Gryphon made an inspired move with the merger with Shield and...

Gryphon made an inspired move with the merger with Shield and their Mauritanian assets. I'm kicking myself for selling out of Redback too early, I won't be making that mistake again. This could be very very big.

The Kinross takeover of Redback has already focused a lot of eyes on this area. Gryphon will be getting more and more attention.


Kinross expects Tasiast bounty

The Tasiast mine in Mauritania is already host to one of the best gold discoveries in decades. But by offering more than US$7-billion in stock and warrants for Red Back Mining Inc., Kinross Gold Corp. is betting that it will get much bigger.

Over the past couple of years, Vancouver-based Red Back has put out one astonishing press release after another detailing new exploration successes at Tasiast. It has been adding gold reserves at the project at a rate of 500,000 ounces a month, according to chief executive Rick Clark.

?The growth rate at Tasiast has been difficult for people to get their heads around,? he said in an interview. ?Some people have said that the last time they saw growth like this was Bre-X.?

Mr. Clark thinks there were some skeptics who had trouble believing in the project. Kinross, however, was not one of them.

Kinross decided about a year ago it wanted to get into West Africa, one of the world?s fastest-growing gold regions. It determined Red Back was its best entry point, largely due to the exploration potential of Tasiast.

Kinross did about six months of due diligence on Tasiast before making its offer. All that work led it to believe it can deliver much more production growth at the site than the Street expects.

Analysts expect on average that Red Back?s overall production can double by 2015 to about one million ounces.

Kinross chief executive Tye Burt will not say what his own target is, but he is confident he can do better than that. Hence, he is willing to pay a big premium for Red Back.

?We?ve put a lot of geologists and technical people on the ground [at Tasiast]. And individual analysts only have technical disclosure and possibly a site visit to work from. We have quite a different starting point,? he said.

He also pointed out that Red Back has explored only eight kilometres of ground out of the total strike length of 80 kilometres at Tasiast, supporting his view that there is a lot more gold to be found.

For Red Back, the merger with Kinross offers what Mr. Clark referred to as the ?Good Housekeeping seal of approval? on all the work the company has done, both at Tasiast and at its Chirano mine in Ghana. And with Tasiast certain to become a much larger operation, having a senior gold mining company step in with experience building huge mines makes sense.

Toronto-based Kinross first agreed to invest $600-million in Red Back in early May. Since then, Kinross shares have underperformed as investors began pricing in a potentially dilutive takeover of the whole company.

The stock fell again Tuesday as analysts pointed to near-term dilution from the deal. However, they also acknowledged the long-term strategic benefit for Kinross to get a toehold in West Africa, and the exploration upside from Tasiast.

?I wouldn?t be surprised if Tye pulled the trigger even faster than he planned because everybody was televising this deal,? said Dennis da Silva, a resource fund manager at Middlefield Capital. ?Just get it done, get this overhang out of the market, and move on.?

He added that the Kinross bid acknowledges the view that the existing gold resources at Tasiast could double, as Kinross needs that upside to make the deal accretive.

Mr. Burt said that even though the initial private placement in Red Back got a mixed response from his investors, they are pleased with the full merger.

There is no consensus view among analysts on whether Kinross will have to raise its offer. A competing bid is viewed as possible but not likely.

Financial Post

Read more: http://www.financialpost.com/Kinross+expects+Tasiast+bounty/3355616/story.html#ixzz0vbBP8D00