing was superb, with the London spot market gold price climbing to an average of US$352/oz in the first quarter of 2003 compared with US$310/oz in 2002.
An excellent way to conclude Kinross’ first decade.