Have a look at the bold. So the mining law is not going to contain any surprises but Aurelian gives it away anyway. Either we have the most incompetent management known to mankind or this is beginning of a takeover war. Logic tells me #2 is the direction we will head in short order. Remember the Newmonts of the world don't have long to make a bid. My feeling is that they already have it prepared and are waiting to release it.

Kinross Gold Agrees to Buy Aurelian for C$1.2 Billion (Update3)

By Stewart Bailey

July 24 (Bloomberg) -- Kinross Gold Corp. agreed to buy Aurelian Resources Inc. for C$1.2 billion ($1.18 billion), giving it the largest gold deposit in Ecuador, where mining was halted in April pending a new minerals law. Aurelian soared.

Kinross will swap 0.317 share for each one of Aurelian's, the company said today in a statement. That's a 48 percent premium, based on yesterday's closing prices. Toronto-based Aurelian jumped as much as 69 percent on news of the buyout, which also includes Kinross warrants.

Tye Burt, chief executive officer of Toronto-based Kinross, plans to add Aurelian's Fruta del Norte deposit, which contains 13.7 million ounces of gold and 22.4 million ounces of silver, to new mines in Russia, Brazil and Chile. Before this acquisition, Burt had planned to boost output by more than a third to 2.6 million ounces next year.

``This shows that if you have a world-class asset, like Aurelian does, then someone will want it,'' Andrew Pullar, a gold-fund manager at Baker Steel Capital Managers LLP, said in an interview from London. ``It's a bold move. A lot of Kinross's growth is in politically risky places.''

Aurelian's directors recommended shareholders accept the offer.

Aurelian climbed C$2.10, or 47 percent, to C$6.55 at 1:31 p.m. in Toronto Stock Exchange trading. A close at that price would be the biggest one-day gain since June 2006. Kinross fell C$1.79, or 8.6 percent, to C$19.05 in Toronto.

Ecuador's government has banned most mining and exploration in the country since April 18, when it started drafting a new minerals law. Aurelian said later that month that it would halt all activity on the Fruta deposit until the government allows operations to resume.

Mining Ban Continues

Ecuadoran Mining Undersecretary Jose Serrano said this month that the mining ban, which was set to end in August, may last until the fourth quarter because of legislative delays. The new law will set royalty payments and minimum social and environmental rules, Serrano said.

``We've had a number of meetings with senior government officials and believe that they will be supportive of the direction, which we are discussing,'' Burt said today on a call with analysts and reporters. ``We believe the country is headed in the right direction.''

The new law is ``not going to contain any substantial surprises,'' he added.

Kinross will buy 15 million new Aurelian shares for C$4.75 each, providing C$71 million to Aurelian to help pay for Fruta del Norte's development. The purchase of that stock is not dependent on the acquisition offer succeeding, Kinross said.

Strategic Fit

Buying Aurelian fits with Kinross's strategy because the company believes working on the Kupol mine project in Russia gave it experience in developing mines in regions with ``some measure of political risk,'' Greg Barnes, a mining analyst at TD Newcrest Inc. in Toronto, said in a note to clients.

``This deposit will add significantly to our mineral resource base,'' Burt said in the statement. ``We intend to pursue a focused strategy to further define the deposit.''

Along with Kinross shares, Aurelian holders also will get 0.1429 of one warrant, with each warrant entitling them to buy a Kinross share for C$32 within five years. Kinross valued the fractional warrants at 92 cents each.

Kinross has the right to match any higher offer for Aurelian. Aurelian will owe Kinross a C$42 million break-up fee if another offer is accepted, the companies said.

Competing bids are most likely to come from Barrick Gold Corp. or Newmont Mining Corp., both of which may be attracted to the size of the Fruta deposit, Barnes said.

Kinross' financial advisers were led by Scotia Capital Inc. and included Rothschild Inc. and CIBC World Markets Inc., the company said. Advising Aurelian are BMO Capital Markets and Dundee Securities Corp. Providing legal counsel to Kinross are Osler, Hoskin & Harcourt LLP and Perez, Bustamante & Ponce, while Cassels Brock & Blackwell LLP is advising Aurelian.

To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.