What happened
Shares of Kinross Gold (KGC +6.77%) slumped on Thursday after the miner announced a $1.4 billion deal to acquire Great Bear Resources. As of 1:05 p.m. ET, the stock was down by 10.9%.
So what
In a press release sent out on Wednesday, Kinross Gold announced its intent to acquire Great Bear Resources for $1.4 billion in stock and cash at a proposed price of 29 Canadian dollars per share. The target company owns a mining complex in Ontario, Canada, and it looks like Kinross Gold management thinks it could be a top-tier deposit area.
Image source: Getty Images.
As is common following such announcements, the acquirer's share price slumped. Great Bear Resources stock, on the other hand, shot up by 24% and is now trading close to the proposed deal price.
The deal terms are for a mix of cash and stock, with maximum payouts of 75% in cash or 40% in Kinross Gold common stock, whatever mix Great Bear Resources' shareholders choose. A further payout of $46 million could go to the target company's shareholders if at least 8.5 million ounces of gold are found at the Great Bear Resources mine site.
Now what
With a market cap of approximately $6.5 billion, Kinross Gold trades at a dirt-cheap EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of 4. If you believe this acquisition can help it grow its earnings and cash flow over the next few years, then now could be the right time to buy this gold miner. But if you don't know much about the gold mining industry and aren't in a position to make an educated speculation about how the Great Bear Resources mine will perform, then you would probably be better off staying away from Kinross Gold stock, even while it's trading at a discount.
