Archive for March, 2010


Underworld Resources Inc. and Kinross Gold Corp. have approved a business combination by way of a friendly offer by Kinross to acquire 100 per cent of the outstanding common shares of Underworld not already owned by Kinross. Subject to the execution of definitive agreements, the board of directors of Underworld unanimously recommends the offer to its shareholders and the directors and management team have agreed to tender their shares to the offer. Pursuant to the terms of the letter agreement, Underworld has agreed to work exclusively with Kinross toward the conclusion of a definitive support agreement which is anticipated to be executed and delivered by the parties by March 15, 2010.

Elements of the transaction include:

– For each common share of Underworld, Kinross will offer 0.141 of a Kinross common share, plus one cent in cash. The offer represents an implied offer price of approximately $2.62 per common share, based on the March 10, 2010, closing price of $18.54 per Kinross common share on the Toronto Stock Exchange. The transaction values the fully diluted share capital of Underworld at approximately $139.2-million.

– The offer represents an attractive and immediate premium of 36 per cent over the closing price of the common shares on the TSX Venture Exchange on March 10, 2010, the last day of trading prior to announcement of the offer, and a premium of approximately 50.2 per cent based on the volume-weighted average prices of the common shares and Kinross’s common shares, for the 20 trading days ended March 10, 2010.

The board of directors of Underworld, after receiving the recommendation of a special committee of independent directors created by Underworld to oversee the transaction process, has unanimously determined that the offer is in the best interests of Underworld and Underworld’s shareholders, and unanimously recommends that Underworld shareholders tender their common shares to the offer. The directors and senior officers of Underworld will enter into customary lock-up agreements with Kinross to tender all of their common shares to the offer.

Underworld’s key asset is the White gold project, located in the Tintina gold belt, approximately 95 kilometres south of Dawson City, Yukon territory, Canada. Underworld chairman Michael Williams commented: “The Kinross offer brings substantial technical and financial resources to the White gold property which will further rapidly advance the project. We feel the Kinross offer provides immediate value to our shareholders.”

Underworld’s financial adviser Canaccord Financial Ltd. has provided an oral opinion to the Underworld board of directors that the consideration offered is fair, from a financial point of view, to Underworld’s shareholders.

Full details of the offer will be included in the formal offer and takeover bid circular to be mailed to Underworld shareholders shortly. The offer will be open for acceptance for at least 35 days following the commencement of the offer. The offer is subject to several conditions, including acceptance of the offer by the holders of at least two-thirds of the outstanding common shares (calculated on a fully diluted basis) and the receipt of all necessary regulatory approvals. If Kinross acquires at least two-thirds of the outstanding common shares, Kinross intends to take steps to acquire all outstanding common shares not acquired pursuant to the offer. If 100 per cent of the common shares are tendered, Kinross will issue approximately 6.8 million common shares pursuant to the transaction (based on the fully diluted share capital of Underworld), representing approximately 1 per cent of Kinross’s current outstanding common shares.

Underworld’s legal counsel is DuMoulin Black LLP. Kinross’s financial adviser is RBC Capital Markets, its strategic adviser is BMO Capital Markets and its legal counsel is Osler, Hoskin & Harcourt LLP.

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