Kinross Gold Corp. (KGC, Financial) has agreed to purchase an interest stake of approximately 19.9% in White Gold Corp. (TSXV:WGO, Financial). Closing – dependent on the satisfaction of customary conditions and the approval of TSX Venture Exchange – is expected sometime during this quarter.
The company says that the completion of the transaction is also conditional to the “concurrent closing of a private placement to Agnico Eagle (AEM, Financial) to maintain its proportionate interest in White Gold” since Agnico Eagle Mines also has a 19.9% interest stake in the Canadian explorer.
The agreement that Kinross Gold has reached with White Gold provides that Kinross Gold will sell to White Gold its 100% interest stake in the White Gold exploration project, located in Canada's Yukon Territory.
White Gold is a Canadian explorer with a highly experienced technical team and with a portfolio of mineral properties in Canada that together cover approximately 30% of the Yukon’s White Gold District, a highly prospective area with a history of a total amount of approximately 17 million ounces of gold produced.
At the White Gold District, more than 7 million ounces of gold have been discovered over the last 10 years. Here the Canadian explorer currently holds 14,648 quartz claims for a total of 297,000 hectares. White Gold is therefore the biggest landholder in the White Gold District where two of the biggest producers of gold, Goldcorp (GG, Financial) and Kinross, also have properties.
Kinross’ White Project, which is part of the deal with the Canadian explorer, holds a potential of 1.5 million ounces of gold while Goldcorp’s Coffee Project holds a potential of 5 million ounces of gold. Other minor companies with properties in the White Gold District are Comstock with its QV Project holding a potential of 230,000 ounces of gold and Western Copper with its Casino Project bearing a potential of 8.9 million ounces of gold and 4.5 billion pounds of copper.
The White Gold Exploration Project is already fully funded for three years of 60,000 meters of drilling.
Kinross Gold says that the sale of the White Gold exploration property to White Gold involves the payment in cash – upon closing – of approximately $7 million; the payment in shares of approximately 19.9% of White Gold’s issued and outstanding shares – calculated on a pro forma basis – valued approximately $26 million; plus a deferred payment of approximately $11 million.
The payment of $11 million will be done by Kinross Gold in three tranches of $3.7 million apiece. The first one will be paid when White Gold announces the completion of a preliminary economic assessment (PEA); the second tranche of $3.7 million will be paid by Kinross Gold to White Gold once White Gold has completed a feasibility study. The payment of the third tranche is conditional to a positive building decision concerning the White Gold exploration project.
A future investor rights agreement will give Kinross the right to participate in any White Gold equity issue to maintain its ownership position in the Canadian explorer and the right to appoint one of White Gold’s directors.
J. Paul Rollinson, Kinross Gold’s president and CEO, said that "this investment will allow the three companies to pool their expertise together to strengthen their position in this excellent mining jurisdiction."
Kinross Gold is currently trading at $4.21, down 7 cents or minus 1.64% from the previous trading day. The gold stock is uptrending, and it has gained 35.4% year to date.
During the first quarter, Donald Smith and Joel Greenblatt decreased their positions by 0.69% to 63,454,883 shares and 67.46% to 27,089 shares of Kinross Gold as of March 31, 2016.
Disclosure: I have no positions in any stock mentioned in this article.
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