SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO/A
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934
KINAM GOLD, INC.
(Name of Subject Company)
KINROSS GOLD CORPORATION
KINROSS GOLD U.S.A., INC.
(Offerors)
(Name of Filing Persons)
$3.75 SERIES B CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
49448220
(CUSIP Number of Class of Securities)
SHELLEY M. RILEY
Secretary
Kinross Gold Corporation
52nd Floor, Scotia Plaza
40 King Street West
Toronto, Ontario, Canada M5H 3Y2
Telephone: (416) 365-5123
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of the
Filing Person)
COPY TO:
KEITH L. POPE, ESQ.
Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111-1537
(801) 532-7840
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
Transaction Valuation Amount of Filing Fee
--------------------- --------------------
$14,313,600* $1,317**
- --------------------------------------------------------------------------------
* This amount assumes the purchase of 894,600 shares of $3.75 Series B
Convertible Preferred Stock, par
value $1.00 per share, at the tender offer price of $16.00.
** The fee was paid at the time of the original Schedule TO filing on
February 20, 2002.
|_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
|X| third-party tender offer subject to Rule 14d-1.
|_| issuer tender offer subject to Rule 13e-4.
|X| going-private transaction subject to Rule 13e-3.
|X| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: |_|
Amount previously paid: Not applicable. Filing party: Not applicable.
Form or registration No.: Not applicable. Date filed: Not applicable.
- -----------------------------------------------------------------------------------------
This Schedule TO/A amends and supplements the Schedule TO filed with
the Securities and Exchange Commission on February 20, 2002 (the "Schedule TO"),
relating to the offer by Kinross Gold U.S.A., Inc., a Nevada corporation and
wholly owned subsidiary of Kinross Gold Corporation, an Ontario corporation, to
purchase all of the publicly-held shares of the Kinam Gold Inc. $3.75 Series B
Convertible Preferred Stock, par value $1.00 per share, for cash in the amount
of $16.00 per share, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 20, 2002 (the
"Offer to Purchase"), and the related Letter of Transmittal. The Offer to
Purchase is hereby amended and supplemented as set forth on the Offer to
Purchase, dated March 14, 2002, attached hereto as Exhibit (a)(1)(A)(1).
Capitalized terms used herein but not otherwise defined shall have the
respective meanings assigned to such terms in the Offer to Purchase.
ITEM 12. EXHIBITS.
Item 12 of the Schedule TO is hereby amended and supplemented to
include the following exhibit:
(a)(1) (A)(1) Offer to Purchase, dated March 14, 2002.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
SCHEDULE 13E-3 ITEM 16. EXHIBITS.
The information set forth under Item 12 above in this Schedule TO/A is
incorporated herein by reference.
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we
certify that the information set forth in this Schedule TO/A is true, complete,
and correct.
KINROSS GOLD CORPORATION
March 14, 2002 By /s/ Brian W. Penny
-------------------------------------------
Brian W. Penny
Vice-President Finance and Chief Financial
Officer
KINROSS GOLD U.S.A., INC.
March 14, 2002 By /s/ Brian W. Penny
-------------------------------------------
Brian W. Penny
Treasurer and Director
EXHIBIT (A)(1)(A)(1)
KINROSS GOLD CORPORATION
OFFER TO PURCHASE ALL PUBLICLY-HELD SHARES OF
THE $3.75 SERIES B CONVERTIBLE PREFERRED STOCK OF KINAM GOLD INC.
AT $16.00 PER SHARE,
AS AMENDED MARCH 14, 2002
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, EASTERN TIME, ON MARCH
20, 2002, UNLESS THE OFFER IS EXTENDED BY KINROSS.
Kinross Gold U.S.A., Inc., a wholly-owned subsidiary of Kinross Gold
Corporation, is offering to purchase all of the publicly-held shares of the
$3.75 Series B Convertible Preferred Stock of Kinam Gold Inc. at a purchase
price of $16.00 per share, payable in cash. This offer is subject to certain
terms and conditions set forth herein and in the related Letter of Transmittal.
The purchase price for the shares of preferred stock will be paid promptly
following the completion of the offer. If you tender any of the shares of Kinam
preferred stock you hold, you must tender all shares of the Kinam preferred
stock you hold.
THIS OFFER TO PURCHASE IS NOT CONDITIONED UPON A MINIMUM NUMBER OF SHARES BEING
TENDERED BUT IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE THE OFFER--CONDITIONS
OF THE OFFER.
Any holder of shares of preferred stock desiring to tender his or her shares
should complete and sign the Letter of Transmittal in accordance with the
instructions in the Letter of Transmittal, mail or otherwise deliver it,
together with the certificate evidencing your shares to Alpine Fiduciary
Services, Inc. (the "Depositary"), at one of the addresses set forth on the
Letter of Transmittal and the back cover of this offer.
KINROSS AND THE SPECIAL COMMITTEE OF KINAM DIRECTORS HAVE BOTH DETERMINED THAT
THE OFFER IS FAIR TO THE NON-AFFILIATED HOLDERS OF KINAM PREFERRED STOCK. THE
KINAM SPECIAL COMMITTEE DETERMINED THAT IT SHOULD REMAIN NEUTRAL AND DID NOT
RECOMMEND FOR, RECOMMEND AGAINST, OR EXPRESS AN OPINION WITH RESPECT TO WHETHER
THE NON-AFFILIATED HOLDERS SHOULD ACCEPT OR REJECT THE TENDER OFFER. THE 945,400
SHARES OF KINAM PREFERRED STOCK HELD BY KINROSS WILL NOT BE TENDERED INTO THIS
OFFER AND WILL CONTINUE TO BE HELD BY KINROSS.
The Kinam preferred stock is listed on the American Stock Exchange under the
symbol KGC^B. On February 19, 2002, the last day before the commencement of this
offer, the last reported sale price of the preferred stock was $15.25 per share.
You are urged to obtain current market prices for the preferred stock prior to
tendering your shares.
Questions or requests for assistance or for additional copies of this offer to
purchase, the Letter of Transmittal, or other offering materials may be directed
to the Information Agent, Georgeson Shareholder Communications, Inc., at (800)
223-2064.
NEITHER KINROSS NOR KINAM HAS AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFER OTHER THAN THOSE
CONTAINED IN THIS DOCUMENT OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY KINROSS OR KINAM.
This offer is not being made to, nor will any tender of shares be accepted from
or on behalf of, shareholders in any jurisdiction in which the making of this
offer or the acceptance of any tender of shares therein would not be in
compliance with the laws of such jurisdiction. However, Kinross may, at its
discretion, take such action as it may deem necessary for Kinross to make the
offer in any such jurisdiction.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
DISCLOSURES IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
DEALER MANAGER
GEORGESON SHAREHOLDER SECURITIES
GEORGESON SHAREHOLDER SECURITIES
CORPORATION
17 STATE STREET, 10TH FLOOR
NEW YORK, NEW YORK 10004
TABLE OF CONTENTS
SUMMARY TERM SHEET....................................................................................1
SPECIAL FACTORS.......................................................................................4
HISTORY........................................................................................................4
BACKGROUND OF THE TENDER OFFER.................................................................................4
RELATIONSHIPS BETWEEN KINROSS AND KINAM........................................................................6
ALTERNATIVES TO THE OFFER......................................................................................8
REASONS FOR AND PURPOSES OF THE TENDER OFFER...................................................................8
Strengthen Balance Sheet and Future Results of Operations......................................................9
Wholly-Owned Subsidiary........................................................................................9
Save Reporting Costs...........................................................................................9
CONSEQUENCES OF THE TENDER OFFER...............................................................................9
TERMS OF THE KINAM PREFERRED STOCK............................................................................10
FAIRNESS OF THE OFFER.........................................................................................11
INTERESTS OF KINROSS IN THE OFFER.............................................................................14
FAIRNESS OPINION OF RAYMOND JAMES.............................................................................15
Precedent Transactions Analysis...............................................................................16
Prior Purchase Analysis.......................................................................................17
Intrinsic Value Analysis......................................................................................17
Convertible Analysis--Method 1................................................................................17
Convertible Analysis--Method 2................................................................................17
Convertible Analysis--Method 3................................................................................17
Discounted Cash Flow Analysis.................................................................................18
Trading Value Analysis........................................................................................18
Comparable Company Analysis...................................................................................18
PLANS OF KINAM AND KINROSS AFTER THE TENDER OFFER.............................................................19
DISSENTERS' RIGHTS OF APPRAISAL...............................................................................21
INTRODUCTION.........................................................................................21
GENERAL INFORMATION...........................................................................................21
ADDITIONAL FINANCIAL INFORMATION..............................................................................22
FORWARD-LOOKING INFORMATION...................................................................................22
THE OFFER............................................................................................23
NUMBER OF SHARES; EXPIRATION DATE.............................................................................23
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.................................................................24
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.......................................................24
WITHDRAWAL RIGHTS.............................................................................................27
CONDITIONS OF THE OFFER.......................................................................................28
BENEFICIAL OWNERSHIP OF KINAM PREFERRED STOCK.................................................................29
PRICE RANGE OF KINAM PREFERRED STOCK..........................................................................29
SOURCE OF FUNDS FOR AND EXPENSES OF THE OFFER.................................................................29
INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS
CONCERNING THE SHARES.....................................................................................30
MATERIAL FEDERAL INCOME TAX CONSEQUENCES......................................................................31
LEGAL MATTERS; REGULATORY APPROVALS...........................................................................33
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS...........................................................33
ADDITIONAL INFORMATION........................................................................................34
SUMMARY TERM SHEET
Kinross Gold U.S.A., Inc. (the "Purchaser"), a wholly-owned subsidiary of
Kinross Gold Corporation ("we," "our," "us," or "Kinross" all of which may
include the Purchaser when we are acting through that company) is offering to
purchase all of the outstanding shares of Kinam preferred stock that the
Purchaser does not already own, at a cash purchase price of $16.00 per share.
The following are some of the questions that you, as a shareholder of Kinam
preferred stock, may have, and answers to those questions. The information in
this summary is not complete and we urge you to carefully read the remainder of
this offer and the accompanying Letter of Transmittal.
WHY IS KINROSS MAKING THE OFFER?
Indirectly through the Purchaser, we currently own all of the outstanding common
shares and 51.4% of the outstanding preferred stock of Kinam. We are offering to
purchase the shares of Kinam preferred stock that we do not own in order to
improve our balance sheet and future results of operations, to make Kinam a
wholly-owned subsidiary, and to save costs by terminating the public reporting
obligations of Kinam. See SPECIAL FACTORS--REASONS FOR AND PURPOSES OF THE
TENDER OFFER.
WILL THE PREFERRED STOCK CONTINUE TO TRADE ON THE AMERICAN STOCK EXCHANGE
SUBSEQUENT TO THE OFFER?
No. We anticipate that Kinam will delist its preferred stock from the American
Stock Exchange upon completion of the offer. See SPECIAL FACTORS--CONSEQUENCES
OF THE TENDER OFFER.
WILL KINAM CONTINUE TO FILE PUBLICLY AVAILABLE REPORTS?
No. In connection with delisting its preferred stock from the American Stock
Exchange, Kinam will terminate the registration of its preferred stock under the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act").
Consequently, Kinam will no longer be subject to the reporting and other
requirements of the Exchange Act, including requirements to file annual and
other periodic reports, to provide proxy and information statements to
shareholders in connection with annual or special meetings of shareholders, or
to provide the type of going-private disclosure contained in this offer to
purchase. See SPECIAL FACTORS--CONSEQUENCES OF THE TENDER OFFER.
WILL I BE ABLE TO SELL MY PREFERRED STOCK SUBSEQUENT TO THE OFFER?
We do not anticipate that a public market will continue for the Kinam preferred
stock subsequent to completion of the offer. If you do not tender your shares in
the offer, you will continue to own the shares and there will not be any
restrictions on your right to transfer the shares. However, we anticipate that
it will be much more difficult for you to readily locate a buyer for your shares
of Kinam preferred stock and to negotiate an acceptable sales price in the
absence of a public market. See SPECIAL FACTORS--CONSEQUENCES OF THE TENDER
OFFER.
WHAT PLANS DOES KINROSS HAVE FOR KINAM AFTER THE TENDER?
To the extent that we do not acquire all of the shares of Kinam preferred stock
through this tender offer, we intend to pursue a merger or recapitalization in
which the remaining holders of Kinam preferred stock would receive $16.00 per
share for their shares of Kinam preferred stock. If we acquire sufficient shares
of the Kinam preferred stock so that we hold 90% or more of the preferred stock
subsequent to the tender offer, this may be accomplished by a short form merger
that will not be subject to shareholder approval. We are not under an obligation
to proceed with a merger or recapitalization subsequent to the tender offer and
may change our intent and elect not to complete such a transaction or to
complete it at a different price per share. See PLANS OF KINAM AND KINROSS AFTER
THE TENDER OFFER.
WHAT IS THE CONCLUSION OF KINAM'S SPECIAL COMMITTEE?
Kinam established a special committee of non-management directors to consider
the fairness of the tender offer to the holders of the Kinam preferred stock
other than the Purchaser (the "non-affiliated holders"). Members of the special
committee are also directors of Kinross, hold equity interests in Kinross, and
one of the members is a partner in a law firm that provides legal services to
both Kinross and Kinam. See INTERESTS OF KINROSS IN THE OFFER. The special
committee retained Raymond James Ltd. to analyze the offer and to provide an
opinion on whether the tender offer was fair to the non-affiliated holders from
a financial point of view. Based on the fairness opinion of Raymond James and
the special committee's consideration of a number of other factors, the special
committee believes that the offer is fair to the non-affiliated holders. Since
all of the members of the special committee also sit on the board of Kinross,
and are therefore not independent of Kinross, the special committee did not deem
it appropriate to recommend acceptance or rejection of the tender offer by the
non-affiliated holders. See SPECIAL FACTORS--FAIRNESS OF THE OFFER.
WHAT WILL I RECEIVE IF I DECIDE TO TENDER MY SHARES?
We will pay you cash in the amount of $16.00 for each share that you properly
tender. If your shares are held of record in your name, and the certificates are
submitted directly to the Depositary, you will not be required to pay a
brokerage commission on the shares that you tender. If your shares are held by
your broker or a bank or another nominee, you should consult with your broker or
bank to determine the fees that you might have to pay. See THE OFFER--NUMBER OF
SHARES; EXPIRATION DATE and -ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
WHEN WILL I RECEIVE PAYMENT FOR MY SHARES?
The cash price of $16.00 per properly tendered share will be paid promptly
following the completion of the offer. No interest will accrue or be paid on the
cash amount payable to you, regardless of when paid. See THE OFFER--ACCEPTANCE
FOR PAYMENT AND PAYMENT FOR SHARES.
DO I HAVE TO TENDER ALL OF MY SHARES?
Yes. If you elect to tender any portion of the shares of the Kinam preferred
stock you hold, you must tender all of the shares of the Kinam preferred stock
you hold. See THE OFFER- NUMBER OF SHARES; EXPIRATION DATE.
DOES THE PURCHASER HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
If all 894,600 of the publicly-held shares of Kinam preferred stock are tendered
and accepted, the Purchaser will be required to pay an aggregate of $14,313,600.
The Purchaser currently has cash reserves available to it that are sufficient to
pay this amount. See THE OFFER--SOURCE OF FUNDS FOR AND EXPENSES OF THE OFFER.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES?
You will have until Midnight, Eastern Time, on March 20, 2002, the expiration
date, to deliver your Letter of Transmittal and the necessary accompanying
documents to the Depositary, unless we extend that date or elect to provide a
subsequent offering period, in our sole discretion. See THE OFFER--NUMBER OF
SHARES; EXPIRATION DATE.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer or elect to provide a subsequent offering period, we will
make a public announcement of our decision not later than 9:00 a.m., Eastern
Time, on the next business day after the date on which the offer was previously
scheduled to expire. See THE OFFER--NUMBER OF SHARES; EXPIRATION DATE and
- -EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
This offer is not conditioned on a minimum number of shares being tendered.
However, the offer is subject to a number of other conditions, which you should
review. We have the right to amend the offer or, to the extent that one or more
of the conditions are not satisfied, to withdraw or terminate the offer, whether
or not you have already tendered your shares. See THE OFFER--CONDITIONS OF THE
OFFER.
HOW DO I TENDER MY SHARES?
You can tender your shares by completing and sending the enclosed Letter of
Transmittal, together with any other documents required by the Letter of
Transmittal, and your stock certificates to the Depositary, Alpine Fiduciary
Services, Inc., at one of the addresses set forth on the back cover of this
offer. If your shares are held in "street name" for you by your broker, you must
instruct your broker to tender the shares on your behalf or obtain certificates
registered directly in your name. If the certificates for your shares are not
immediately available, you may tender your shares by using the procedure for
guaranteed delivery. See THE OFFER--PROCEDURES FOR ACCEPTING THE OFFER AND
TENDERING SHARES.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES AND UNTIL WHAT TIME CAN I WITHDRAW
THEM?
You can withdraw previously tendered shares at any time until the expiration
date, including any extension, if we extend the offer. To withdraw tendered
shares you must deliver a written notice of withdrawal, or facsimile thereof,
with the required information to the Depositary while you still have the right
to withdraw the tendered shares. Once withdrawn, you may re-tender shares only
by again following one of the delivery procedures prior to the expiration of the
offer, or any subsequent termination date if we choose to extend the offer. See
THE OFFER--WITHDRAWAL RIGHTS.
WHAT ARE THE MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES IF I TENDER MY
SHARES AND I AM A UNITED STATES PERSON?
Under federal tax provisions, for most United States shareholders, the sale of
the shares on acceptance of the tender will generally result in a taxable
capital gain or loss based on the difference between $16.00 per share and the
tax basis of the shares tendered. Such gain or loss would be taxed at long-term
or short-term rates depending on the time you have held your shares that you
tender. It is possible, however, depending upon your individual circumstances,
that special tax rules may apply to alter your tax treatment and you should
consult your tax advisor prior to electing to accept the tender offer. To avoid
backup withholding of United States federal income tax at a 30% rate,
shareholders who are United States Persons should submit to the Depositary the
Form W-9 included with the Letter of Transmittal. Non-United States holders
should submit a properly completed IRS Form W-8BEN to the Depositary to avoid
such backup withholding. See THE OFFER--MATERIAL FEDERAL INCOME TAX
CONSEQUENCES.
WHERE CAN I OBTAIN MORE INFORMATION ABOUT KINROSS AND KINAM?
Kinross and Kinam are subject to the informational filing requirements of the
Exchange Act. Copies of their reports can be obtained from the public reference
facilities maintained by the Securities and Exchange Commission. Kinam reports
can also be accessed at HTTP://WWW.SEC.GOV. Kinross' filings with the securities
regulatory authorities in Canada can be found at HTTP://WWW.SEDAR.COM. The
Purchaser is a wholly-owned subsidiary of Kinross and is not subject to any
independent informational filing requirements. The financial position and
results of operations of the Purchaser are included in the consolidated
financial statements of Kinross. See THE OFFER--ADDITIONAL INFORMATION.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
You can call Georgeson Shareholder Communications Inc., which is acting as
Information Agent, at (800) 223-2064, to ask questions about the offer.
SPECIAL FACTORS
HISTORY
Kinam's predecessor, Amax Gold Inc., issued 1,840,000 shares of Kinam preferred
stock in a 1994 registered public offering. In a merger completed June 1, 1998,
we acquired 115,238,675 of the common shares of Kinam in exchange for the
issuance of 92,213,988 of our common shares. Immediately subsequent to the
merger, we cancelled 23,024,687 shares of Kinam's common stock held by us for no
consideration and, in January 2001, Kinam issued an additional 100 shares to us
in exchange for assets we contributed to Kinam. This merger gave us effective
control of Kinam, since the outstanding Kinam common shares, which currently
have 92,214,088 votes, and the outstanding Kinam preferred stock, which
currently have 2,576,000 votes, vote as a single class on all matters submitted
to shareholders, except as otherwise required by law or specifically provided by
the terms of Kinam's articles of incorporation governing the preferred stock.
In July 2001, we completed the acquisition of 945,400 shares of Kinam preferred
stock from three shareholders, in exchange for the issuance of 24,186,492 shares
of our common shares, giving us ownership of 51.4% of the Kinam preferred stock.
The acquisition price for financial reporting purposes was an aggregate of $23.3
million, or approximately $24.65 per share of Kinam preferred stock. See
INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING THE
SHARES. This acquisition did not result in the cancellation of any shares or
other change in the capitalization of Kinam. Consequently, we now control
93,537,648 votes out of a total of 94,790,088 votes entitled to be cast on any
matter submitted to the shareholders on which the Kinam common and preferred
vote as a single class. At the time of this offer, there are 894,600 shares of
the Kinam preferred stock outstanding that we do not own. These are the shares
we are seeking to acquire in this tender offer.
Prior to August 2000, Kinam had declared quarterly cash dividends on the
preferred stock at a rate equal to an annual payment of $3.75 per share.
Commencing with the dividend due August 15, 2000, Kinam suspended payment of the
quarterly dividends due to an absence of earnings and in an effort to conserve
cash for operations, the development of Kinam's business, and the repayment of
Kinam's obligations, including amounts owed to us. Under Nevada corporate law,
which governs Kinam, Kinam is prohibited from paying dividends on the preferred
stock if its total assets are less than its total liabilities. This
determination can, at the election of Kinam, be based on either its financial
statements or a fair valuation of its assets and liabilities. Kinam has not
undertaken and does not propose to undertake a valuation of its assets and
liabilities for that purpose. Kinam's financial statements as of September 30,
2001, reflect that its total liabilities exceed its total assets by $81.3
million. A significant portion of the liabilities of Kinam are the obligations
to us. See RELATIONSHIPS BETWEEN KINROSS AND KINAM. Kinam would need to generate
substantial earnings, or otherwise significantly increase its net assets, before
it could resume paying a dividend on the Kinam preferred stock based on its
financial statements. Even if Kinam were permitted to pay dividends, it is under
no obligation to do so and, at current gold prices, Kinam does not expect to
resume the payment of dividends for the foreseeable future.
Kinross Gold Corporation is an Ontario corporation, with the following business
address and telephone number: 52nd Floor, Scotia Plaza, 40 King Street West,
Toronto, Ontario, Canada M5H 3Y2, telephone number (416) 365-5123. Kinam Gold
Inc. is a Nevada corporation with the following business address and telephone
number: 802 E. Winchester Avenue, Suite 100, Murray, Utah 84107, telephone
number (801) 290-1101. Kinross Gold U.S.A., Inc. is a Nevada corporation with
the following business address and telephone number: 802 E. Winchester, Suite
100, Murray, Utah 84107, telephone number (801) 290-1101.
BACKGROUND OF THE TENDER OFFER
Our board of directors determined to commence this tender offer based on its
desire to:
o improve our consolidated balance sheet and future results of
operations;
o acquire all of the shares of Kinam preferred stock, so as to make
Kinam a wholly-owned subsidiary; and
o terminate the reporting obligations of Kinam under the Exchange Act to
eliminate the costs associated with compliance with such obligations.
We acquired a majority of the outstanding Kinam preferred stock in July 2001. We
had initially contemplated creating a senior debt instrument to offer in
exchange for the Kinam preferred stock and outstanding Kinross convertible
debentures. In December 2000, we approached the largest single holder of the
Kinam preferred stock, Income Series, a subsidiary of Franklin Custodian Funds
Inc., and Franklin Income Securities Fund, a subsidiary of Franklin Templeton
Variable Insurance Products Trusts (the "Franklin Funds"), which rejected our
proposal to exchange the Kinam preferred stock held by it for a debt instrument.
After several months of negotiation, we reached an agreement with the Franklin
Funds in June 2001, and shortly thereafter with two other institutional holders,
to acquire the shares of Kinam preferred stock held by them in exchange for
Kinross common shares. As a result of the rejection of the senior debt
instrument and the difficulties in structuring an exchange offer or other
transaction with the remaining holders of the Kinam preferred stock, we
temporarily abandoned our efforts to acquire the remaining Kinam preferred
stock. See INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS
CONCERNING THE SHARES.
Beginning in September 2001, we began seriously considering alternative
possibilities for acquiring the remainder of these shares, thus eliminating the
costs and administrative burden of Kinam separately complying with the reporting
requirements of United States securities laws. We considered various
alternatives to accomplish this objective and ultimately decided that a cash
tender offer would be the preferred method, although we were not comfortable
with proceeding with the tender offer with the cash resources then available to
us. See the discussion under ALTERNATIVES TO THE OFFER below. In early January
2002, there was a strengthening in the price of gold and we began discussions
with CIBC World Markets Inc. about the possibility of it underwriting a public
offering of our common shares in Canada. CIBC indicated that it was willing to
do so if gold prices remained firm and continued to improve.
At our board meeting held on January 21, 2002, management presented the concept
of the proposed tender offer for the shares of the Kinam preferred stock not
already owned by us, to be funded by an equity offering. The board discussed the
potential cost of acquiring the Kinam preferred stock and the advisability of
using the proceeds of an offering for this purpose. At this meeting a decision
was made to explore the possibility of proceeding with a tender offer and to
commence the steps necessary to prepare for a tender offer.
The board of directors of Kinam met immediately following our board meeting and
appointed a special committee of Kinam board members, consisting of John Brough,
John Huxley, and Cameron Mingay, to consider the fairness of the proposed tender
offer to the non-affiliated holders of Kinam preferred stock. The board of
directors of Kinam delegated to the special committee the sole authority to
respond to the offer for shares of Kinam preferred stock and to recommend for,
recommend against, or remain neutral and express no opinion with respect to
whether the non-affiliated holders of the Kinam preferred stock should accept
the offer and tender their shares pursuant to the offer. None of the members of
the special committee are employees of Kinam or Kinross, but they all sit on the
Kinross board and hold Kinross common shares and options to acquire Kinross
common shares (in the aggregate, less than 1% of the outstanding Kinross common
shares). In addition, Mr. Mingay is a partner in a law firm which provides legal
services to Kinross and Kinam. The special committee discussed the appointment
of Foley Hoag & Eliot LLP to act as counsel to the special committee and decided
it was appropriate to meet with an investment banker with a view to considering
the retention of such firm to assist the special committee in evaluating any
offer that might be made by Kinross.
We signed a letter agreement on January 22, 2002, pursuant to which CIBC agreed,
on behalf of a syndicate, to purchase 20,000,000 of our common shares at a price
of CDN$1.35 per share in a registered public offering in Canada. We also granted
the underwritering syndicate an option to acquire up to an additional 3,000,000
of our common shares at the same price. All of the 23,000,000 shares subject to
the letter agreement were sold to the underwriting syndicate on February 12,
2002.
On January 23, 2002 the special committee retained Foley, Hoag & Eliot LLP as
counsel to the special committee. On January 24, 2002, the special committee met
with Raymond James and received a presentation respecting the qualifications of
that firm and its experience. The special committee decided at that meeting that
Raymond James should be appointed to consider the fairness, from a financial
point of view, of the proposed offer. Counsel to the special committee and
Raymond James then discussed with the special committee the potential tender
offer and the process of evaluating the fairness of any offer that might be
received.
On January 31, 2002, we provided a letter to Kinam indicating our intention to
proceed with a tender offer for the Kinam preferred stock conditioned on the
completion of the equity financing and a finding by both of our boards of
directors that the offer would be fair to the non-affiliated holders of the
Kinam preferred stock. In that letter, we indicated our intent to seek to
acquire the Kinam preferred stock at a price of $14.00 per share. The special
committee of Kinam met telephonically on January 31, 2002, to discuss our
proposal and the status of the evaluation work being conducted by Raymond James.
Various discussions were held among the special committee members on February 1,
2, and 3, 2002, and, on February 2, 2002, Mr. Huxley proposed to Robert Buchan,
the Chairman and Chief Executive Officer of Kinross, that Mr. Buchan consider
increasing the price Kinross was prepared to pay from $14.00 per share to a
higher amount. At a scheduled telephonic meeting of the special committee held
on February 3, 2002, Raymond James reported on the analytical work and due
diligence that it had conducted since
the last meeting of the special committee and described the methodologies which
it proposed to apply in establishing a range of fairness. After the meeting, the
special committee contacted Mr. Buchan and formally requested that Kinross
increase the price it was prepared to pay to $16.00 per share. Mr. Buchan agreed
to such request and a letter to that effect was delivered to Kinam. On February
4, 2002, Kinross and Kinam issued press releases reflecting Kinross' intention,
subject to the satisfaction of the conditions with respect to the successful
completion of our financing and the determination of both boards of directors as
to the fairness to the non-affiliated holders, to make a tender offer for the
Kinam preferred stock at $16.00 per share.
On February 12, 2002, we closed our Canadian financing, resulting in net
proceeds to us of approximately $18.5 million. The special committee met later
that same day to further discuss the tender offer.
On February 13, 2002, Kinross held a meeting of its board of directors. Based on
its analysis of the information provided to it by management, the fact that a
special committee had been appointed by Kinam, the fact that the special
committee had retained a financial advisor to render an opinion as to whether
the tender offer was fair to the non-affiliated holders, the fact that the
tender offer was subject to the determination by the Kinam special committee
that such offer was fair to the non-affiliated holders, and other factors, our
board of directors concluded that the proposed tender offer was fair to the
non-affiliated holders of the Kinam preferred stock and authorized the
commencement of the tender offer. See FAIRNESS OF THE OFFER.
The special committee met with Raymond James on February 14, 2002, at which time
Raymond James presented its report to the special committee. Raymond James also
delivered its oral opinion to the special committee, concluding that the
proposed offering price to be received by the holders of shares of Kinam
preferred stock pursuant to the offer was fair from a financial point of view to
such holders and within the range of values that Raymond James had established
for the Kinam preferred stock. After discussion, and based on the conclusion of
Raymond James and other factors considered by the special committee, the special
committee unanimously concluded that the proposed price of $16.00 per share was
fair to the non-affiliated holders of the Kinam preferred stock. Since all of
the members of the special committee were also directors of Kinross and hold
common shares and options to acquire common shares of Kinross (in the aggregate,
less than 1% of the outstanding common shares), and thus are not independent of
Kinross, the special committee determined that it would be inappropriate for it
to recommend either acceptance or rejection of the tender offer to the
non-affiliated holders. The special committee therefore determined that it
should remain neutral and did not recommend for, recommend against, or express
an opinion with respect to whether the non-affiliated holders should accept the
tender offer. See FAIRNESS OF THE OFFER.
RELATIONSHIPS BETWEEN KINROSS AND KINAM
We currently control the business, management, and direction of Kinam. All of
the members of the board of directors of Kinam, including the members of the
special committee, are directors or officers of Kinross. In addition, all of the
executive officers of Kinam are executive officers of Kinross. Kinross pays the
salaries of all of the executive officers and does not charge Kinam for the
management services provided by our directors and officers.
We acquired control of Kinam on June 1, 1998, by completing a merger in which
Kinam became a majority owned subsidiary of Kinross. Prior to the merger, Kinam
was approximately 59% owned by Cyprus Amax Minerals Company. In the merger, each
outstanding share of Kinam's common shares was exchanged for 0.8004 of a share
of Kinross common shares. Immediately following the merger, we held all of the
outstanding common shares of Kinam. We subsequently transferred ownership of
such shares to the Purchaser, our wholly-owned subsidiary, which is currently
Kinam's sole common shareholder.
In connection with the 1998 merger, we advanced $255.8 million to Kinam for
repayment of Kinam's outstanding third-party bank debt. This debt was incurred
prior to our acquisition of Kinam and was guaranteed by the former parent of
Kinam, Cyprus Amax. The payment of the amount due to third-party banks and the
release of the Cyprus Amax guaranty was a condition to the completion of our
acquisition of Kinam.
During the balance of 1998, Kinam repaid $41.6 million of this
obligation. In 1999, we advanced an additional $16.6 million to Kinam to permit
it to purchase assets related to the True North property in Alaska. An
additional $6.7 million was advanced by Kinross in 2000, and approximately $14.9
million in the first nine months of 2001, primarily for True North property
development and to repay third-party long-term debt obligations of Kinam. Kinam
has repaid a portion of the advances, resulting in a balance of $234.8 million
owed to us on this obligation as of September 30, 2001. During the fourth
quarter of 2001, this obligation was reduced by an additional $18 million,
resulting in a balance of approximately $216.8 million as of December 31, 2000.
These advances are non-interest bearing, are due on demand, and have no fixed
terms of repayment.
Pursuant to the 1998 merger, we acquired a demand loan in the principal amount
of $92.3 million from Cyprus Amax that was an obligation of Kinam. Again, we
have not charged Kinam interest on this loan. Subsequent partial repayments
reduced this demand loan payable to $73.6 million at December 31, 2000, and it
has remained unchanged through December 31, 2001. The demand loan is
non-interest bearing, due on demand, and does not have any fixed terms of
repayment.
Effective January 1, 2001, we transferred all of the outstanding shares of La
Teko Resources, Inc. to Kinam in exchange for the issuance of 100 shares of
Kinam common shares. This transaction was recorded on the financial statements
of Kinam at the carrying value of La Teko's assets at December 31, 2000, in the
approximate amount of $36 million.
We have arranged for the issuance of letters of credit under a syndicated credit
facility, to guarantee the obligations of Kinam under the Fort Knox Industrial
Revenue Bonds, totaling $49.9 million as of December 31, 2001. The Kinam assets
associated with Fort Knox are pledged to secure this syndicated credit facility.
In addition, we have guaranteed surety bonds for Kinam on various projects in
the aggregate principal amount of approximately $40 million.
Since we have not charged Kinam interest on the amounts due to us, or for the
other financial assistance we have provided to Kinam, Kinam's losses were lower
than they would have been if such debt had continued to be carried by
third-party lenders and interest was charged. Nonetheless, Kinam has continued
to incur operating losses in recent years and consequently is currently
prohibited by Nevada corporate law from paying dividends on the Kinam preferred
stock based on the book value of its assets and liabilities for financial
reporting purposes. See HISTORY and TERMS OF THE KINAM PREFERRED STOCK. We would
be entitled to be repaid the amounts due to us from Kinam on liquidation prior
to the payment of the liquidation preference of the Kinam preferred stock. See
TERMS OF THE KINAM PREFERRED STOCK.
We control the shareholder vote for all matters presented jointly to the common
and preferred shareholders of Kinam and thus control the election of directors.
After Kinam's failure to pay six consecutive quarterly dividend payments, which
occurred November 15, 2001, the holders of the preferred stock, voting
separately as an independent class, have the right to elect two directors to
Kinam's board. However, since we hold 51.4% of the outstanding preferred stock,
we also control this vote.
ALTERNATIVES TO THE OFFER
Kinross acquired all of the common stock of Kinam in 1998 and a majority of the
outstanding shares of the Kinam preferred stock in July 2001. In September 2001,
we began to consider a number of alternative transactions to complete the
acquisition of the remaining preferred stock, including a merger between Kinam
and a newly-created entity in which the non-affiliated holders of the Kinam
preferred stock would receive stock or cash; amending the rights of the Kinam
preferred stock to change the rate at which shares of the Kinam preferred stock
could be converted into Kinross common shares; and structuring an exchange offer
in which holders of shares of the Kinam preferred stock would receive common
shares of Kinross. We were not interested in divesting ourselves of our
ownership in Kinam and consequently did not consider the sale of Kinam or any
other transaction as an alternative to acquiring the shares of Kinam preferred
stock we did not own. We do not currently intend to sell our interest in Kinam
in the foreseeable future.
Each of these alternatives, except potentially, the exchange offer, involved an
obligation to file a proxy statement or to file and obtain the effectiveness of
a registration statement under United States securities laws, potentially
involving significant costs and time delays. The exchange offer would have been
required to have been made subject to a registration statement or pursuant to an
exemption from registration. The steps necessary to satisfy the exemption from
registration were not considered attractive or consistent with Kinross' business
objectives. Ultimately, we decided that a cash tender offer was the most
efficient way to proceed with the acquisition of the shares of the Kinam
preferred stock, once sufficient cash resources were available to us. We
determined that the cash tender offer would be preferable because it would avoid
the costs and delays associated with the filing and review by the Securities and
Exchange Commission of a registration statement or proxy statement; the cash
tender offer would eliminate the risk of changing stock prices which would be
present in any transaction in which the preferred holders would receive our
common shares; and a tender offer would provide the preferred shareholders with
an opportunity to liquidate their shares on a basis that could be easily
evaluated.
A tender offer, however, does carry risk for shareholders that do not tender
their shares in that such shareholders could be left with illiquid securities.
Kinross intends to pursue a merger after completion of the tender offer that
will result in all remaining non-affiliated holders of the Kinam preferred stock
receiving cash for their shares of Kinam preferred stock, but there is no
guarantee that such a transaction will be completed at a particular price per
share or at all. See CONSEQUENCES OF THE TENDER OFFER below.
In January 2002, as a result of increasing gold prices, we were able to take
advantage of the short form registration procedures available under Canadian
securities laws to large public companies and commenced a public equity
financing in Canada. Completion of this financing gave us the capital resources
necessary, on a consolidated basis, to proceed with an offer to purchase the
Kinam preferred stock.
REASONS FOR AND PURPOSES OF THE TENDER OFFER
Kinross believes that the public trading market for the shares of Kinam stock
has been and will continue to be characterized by low prices and low trading
volume. As a result of the limited trading volume, significant changes in the
trading price can occur with very little market activity. This may make it
difficult for holders of any significant amount of Kinam preferred stock to sell
their stock at the prices reported by the American Stock Exchange. For these
reasons, and because of the factors described below, Kinross is making this
tender offer to provide the holders of shares of Kinam preferred stock, other
than Kinross, with liquidity for their shares at a price that the special
committee has determined to be fair to the non-affiliated holders. As discussed
above under the caption BACKGROUND OF THE TENDER OFFER, we decided to proceed
with the tender offer at this time as a result of the completion of a public
offering of our common shares in Canada on February 12, 2002, that resulted in
net proceeds to us of approximately $18.5 million.
The following are some of Kinross' reasons and purposes for making the tender
offer: (i) strengthen our consolidated balance sheet and future results of
operations; (ii) acquire all of the shares of Kinam preferred stock, making
Kinam a wholly-owned subsidiary; and (iii) to save costs by terminating the
reporting obligations of Kinam under the Exchange Act. Each of these reasons and
the effect of the tender offer on Kinross are further discussed below. The
effects of the tender offer on Kinam and non-affiliated holders of Kinam
preferred shares are discussed under CONSEQUENCES OF THE TENDER OFFER below.
STRENGTHEN BALANCE SHEET AND FUTURE RESULTS OF OPERATIONS
All of the results of operations, assets and liabilities of Kinam are reflected
in our consolidated financial statements, adjusted to conform with Canadian
Generally Accepted Accounting Principles, and adjusted to eliminate the
inter-corporate demand loan and advances due to us. The Kinam preferred stock
held by non-affiliates is reflected as minority interest on our balance sheet at
a value of $48 million as of December 31, 2001. If we acquire all of the
preferred stock from the non-affiliated holders pursuant to this tender offer,
we will eliminate this liability and pay an aggregate of approximately $14.3
million. The difference of approximately $33.7 million would be used to reduce
the carrying value of certain property, plant, and equipment on the consolidated
balance sheet. This would reduce the future depreciation, depletion and
amortization associated with these assets, resulting in a smaller non-cash
offset
against any future earnings. In addition, we would no longer be required to
accrue the dividends with respect to the Kinam preferred stock held by the
non-affiliated holders as an expense on our financial statements, eliminating an
annual charge of approximately $3.4 million.
WHOLLY-OWNED SUBSIDIARY
Making Kinam a wholly-owned subsidiary will decrease the costs of maintaining
and auditing separate financial statements for Kinam and eliminate the costs of
holding separate shareholder meetings. It will permit us to take any required
action by written consent as the sole shareholder of Kinam, without any notice
or information requirements to minority shareholders. In addition, it will
permit us to structure the financial and business relationships between Kinam
and Kinross without regard to the potential impact on minority shareholders.
SAVE REPORTING COSTS
As a publicly-held company, Kinam is subject to the information requirements of
the Exchange Act. This requires the annual audit of Kinam's financial statements
and the preparation and filing of quarterly reports and annual reports to
shareholders and the investment community in the United States. In addition,
Kinam is required to prepare and file proxy solicitation materials or
shareholder information statements and interim reports with respect to certain
material developments. Termination of Kinam's reporting obligations under the
Exchange Act would result in the elimination of the costs, and management time
and effort, associated with these requirements.
CONSEQUENCES OF THE TENDER OFFER
As set forth above, the intent of the tender offer is to make Kinam a
wholly-owned subsidiary, thereby terminating Kinam's reporting obligations as a
publicly-held company. It is anticipated that on completion of the offer, Kinam
will delist its preferred stock from the American Stock Exchange and terminate
the registration of the Kinam preferred stock under the Exchange Act. As a
consequence, Kinam would no longer be subject to the reporting and other
requirements of the Exchange Act, including requirements to file annual and
other periodic reports, to provide proxy and information statements to
shareholders in connection with annual or special meetings of shareholders, or
to provide the type of going-private disclosure contained in this offer to
purchase.
Holders of Kinam preferred stock who do not tender their shares prior to the
expiration date would continue as shareholders of Kinam. In the event that we do
not acquire all of the shares of the Kinam preferred stock, Kinross proposes to
complete a merger or recapitalization, in which any remaining non-affiliated
holders would receive cash for their shares of preferred stock. However, we are
under no obligation to do so and may permit such shareholders to retain their
shares of Kinam preferred stock and remain minority shareholders in Kinam. We
intend to hold the shares acquired in the offer. If we acquire all of the
remaining 894,600 shares of Kinam preferred stock that we do not already own,
through this tender offer or otherwise, we will determine at that time whether
to retire, cancel or continue to hold the shares. At this time, Kinross has no
intention or plan to cause any of the shares acquired in the offer to be
redeemed by Kinam. The completion of the tender offer will not affect the
capitalization or financial statements of Kinam. See PLANS OF KINAM AND KINROSS
AFTER THE TENDER OFFER.
At the time of this offer, we own 51.4% of the outstanding shares of Kinam
preferred stock. If we acquire a sufficient number of shares to give us control
of 66.67% of the Kinam preferred stock, we will have the necessary vote to
control all matters submitted to a vote of the Kinam preferred stock, whether or
not the preferred stock votes with the Kinam common shares or separately as an
independent class.
TERMS OF THE KINAM PREFERRED STOCK
The Kinam preferred stock is governed by the designation establishing the
preferred stock under Kinam's articles of incorporation. The designation
establishes a class of 1,840,000 shares, par value $1.00 per share, of $3.75
Series B Convertible Stock. Holders of the preferred stock are entitled to
receive dividends "when, as, and if declared" by the board of directors of Kinam
at an annual rate of $3.75 per share. Those dividends must be paid prior to the
payment of any dividends with respect to a junior stock, including the common
shares. The dividends are cumulative. However, there is no obligation requiring
the board of directors to declare dividends. In addition, under Nevada corporate
law, Kinam is prohibited from paying dividends if its total assets are less than
its total liabilities. Based on its financial statements, Kinam's total
liabilities exceeded its total assets by $81.3 million as of September 30, 2001.
Consequently, Kinam currently is prohibited from paying dividends on the
preferred stock, unless it otherwise concludes that the current fair value of
its assets, less the amount of the proposed dividend, would exceed its
liabilities. To the extent that excess funds that might be used to pay dividends
become available in the future, the board of directors of Kinam would decide
whether to use these funds to pay a dividend to the holders of the Kinam
preferred stock, to invest them in the further growth of the business, including
the development, exploration, and/or acquisition of mining properties, or to use
the funds to reduce the debt of Kinam, including its obligations to us. There
can be no assurance that any such funds would be used for the payment of
dividends.
Subsequent to November 15, 2001, when six consecutive quarterly dividend
payments had not been paid by Kinam, the holders of the preferred stock, as a
group, have had the right to elect two board members to the board of directors
of Kinam. However, as a result of our ownership of a majority of the outstanding
Kinam preferred stock, we are able to control the election of these directors.
Since the date of our acquisition of Kinam in 1998, the Kinam preferred stock
has been convertible into our common shares at a current rate of 4.8512 of our
common shares for each share of Kinam preferred stock. This conversion can be
made at the election of the holders of the Kinam preferred shares. The
conversion ratio is subject to adjustment in the event of certain
recapitalization events in Kinross, which we do not currently anticipate will
occur.
Kinam has the right, but not the obligation, to redeem outstanding shares of
Kinam preferred stock. This redemption right could currently be exercised for
$51.125 per share, which will decrease to $50.75 on August 15, 2002, $50.375 on
August 15, 2003, and then to $50.00 per share on August 15, 2004, and thereafter
plus, in each case, accrued and unpaid dividends. It is not anticipated that
Kinam will exercise this redemption right.
The preferred stock has a liquidation preference of $50.00 per share. This
preference would be paid prior to any amounts being distributed to holders of
junior stock, including the common shares. However, the preference would only be
paid after satisfaction of all of the debts of Kinam, including the payment of
the obligations to Kinross. As of September 30, 2001, our liabilities exceeded
our assets, for financial reporting purposes, by $81.3 million. It is not
anticipated that Kinam will be liquidated and there is no obligation to do so.
The holders of the shares of the Kinam preferred stock are entitled to 1.4 votes
per share. The preferred stock votes together with the common shares as a single
class, unless otherwise specifically provided in the designation or as may be
required by Nevada corporate law. The designation grants separate class voting
rights to the preferred stock if Kinam proposes to amend its articles of
incorporation so as to adversely affect the rights of the holders of the
preferred stock; to authorize or issue a class of stock senior to the preferred
stock; or to reclassify the preferred stock. Any of the foregoing would require
approval of the holders of at least 66-2/3% of the outstanding preferred stock.
FAIRNESS OF THE OFFER
Both the board of directors of Kinross and the special committee of Kinam
unanimously determined that the offer to purchase the Kinam preferred stock from
the non-affiliated holders for $16.00 per share is fair to the non-affiliated
holders. However, an unaffiliated representative to act solely on behalf of the
non-affiliated holders was not retained to participate in the negotiations of
the terms of the offer and the tender offer is not subject to approval by the
majority of the non-affiliated holders.
The board of directors of Kinam appointed the special committee to review the
fairness of the offer to the non-affiliated holders. The members of this special
committee are not employees of either Kinam or Kinross but are directors of
Kinross and hold equity positions in Kinross, in the aggregate totaling less
than 1% of the issued and outstanding Kinross common shares. In addition, one of
the members of the special committee, Mr. Mingay, is a partner in a law firm
that provides legal services to both Kinam and Kinross. The special committee
retained independent counsel to advise it and Raymond James to provide an
opinion regarding the fairness, from a financial point of view, of the offer.
Based on the appointment of the special committee consisting exclusively of
non-management members, the retention by that committee of independent legal
counsel to advise it regarding its duties, the opinion provided to the special
committee by Raymond James as to the fairness, from a financial point of view,
of the price offered by Kinross in the tender offer, and a number of other
factors, the special committee unanimously concluded that the terms of the offer
were fair to the non-affiliated holders.
Each of the members of the special committee is a director of Kinross and holds
an equity position in Kinross and, consequently, is not independent from the
Kinross tender offer. As a result of this lack of independence, the special
committee did not deem it appropriate for it to make a recommendation with
respect to whether the non-affiliated holders should accept or reject the tender
offer. The special committee therefore determined that it should remain neutral
and did not recommend for, recommend against, or express an opinion with respect
to whether the non-affiliated holders should accept the tender offer. Each
holder of Kinam preferred stock should independently decide, based on the
information in this offer to purchase, the information about Kinam and Kinross
that is publicly available, and any other factors deemed relevant by the holder,
whether or not it is in such holder's best interests to accept or reject the
tender offer.
The factors considered by the special committee in arriving at its decisions
with respect to fairness and whether or not to recommend acceptance of the
tender offer are described herein and in Kinam's Solicitation/Recommendation
Statement on Schedule 14D-9 which is being furnished to the non-affiliated
holders with this offer to purchase. Also included with the
Solicitation/Recommendation Statement is the opinion of Raymond James. You
should read the Solicitation/Recommendation Statement and opinion carefully.
In reaching the determination that the tender offer was fair to the
non-affiliated holders, the special committee considered, among other matters,
the following items:
o That Raymond James, an independent financial advisor, provided a
fairness opinion to the special committee of Kinam directors, which
opinion concluded, as of February 14, 2002, based upon and subject to
the various considerations set forth in its opinion, that the $16.00
per share offer price is fair, from a financial point of view, to the
holders of the Kinam preferred stock;
o The financial analysis of Raymond James contained in the report
delivered to the special committee by Raymond James in connection with
its fairness opinion;
o The fact that Kinross' offering price represents a premium of 71.4%
above the average closing price for the Kinam preferred stock of
$9.337 for the 30 trading days prior to the first announcement
regarding Kinross' consideration of the tender offer at a potential
price of $16.00 per share;
o The fact that the historical trading volume for the Kinam preferred
stock has been limited and that the trading market is illiquid, which
may cause isolated transactions in the stock to have a significant
impact on the trading price and which may make it difficult for
holders of a substantial amount of preferred stock to sell their
securities at prices reported by the American Stock Exchange;
o The current conversion rate of the Kinam preferred stock under the
Kinam articles of incorporation of 4.8512 common shares of Kinross for
each share of Kinam preferred stock and the recent trading prices of
the Kinross common shares;
o The fact that Kinam's financial statements, as of September 30, 2001,
reflect that its liabilities exceed its assets by $81.3 million, and
that Nevada corporate laws prohibit the payment of dividends by a
corporation if, after payment of the dividend, its liabilities would
exceed the value of its assets;
o The fact that Kinam suffered net losses of $53.2 million and $112.7
million for the years ended December 31, 2000 and 1999, respectively,
and $12.8 million for the nine months ended September 30, 2001, even
though it was not paying interest on its obligations to Kinross or
paying for the management services provided by Kinross;
o The significant obligation of Kinam to Kinross in the amount of
approximately $290 million at December 31, 2001;
o The rights and preferences of the Kinam preferred stock, as set forth
in the articles of incorporation of Kinam, including the dividend and
liquidation preferences, voting rights, conversion rights, and the
redemption provisions;
o The fact that the liquidation preference set forth in the Kinam
preferred stock designation would be subject to the payment of all of
the other liabilities and obligations of Kinam and, in a liquidation
event, the assets of Kinam may not be sufficient to pay any or all of
such liquidation preference;
o The fact that no provision in the Kinam preferred stock designation
obligates Kinross to repurchase or redeem the shares of Kinam
preferred stock or to liquidate Kinam at any set time in the future;
and
o The future business prospects of Kinam and the gold market in general,
including Kinam's operations and assets and their relationship to the
price of gold.
In coming to its conclusion that the offer is fair to the non-affiliated
holders, the special committee of Kinam directors also considered the following
negative factors:
o The fact that Kinross acquired the shares of Kinam preferred stock
that it now holds in July 2001 in exchange for Kinross common shares
which were valued at more than the $16.00 price per share offered in
the tender offer. The special committee recognized that the stock
acquired in July of 2001 was acquired for Kinross common shares,
rather than cash, and that the acquisition price was recorded for
financial reporting purposes at a price higher than that used by
Kinross for negotiating purposes, solely as a result of the increase
in the trading price of Kinross common shares during the negotiations
and consummation of the transaction. See THE OFFER--INTERESTS OF
DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING THE
SHARES;
o The fact that shareholders who tender their shares, or who receive
cash in exchange for their shares in any merger following the tender
offer, will no longer be holders of the Kinam preferred stock and,
therefore, will not participate in any future earnings or growth of
Kinam that may otherwise affect the value of the Kinam preferred
stock, to the extent any occurs;
o The fact that the special committee of Kinam directors that was formed
for the purpose of independently analyzing the fairness of the Kinross
tender offer are all also directors and equity holders of Kinross and
thus subject to conflicts of interest with respect to their
recommendation and findings related to the Kinross offer; and
o The fact that, since Kinross owns 100% of the outstanding common
shares and over 50% of the outstanding preferred shares of Kinam, no
third-party would be likely to make any bid for the publicly-held
shares of Kinam preferred stock and, consequently, there can be no
"market check" on the transaction by someone making a competing bid.
The special committee did not consider the liquidation value of Kinam, since the
liquidation of Kinam was not considered as an alternative to the tender offer
and there is no obligation or plans to liquidate Kinam. In addition, based on
the financial statements of Kinam as of September 30, 2001, the holders of the
preferred shares would not be entitled to any payment on liquidation of Kinam
since its assets were less than its liabilities. Raymond James did not conduct a
liquidation analysis based on its conclusion that the lack of asset coverage to
pay the holders of the preferred shares upon a liquidation meant that this
analysis would not be meaningful.
After considering the factors described above, the Kinam special committee
unanimously concluded that the offer is fair to the non-affiliated holders of
Kinam preferred stock. The foregoing discussion of the information and factors
considered by the special committee is not intended to be exhaustive, but is
believed to include all material factors considered by the special committee. In
reaching its conclusion, the special committee did not assign any relative or
specific weight to individual factors, and individual members of the special
committee may have given differing weights to different factors. The
determination by the special committee does not purport to be the only
conclusion possible. In the final analysis, the adequacy, fairness, and
acceptability of the tender offer is for each non-affiliated holder to decide in
the manner that each holder deems best.
The board of directors of Kinross considered, among other matters, the following
factors in reaching its conclusion that the tender offer is fair to the holders
of the Kinam preferred stock other than Kinross:
o The fact that Kinross' offering price represents a premium of 74.1%
above the average trading price for the Kinam preferred stock of
$9.337 for the 30 trading days prior to the first announcement
regarding Kinross' consideration of the tender offer at a potential
price of $16.00 per share;
o The fact that the historical trading volume for the Kinam preferred
stock has been limited and that the trading market is illiquid, which
may cause isolated trading transactions in the stock to have a
significant impact on the trading price and which may make it
difficult for holders of a substantial amount of preferred stock to
sell their securities at prices reported by the American Stock
Exchange on which the Kinam preferred stock is traded;
o Management's belief that, at $300.00 spot gold prices, Kinam would not
be in a position to declare dividends for the foreseeable future;
o The fact that Kinam's financial statements as of September 30, 2001,
reflect that its liabilities exceed its assets by $81.3 million and
that Nevada corporate laws prohibit the payment of dividends by a
corporation if, after payment of the dividend, its liabilities would
exceed the value of its assets;
o The fact that each share of Kinam preferred stock is currently
convertible into 4.8512 common shares of Kinross and that the closing
price of the Kinross common shares on the American Stock Exchange was
$1.06 per share on February 11, 2002;
o The fact that the terms of the acquisition of Kinam preferred stock
from the Franklin Funds that was completed in July 2001 were
established only after extended and acrimonious negotiations with the
Franklin Funds in which litigation was threatened; was payable in
Kinross common shares rather than cash; and was based on an internal
calculation by management of approximately $16.50 per share that, as a
result of the increase in the trading price of Kinross common shares
between the time of negotiations and the closing, was attributed a
value on Kinross' financial statements of $25.80 per share;
o The fact that the negotiations with Capital Pro International and the
Tell Fund to acquire Kinam preferred stock held by them was negotiated
based on an internal calculation by management of $17.74 per share
that, as a result of an increase in the market value of the Kinross
common shares, was attributed a value on the financial statements of
$18.92 per share, again as a result of an increase in the market value
of the Kinross common shares;
o That a special committee of non-management directors was appointed by
Kinam to consider the tender offer from the point of view of the
non-affiliated holders;
o That the special committee of Kinam directors retained independent
financial and legal advisors to assist it in considering the Kinross
tender offer and making its determinations with respect thereto; and
o The fact that the tender offer was subject to the determination of the
Kinam special committee that such offer was fair to the non-affiliated
holders.
After considering the foregoing factors, the Kinross board of directors
unanimously concluded that the tender offer was fair to the holders of Kinam
preferred stock. However, each holder of Kinam preferred stock should carefully
consider the information contained in this offer to purchase, the information
about Kinross and Kinam that is publicly available, and any other factors the
holder deems material before deciding to accept or reject the tender offer.
The foregoing list of factors considered by the Kinross board of directors is
not intended to be exhaustive, but is believed to include all material factors
considered by the board. In reaching its conclusion, the board of directors did
not assign any relative or specific weight to the individual factors, and
different factors may have been given different weight by the directors. Based
on its conclusion, the board of directors of Kinross instructed the Purchaser to
proceed with the tender offer, and the tender offer was not separately
considered by the board of directors of the Purchaser. Each of the directors and
officers of the Purchaser is also a director or officer of Kinross.
No arrangements have been made to grant the non-affiliated holders of the Kinam
preferred stock access to the corporate files of Kinross or Kinam or to obtain
counsel or appraisal services at the expense of Kinross or Kinam.
INTERESTS OF KINROSS IN THE OFFER
Since Kinross controls Kinam, the financial results of both businesses are
reported on a consolidated basis. The Kinam preferred stock is currently
reflected as a minority interest liability on our balance sheet at a value of
$48 million. The acquisition of the Kinam preferred stock that we do not
currently own will eliminate this liability and, to the extent that the
acquisition cost of the Kinam preferred stock is less than the carrying value of
such stock on our balance sheet, the difference will be used to reduce the
carrying value of certain property, plant, and equipment on Kinross'
consolidated balance sheet. This will reduce the future amortization, depletion,
and depreciation charges associated with these assets. In addition, we will no
longer be required to reflect the dividends accrued on the Kinam preferred stock
as an expense, thereby increasing the earnings, if any, we can report in the
future.
We have historically advanced funds to Kinam to pay for expenses and obligations
that are not otherwise covered by Kinam's cash from operations. We have not
charged Kinam interest on these advances. In addition, we have not charged Kinam
a management fee for the services provided to Kinam by our officers.
Consequently, we have indirectly borne the burden of the costs and management
time spent in preparing and filing periodic reports of Kinam pursuant to the
Exchange Act. If Kinam terminates its obligation to file reports under the
United States securities laws, we would save the costs associated with these
filings, including the preparation and audit of separate financial statements
for Kinam. All of the foregoing benefit Kinross and are not necessarily
beneficial from the point of view of the non-affiliated holders.
FAIRNESS OPINION OF RAYMOND JAMES
The special committee retained Raymond James to provide it with a fairness
opinion in connection with the tender offer. Raymond James was selected to act
as the special committee's financial advisor based on Raymond James'
qualifications, expertise, and reputation. At the meeting of the special
committee on February 14, 2002, Raymond James rendered to the special committee
of the Kinam board of directors its oral opinion, subsequently confirmed in
writing, that as of that date, and subject to and based on the various
considerations set forth in its opinion, the price to be received by the holders
of Kinam preferred stock pursuant to the tender offer was fair from a financial
point of view to the holders of shares of preferred stock and that the $16.00
offer fell within the valuation range for the Kinam preferred stock established
by Raymond James.
THE FULL TEXT OF RAYMOND JAMES' WRITTEN OPINION AND REPORT TO THE SPECIAL
COMMITTEE, DATED AS OF FEBRUARY 14, 2002, WHICH SET FORTH, AMONG OTHER THINGS,
THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON
THE SCOPE OF THE REVIEW UNDERTAKEN BY RAYMOND JAMES IN RENDERING ITS OPINION, IS
ATTACHED AS EXHIBITS (a)(2)(A) AND (a)(2)(B) TO THE SCHEDULE TO FILED BY KINROSS
AND THE PURCHASER WITH THE SECURITIES AND EXCHANGE COMMISSION. A COPY OF THE
OPINION OF RAYMOND JAMES IS INCLUDED WITH THIS OFFER. COPIES OF THE OPINION AND
REPORT ARE AVAILABLE FOR INSPECTION AND COPYING BY HOLDERS OF KINAM PREFERRED
STOCK OR THEIR PROPERLY DESIGNATED REPRESENTATIVES AT OUR PRINCIPAL BUSINESS
OFFICES, 52ND FLOOR, SCOTIA PLAZA, 40 KING STREET WEST, TORONTO, ONTARIO M5H
3Y2, CANADA, DURING REGULAR BUSINESS HOURS.
RAYMOND JAMES' OPINION IS DIRECTED TO THE SPECIAL COMMITTEE OF THE KINAM
DIRECTORS, ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE
TENDER OFFER, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE TENDER OFFER NOR DOES
IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF THE SHARES OF PREFERRED STOCK TO
TENDER SHARES PURSUANT TO THE TENDER OFFER. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION AND THE REPORT.
In connection with rendering its opinion, Raymond James, among other things:
o reviewed certain publicly available financial statements and other
information of Kinross and Kinam, respectively;
o reviewed certain internal information, including life of mine analyses
for Kinross and Kinam, respectively;
o reviewed the trading activity and prices for the Kinam preferred stock
and the common shares of Kinross;
o compared the trading activity and price of the Kinam preferred stock
and the common shares of Kinross with other publicly-traded companies
comparable to Kinam and Kinross;
o reviewed certain gold industry reports and certain research reports
published by United States and Canadian investment banks on Kinross
and other gold producers;
o reviewed the articles of incorporation of Kinam;
o reviewed the past, current, and anticipated financial returns of the
Kinam preferred stock under different gold price scenarios;
o reviewed the financial terms, to the extent publicly available, of
certain similar tender offers;
o discussed the strategic and financial considerations for the tender
offer with the management of Kinross and the special committee of
Kinam directors;
o discussed the current and prospective business outlook of Kinross and
Kinam with the management of Kinross and Kinam, respectively;
o reviewed correspondence from counsel for the Franklin Funds relating
to its negotiations with the management of Kinross over the sale of
its shares of the preferred stock;
o held discussions with the auditors of Kinam and Kinross;
o held discussions with the legal advisors of Kinross and Kinam; and
o performed such other analyses and considered such other factors as it
deemed appropriate.
In rendering its opinion, Raymond James assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion, including, without limitation,
any information obtained in the context of the actions outlined above and any
information provided by Kinross or Kinam and their legal or accounting advisors.
With respect to the internal information, Raymond James assumed that it was
reasonably prepared and reflected the best currently available estimates and
judgments of the future performance of Kinam and Kinross, respectively. Raymond
James did not make any independent valuation or appraisal of the assets or
liabilities of Kinam or Kinross; nor was it furnished with any such appraisals.
The opinion of Raymond James is necessarily based on financial, economic, market
and other conditions as in effect on, and the information made available to it,
as of February 14, 2002.
The following is a brief summary of the material financial analyses performed by
Raymond James in connection with its oral opinion and the preparation of its
written opinion dated February 14, 2002.
In analyzing the value of the Kinam preferred stock, Raymond James reviewed the
prices paid for shares of the Kinam preferred stock in prior transactions,
assessed the current and future financial performance of Kinam through the
discounted cash flow method, compared the preferred stock to similarly rated
publicly-traded securities with and without conversion features and reviewed
several "going private" transactions. Similar valuation techniques were applied
to Kinross, including a peer analysis of a group of senior and intermediate gold
producers. The discounted cash flow analyses were conducted at discount rates of
5% and 10% and at various price
levels for gold from $275.00 per ounce to $325.00 per ounce. Historical trading
prices from the initial offering of the Kinam preferred stock to the current
date were reviewed, as were prices for the Kinross common shares over the past
five years.
Raymond James reviewed the Articles of Incorporation of Kinam and conducted a
financial review of Kinam, including common tests to determine the adequacy of
dividend coverage and book value per share reserves. As the Kinam preferred
stock is a hybrid instrument, Raymond James disaggregated it into its component
pieces and compared such pieces on a number of measures to other similarly rated
instruments and to the tender offer price.
PRECEDENT TRANSACTIONS ANALYSIS
No transaction utilized for comparative purposes is identical to the currently
contemplated transaction. A review of "going private" transactions under Rule
13E-3 was conducted to assess the level of premiums paid to minority
shareholders. While these transactions were not identical to the transaction in
question, the premiums offered to holders of Kinam preferred stock are
significantly higher on average than those offered to minority shareholders in
several of the precedent transactions examined. In order to assess the en-bloc
value of the common shares of Kinross to be received upon conversion of the
Kinam preferred stock, Raymond James also reviewed recent merger and acquisition
transactions in the mining industry, based upon value benchmarks implied by
price to cash flow ratios. Raymond James believes that a range of price to cash
flow ratios for Kinross' common shares on an en bloc basis implied by a price
range of $15.00 to $18.00 per share of Kinam preferred stock is fair based on
the life of Kinross' mine reserves and the cost of its operations relative to
other producers in the industry.
PRIOR PURCHASE ANALYSIS
Raymond James reviewed the terms of the purchase by Kinross of Kinam preferred
stock from certain of Kinam's preferred shareholders in July 2001. The sellers
in these transactions - the Franklin Funds, Capital Pro International, Inc. and
The Tell Fund - received consideration that was different from and valued higher
than the current tender offer price. Raymond James noted differences between
those sales and the tender offer which may account for the price differential;
namely the difference in the form of consideration, the apparent absence in the
earlier sales of any formal attempt to value the Kinam preferred stock and the
nature of the negotiations, including threatened litigation in the negotiations
with the Franklin Funds.
INTRINSIC VALUE ANALYSIS
Raymond James analyzed the market price of Kinam and other D-rated preferred
shares in comparison with their intrinsic value, which is defined as the value
of accrued dividends plus the value of the underlying Kinross common shares that
would be received upon conversion. Since the announcement of the suspension of
dividends on the preferred stock in July 2000, the premium of preferred stock
price to intrinsic value has declined steadily. Raymond James calculated that
other D-rated preferred shares are trading at a 31.4% discount to intrinsic
value. A price range of $15.00 to $18.00 per share of Kinam preferred stock
represents premiums of 27.7% to 53.2% to intrinsic value.
CONVERTIBLE ANALYSIS--METHOD 1
As the Kinam preferred stock is a hybrid instrument, Raymond James disaggregated
it into its component pieces of a fixed income security and an option and
compared these on a number of measures to other similarly rated instruments and
to the tender offer price. This analysis showed that:
o other D-rated preferred shares are trading at dividend yields of 63.5%
and net dividend yields (after adjusting for option value) in excess
of 100%; and
o Economic value is defined as the sum of implied fixed income value of
the shares at a given net dividend yield level plus the option value.
A price range of $15.00 to $18.00 at an implied net dividend yield of
50% represents a premium to economic value of 39% to 69%. Applying
higher net dividend yields that are more consistent with market
comparables as described above would imply a greater premium to
economic value for the Kinam preferred stock.
CONVERTIBLE ANALYSIS--METHOD 2
Raymond James also compared the market conversion price of D-rated convertible
preferred shares to the price of the underlying common stock in order to
calculate their conversion premiums. Market conversion price is defined as the
market price of the preferred stock divided by its conversion ratio. Other
D-rated convertible preferred shares are currently trading at average conversion
premiums of 88%. A price range of $15.00 to $18.00 per share of Kinam preferred
stock represents conversion premiums of 189% to 247% to the price of Kinross'
common shares.
CONVERTIBLE ANALYSIS--METHOD 3
Raymond James compared a price range of $15.00 to $18.00 for the Kinam preferred
stock to the sum of the accrued dividends and the Black Scholes option value
implicit in the Kinam preferred stock. Raymond James then compared this
relationship to similar ratios for the group of D-rated convertible preferred
shares. Raymond James' calculations illustrated that other D-rated convertible
preferred shares are trading at, on average, a 22% discount to their combined
option value and accrued dividend value. In comparison, a price range of $15.00
to $18.00 per share of Kinam preferred stock represents premiums of 52% to 85%
to the combined value of the accrued dividends of the Kinam preferred stock and
its implicit option value.
DISCOUNTED CASH FLOW ANALYSIS
Raymond James also conducted a discounted cash flow analysis, using a range of
assumptions regarding the price of gold, to calculate the net asset values of
Kinam. Assuming a 5% discount rate, Raymond James estimated the net asset value
of Kinam to be approximately negative $99 million, where the price of gold is
$300.00 per ounce in 2002, increasing to $325.00 in 2005; negative $73 million,
where the price of gold is $325.00 per ounce for the entire life of the mine;
and negative $116 million, where the price of gold is $300.00 per ounce in 2002,
increasing to $315.00 in 2004.
Raymond James performed a similar analysis for Kinross. See COMPARABLE COMPANY
ANALYSIS BELOW.
TRADING VALUE ANALYSIS
Raymond James reviewed the historical trading prices of the Kinam preferred
stock during the past year. Based on the closing price of the Kinam preferred
stock on February 1, 2002, the last day of trading prior to the Kinam Board's
announcement of the consideration of a possible offer, a $15.00 to $18.00 price
range represents a 4.5% discount to a 14.7% premium. Based on the average
trading price for the 30 calendar day period prior to February 4, 2002, a $15.00
to $18.00 price range represents premiums of 47.6% and 77.2%, respectively.
Based on the average trading price during the 365-day period prior to February
4, 2002, a $15.00 to $18.00 price range per share represents premiums of 67.9%
and 101.6%, respectively.
COMPARABLE COMPANY ANALYSIS
Holders of Kinam preferred stock are entitled to receive 4.8512 Kinross common
shares upon conversion of each share of Kinam preferred stock. Raymond James
analyzed the valuation of the underlying Kinross common shares to comparable
companies using industry benchmarks. Raymond James compared the effective price
to net asset value (P/NAV) ratio implied by a $15.00 to $18.00 price range to
industry averages, using a variety of net asset value estimates published by
industry research analysts on Kinross and on the industry. Raymond James
concluded that the $15.00 to $18.00 price range implies effective P/NAV ratios
that are at a premium to the average industry P/NAV ratios and Kinross' current
P/NAV ratio.
Raymond James also calculated the effective price to cash flow ratio of each
Kinross common share to be received by a holder of Kinam preferred stock on
conversion for a price range of $15.00 to $18.00. A price range of $15.00 to
$18.00 per share implies price to 2002 cash flow ratios of 8.3x to 11.2x
compared to current industry average of 9.4x and Kinross' price to 2002 cash
flow ratio of 5.0x. A price range of $15.00 to $18.00 implies price to 2003 cash
flow ratios of 13.4x to 18.1x compared to an industry average of 10.9x and
Kinross' price to 2003 cash flow ratio of 8.1x.
In addition, Raymond James conducted additional tests to determine the value of
the preferred stock, including, but not limited to, reviews of the adequacy of
preferred dividend coverage, Kinam's record of dividend payments, equity (or
book value) of the preferred stock, and independent credit assessments. Raymond
James also analyzed the historical trading value of the preferred stock,
standing alone and as compared to other comparably rated securities. As a result
of the capital deficiency of Kinam, as confirmed by the results of the
discounted flow analysis, the preferred stock currently possesses insufficient
asset coverage for a liquidation analysis to be meaningful.
Based upon and subject to the analysis summarized above and certain other
qualifications, Raymond James opined on February 14, 2002, that the price to be
received by the holders of shares of Kinam preferred stock pursuant to the
tender offer was fair from a financial point of view to such holders and within
the range of value that it provided in its oral report on February 14, 2002.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Raymond James considered the results of all of its analyses as a
whole and did not attribute any particular weight to any particular analysis or
factor considered by it. Furthermore, Raymond James has informed the Kinam
special committee of its belief that selecting any portion of its analyses or
factors considered by it, without considering all analyses and factors as a
whole, would create an incomplete view of the process underlying its opinion. In
addition, Raymond James may have given various analyses and factors more or less
weight than other analyses and factors and may have deemed various assumptions
more or less probable than other assumptions, so that the results from any
particular analysis described above should therefore not be taken to be Raymond
James' view of the actual value of the preferred stock. Raymond James did not
draw any conclusion as to any particular analysis, but considered all of its
analyses as an entirety in reaching its conclusion as to fairness from a
financial point of view.
In performing its analyses, Raymond James made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Kinam or Kinross. Any estimates
contained in
Raymond James' analysis are not necessarily indicative of future results or
actual values, which may be significantly more or less favorable than those
suggested by such estimates. The analyses were prepared solely as part of
Raymond James' analysis of the fairness from a financial point of view of the
tender offer, and were conducted in connection with the delivery by Raymond
James of its opinion dated February 14, 2002 to the Kinam special committee. The
analyses do not purport to be appraisals or to reflect the prices at which the
preferred stock actually may be valued or the prices at which the preferred
stock may actually trade in the marketplace. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.
In addition, as described above, Raymond James' opinion and presentation to the
special committee of the Kinam directors was one of many factors taken into
consideration by the special committee in making its determination that the
tender offer was fair to the non-affiliated holders. Consequently, the Raymond
James analyses as described above should not be viewed as determinative of the
opinion of the special committee of the Kinam directors with respect to the
value of the preferred stock. The purchase price of the tender offer and other
terms of the tender offer were determined by the Kinross board of directors.
Raymond James did not recommend any specific tender offer price to the special
committee of the Kinam directors or that any given tender offer price
constituted the only appropriate tender offer price.
Raymond James is an internationally recognized investment banking and advisory
firm. Raymond James, as part of its investment banking and financial advisory
business, is continuously engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of Raymond James' trading, brokerage and financing activities,
Raymond James or its affiliates may at any time hold long or short positions,
trade or otherwise effect transactions, for its own account or for the account
of customers, in the equity securities of Kinam or Kinross.
Pursuant to an engagement letter, dated January 24, 2002, between Raymond James
and Kinam, Raymond James provided a financial opinion and financial advice in
connection with the tender offer. Kinam agreed to pay Raymond James a fee of
$77,500 for providing a fairness opinion in connection with the tender offer. In
addition, Kinam has agreed to indemnify Raymond James and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Raymond James or any of its affiliates against certain liabilities
and expenses, including certain liabilities under the federal securities laws,
related to or arising out of Raymond James' engagement and any related
transactions. In April 1998, Goepel McDermid Securities, a predecessor of
Raymond James, provided a fairness opinion to Kinross on an unrelated matter and
received usual and customary fees for the rendering of these services.
PLANS OF KINAM AND KINROSS AFTER THE TENDER OFFER
It is anticipated that Kinam will continue to conduct its historical business of
mining and processing gold ore subsequent to the tender offer. There is no
current intent to materially change the business of Kinam or to sell Kinam or a
significant portion of its assets. We anticipate that the members of the board
of directors of Kinam who are not also officers of Kinam, may resign subsequent
to the tender offer.
We are seeking to acquire all of the shares of the Kinam preferred stock that we
do not currently own through the tender offer. To the extent that not all of
such shares are tendered into the offer, we intend to pursue a merger or a
recapitalization in which the remaining holders of the Kinam preferred stock
would receive $16.00 per share for their shares of Kinam preferred stock.
However, we are under no obligation to complete such a merger or
recapitalization or to pay $16.00 per share and may decide, subsequent to the
completion of the tender offer, and particularly if we do not acquire sufficient
shares in the tender offer to increase our holdings to 66-2/3% or greater of the
Kinam preferred stock, not to proceed with the merger or recapitalization or to
change the price if we do proceed.
If we elect not to proceed with a merger or recapitalization, holders of Kinam
preferred stock who do not tender into this offer will remain as shareholders of
Kinam. However, it is not anticipated that Kinam will declare any dividends on
the preferred stock in the foreseeable future or that a public trading market
will continue to exist for the Kinam preferred stock.
If we proceed with a merger subsequent to the tender offer, we will create a
newly-formed, wholly-owned subsidiary for the purpose of merging with Kinam. If
we obtain sufficient shares of the Kinam preferred stock in the tender offer so
that we hold 90% or more of the outstanding preferred stock, we will complete a
"short-form" merger under the corporate code of the state of Nevada. This
permits us to authorize and complete the merger by action of our board of
directors, and the merger would not be subject to, or submitted to, the vote of
the shareholders of Kinam.
In the event that we do not hold 90% or more of the Kinam preferred stock, the
merger would be required to be approved by the shareholders of Kinam. Approval
of the merger requires the affirmative vote of the Kinam common stock and the
Kinam preferred stock voting separately as individual classes. This approval
would require the affirmative vote of a majority of the outstanding
common stock and 66-2/3% of the outstanding preferred stock. We currently hold
100% of the Kinam common stock and 51.4% of the Kinam preferred stock. If we
acquire sufficient shares of Kinam preferred stock as a result of this tender
offer so as to increase the number of shares of Kinam preferred stock we hold to
66-2/3% or more of the outstanding preferred stock we will vote all shares held
by us in favor of the proposal and the merger would be approved whether or not
remaining non-affiliated holders voted for or against the merger. If we do not
acquire a sufficient number of shares of Kinam preferred stock, the affirmative
vote of additional holders of Kinam preferred stock will be required to obtain
the 66-2/3% majority necessary to approve the merger.
If we elected to proceed with a recapitalization, we would propose a reverse
split of the outstanding preferred stock so that all of the remaining holders of
preferred stock, except for us, would be reduced to owning a fraction of a
share. We would not issue fractional shares and instead would pay the holders an
amount of cash equal to $16.00 per share (on a pre-split basis). Approval of the
recapitalization would require the affirmative vote of the Kinam common stock
and the Kinam preferred stock voting separately as individual classes. This
approval would require the affirmative vote of a majority of the outstanding
common stock and 66-2/3% of the outstanding preferred stock. We currently hold
100% of the Kinam common stock and 51.4% of the Kinam preferred stock. If we
acquire sufficient shares of Kinam preferred stock as a result of this tender
offer so as to increase the number of shares of Kinam preferred stock we hold to
66-2/3% or more of the outstanding preferred stock we will vote all shares held
by us in favor of the proposal and the recapitalization would be approved
whether or not remaining non-affiliated holders voted for or against the
recapitalization. If we do not acquire a sufficient number of shares of Kinam
preferred stock, the affirmative vote of additional holders of Kinam preferred
stock will be required to obtain the 66-2/3% majority necessary to approve the
recapitalization.
If either type of merger or a recapitalization is completed, the remaining
non-affiliated holders would receive $16.00 per share in exchange for the shares
of Kinam preferred stock then held by them. Under Nevada corporate law,
shareholders would have the right to dissent from a merger as described under
DISSENTERS' RIGHTS OF APPRAISAL.
DISSENTERS' RIGHTS OF APPRAISAL
Holders of Kinam preferred stock are not entitled to dissenter's rights in
connection with the tender offer.
If we do not acquire all of the shares of Kinam preferred stock as a result of
the tender offer and we elect to proceed with a cash out merger, the remaining
holders of Kinam preferred stock will have dissenters' rights. If Kinam elects
to proceed with a recapitalization, such holders would not have dissenters'
rights unless the board of directors of Kinam elects to grant dissenters' rights
in connection with the transaction at the time it is presented to the
shareholders. Under Nevada law, a shareholder is entitled to dissent from, and
obtain payment for the fair value of his or her shares in the event of
consummation of a plan of merger or plan of exchange subject to shareholder
approval in which the corporation is a party and, to the extent that the
articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or non-voting shareholders are entitled to dissent and
obtain payment for their shares, any other corporate action taken pursuant to a
vote of the shareholders. Dissenters' rights are not available to holders of
securities that are: (i) listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
NASD; or (ii) held by more than 2,000 shareholders of record. As previously
stated, we do not anticipate that the Kinam preferred stock will continue to be
listed on Amex, any other securities exchange, or an interdealer quotation
system subsequent to the tender offer and, consequently, neither of these
exceptions will apply to Kinam.
If dissenters' rights are available, shareholders have the right to receive
payment for the value of their shares of Kinam preferred stock as set forth in
Sections 92A.300 to 92A.500 of the Nevada corporate laws. Under the Nevada
corporate code, a shareholder wishing to assert dissenters' rights must deliver
to Kinam, before the shareholder vote, a written notice of the intent to demand
payment for such shareholder's shares if the transaction is approved. The
shareholder may not vote any of the shares held by such shareholder in favor of
the transaction. The shareholder must exercise dissenters' rights with respect
to all shares held beneficially by such shareholder. In addition, the
shareholder must comply with all of the requirements of the Nevada corporate law
governing dissenters' rights, a copy of which has been filed as Exhibit (f) to
the 13E-3 information included in the Schedule TO filed by Kinross and the
Purchaser with the Securities and Exchange Commission and which is incorporated
herein.
INTRODUCTION
GENERAL INFORMATION
The following is a brief summary of certain information concerning Kinam.
Additional information, including the financial statements of Kinam are
contained in the periodic reports filed by Kinam with the Securities and
Exchange Commission. See ADDITIONAL INFORMATION. Holders of Kinam preferred
stock should carefully review these periodic reports in making their decision
whether or not to accept the tender offer.
Kinam and its subsidiaries are engaged in the mining and processing of gold and
silver ore and in the exploration for, and acquisition and development of,
gold-bearing properties, principally in North America, Russia, and Chile. Kinam
was incorporated in Delaware in 1987. On June 1, 1998, Kinam completed a merger
in which it became a subsidiary of Kinross. In May 2001, Kinam was
reincorporated in the state of Nevada.
Kinam's operating properties consist of a 100% interest in the Fort Knox mine
located near Fairbanks, Alaska, a 54.7% interest in the Kubaka mine located in
the Magadan Oblast situated in Far East Russia and a 50% interest in the Refugio
mine in Chile. Kinam also owns the Hayden Hill mine in Lassen County,
California, and a 90% interest in the Guanaco mine in Chile. Mining at the
Hayden Hill and Guanaco mines was completed during 1997. In addition, Kinam owns
the Haile property in Lancaster County, South Carolina. Kinam also owns a 50%
interest in the Sleeper mine in Humboldt County, Nevada, and the Wind Mountain
mine in Washoe County, Nevada, which are in reclamation. During 1999, Kinam
acquired a 65% interest in the True North property located near the Fort Knox
mine and effective January 1, 2001, acquired the remaining 35%. All of Kinam's
operating properties are open pit mines. Except for leased mobile mining
equipment at Fort Knox and Refugio, Kinam owns its mining and processing
equipment, which is maintained in good operating condition. Ore from Kinam's
properties is processed by milling or heap leaching.
Kinam relies solely on us for funding the portion of operating costs, capital
expenditures, general corporate expenditures and debt and interest payments not
funded by cash flows from operating activities. Kinam continues to conserve cash
whenever possible including approving only capital expenditures necessary to
sustain operations, continued low exploration expenditures, suspending the
payment of preferred stock dividends and continually monitoring costs at all its
operations. Assuming the price of gold remains at its recent levels, Kinam
anticipates additional borrowings by Kinam to fund debt repayment requirements
and planned capital expenditures.
As of February 15, 2002, there were 1,840,000 shares of Kinam's $3.75 Series B
Convertible Preferred Stock issued and outstanding, of which we held 945,400
shares. None of the shares held by us will be tendered into the offer. We are
offering to acquire all of the 894,600 shares not currently held by us at a cash
price of $16.00 per share. Kinam's preferred stock is listed on the American
Stock Exchange under the symbol KGC^B. On February 1, 2002, the day before we
first announced that we were considering the tender offer, the last reported
sale price of the Kinam preferred stock was $15.70 per share. Shareholders are
urged to obtain current market prices for the Kinam preferred stock before
tendering their shares.
Kinross has retained Georgeson Shareholder Communications Inc., to act as
Information Agent for the tender offer. You can contact Georgeson Shareholder
Communications Inc., at (800) 223-2064 for more information or to ask questions
regarding the tender offer.
ADDITIONAL FINANCIAL INFORMATION
In addition to the financial statements of Kinam, which are incorporated into
this offer to purchase by reference to the periodic reports of Kinam, the
following financial information is provided. See THE OFFER-ADDITIONAL
INFORMATION.
The Kinam preferred stock has a liquidation preference of $50.00 per share and
is not convertible into common shares of Kinam. However, at September 30, 2001,
Kinam had a capital deficiency of $81.3 million and, consequently, the preferred
stock has an attributed book value of $nil per share.
Kinam had operating losses for the nine months ended September 30, 2001, and for
the years ended December 31, 2000 and 1999. Therefore, earnings were inadequate
to cover fixed charges for the nine months ended September 30, 2001, and for the
years ended December 31, 2000 and 1999. The amount of the deficiency was $10
million for the nine months ended September 30, 2001, and $49.1 million and
$109.8 million for the years ended December 31, 2000 and 1999, respectively.
FORWARD-LOOKING INFORMATION
This document contains and incorporates by reference statements that are not
historical facts and constitute projections, forecasts, and forward-looking
statements with respect to Kinam's and Kinross' businesses, financial conditions
and results of operations. These projections, forecasts, and forward-looking
statements are also found in Kinam's and Kinross' public filings, including
annual and quarterly reports under the caption "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." You
can generally identify forward-looking statements by looking for words such as
may, will, expect, intend, estimate, anticipate, believe or continue. Variations
on those or similar words, or the negatives of such words, also may indicate
forward-looking statements.
These forward-looking statements are based on certain assumptions and are
subject to a number of risks and uncertainties. Such uncertainties include, but
are not limited to:
o expected gold sales;
o the market price of gold;
o estimated gold reserves and recovery and production rates;
o the success or failure of exploration and development efforts;
o the ability of Kinross and Kinam to obtain necessary financing;
o anticipated production and administrative costs;
o competition; and
o other risk factors, including those detailed from time to time in
Kinross' and Kinam's press releases, reports to shareholders and
filings with the Securities and Exchange Commission. See THE
OFFER--ADDITIONAL INFORMATION.
These forward-looking statements are based on management's expectations as of
the date of this document, or if incorporated by reference from a document as of
an earlier date, the earlier date. Actual future performance and results could
differ materially from those contained in or suggested by these forward-looking
statements as a result of the factors described above and elsewhere in this
offer. You are cautioned not to place undue reliance on these projections,
forecasts, and forward-looking statements.
THE OFFER
NUMBER OF SHARES; EXPIRATION DATE
On the terms and subject to the conditions described herein and in the
accompanying Letter of Transmittal, we will purchase all of the 894,600 shares
of Kinam preferred stock held by the non-affiliated holders at a purchase price
of $16.00 per share. If you tender
certificates registered in your name directly to the Depositary, you will not be
obligated to pay brokerage commissions or solicitation fees on the sale of your
shares into this offer. If you hold your shares through a broker or a bank, you
should consult with your broker or bank to determine any fees that may be
applicable if you tender your shares through them. If you elect to tender any
shares, you must tender all of the shares that you own. The expiration date is
Midnight, Eastern Time, on March 20, 2002, unless we elect to extend the offer,
in which case we will make a public announcement of the extended date. The offer
is also subject to certain other conditions. See the discussion under CONDITIONS
OF THE OFFER below. If your shares are accepted, you will be entitled to receive
a cash payment of $16.00 per share that will be paid promptly subsequent to the
closing of the offer.
Subject to the applicable regulations of the Securities and Exchange Commission,
we expressly reserve the right, in our reasonable discretion, to: (i) extend the
period during which tenders can be made and accepted; (ii) provide a subsequent
offering period during which tenders will be immediately accepted; (iii)
terminate the offer and not accept for payment any shares upon the occurrence of
any of the conditions specified in CONDITIONS OF THE OFFER; and (iv) waive any
condition or otherwise amend the offer in any respect, by giving oral or written
notice of such extension, delay, termination, waiver, or amendment to the
Depositary and, to the extent required by governing law, by making a public
announcement thereof. Any such extension, delay, termination, or amendment will
be followed as promptly as practicable by a public press release, mailing a
notice to all shareholders, or filing a Form 8-K. In the case of an extension or
a subsequent offering period, the announcement will be made no later than 9:00
a.m., Eastern Time, on the next business day after the previously scheduled
expiration date. Subject to applicable law and without limiting the manner in
which we may choose to make any public announcement, we shall have no obligation
to publish, advertise, or otherwise communicate any such public announcement
other than by a press release or by filing a Form 8-K with the Securities and
Exchange Commission.
If we make a material change in the terms of the offer or other information
concerning the offer, or if we waive a material condition of the offer, we may
extend the offer to the extent required by governing law. The minimum period
during which an offer must remain open following a material change in the terms
of the offer or information concerning the offer, other than a change in the
offer price or a change in the number of shares sought, generally depends on the
facts and circumstances then existing, including the relative materiality of the
changed terms or information. With respect to a change in the offer price or a
change in the number of shares subject to the offer, a minimum period of ten
business days is generally required to allow for adequate dissemination to
shareholders and investor response.
If, prior to the expiration date, we decide to decrease the number of shares
being sought or to increase or decrease the consideration being offered in the
offer, such decrease in the number of shares being sought or such increase or
decrease in the consideration being offered will be applicable to all
shareholders whose shares are accepted for payment pursuant to the offer,
whether they have tendered their shares before or after the change.
For purposes of this offer, a "business day" means any day other than a
Saturday, Sunday, or federal holiday and consists of the time period from 12:01
a.m. through 12:00 Midnight, Eastern Time.
Under applicable law, we may not make any purchases, or arrange for any
purchases, of Kinam preferred stock or any right to purchase Kinam preferred
stock, otherwise than pursuant to the offer, until at least ten business days
after the expiration date of the offer.
This offer to purchase and the related Letter of Transmittal will be mailed to
record holders of Kinam preferred stock whose names appear on Kinam's
shareholder list and will be furnished, for subsequent transmittal to beneficial
owners of shares, to brokers, dealers, commercial banks, trust companies, and
similar persons whose names, or the names of whose nominees, appear on the
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the offer (including, if the
offer is extended or amended, the terms and conditions of any such extension or
amendment), we will accept for payment and pay for (and thereby purchase) all
894,600 shares of Kinam preferred stock held by the non-affiliated holders that
are properly tendered and not properly withdrawn prior to the expiration date.
All questions as to the satisfaction of the procedures for tender or withdrawal
will be determined by us in our reasonable discretion, which determination will
be final and binding. See NUMBER OF SHARES; EXPIRATION DATE and CONDITIONS OF
THE OFFER.
Promptly after the expiration date, we will accept for payment, and pay a
purchase price in cash of $16.00 per share for, the shares of Kinam preferred
stock properly tendered and accepted by us.
For purposes of the offer, we will be deemed to have accepted for payment (and
thereby purchased) shares of Kinam preferred stock validly tendered and not
properly withdrawn as, if, and when we give oral or written notice to the
Depositary of our acceptance for payment of such shares pursuant to the offer.
Upon the terms and subject to the conditions of the offer, payment for shares
accepted
for purchase pursuant to the offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payments from us and transmitting such payments to
tendering shareholders whose shares have been accepted for payment. Under no
circumstances will interest on the purchase price for shares be paid, regardless
of any delay in making such payment.
In all cases, payment for shares of Kinam preferred stock tendered and accepted
for payment pursuant to the offer will be made only after timely receipt by the
Depositary of: (i) the certificates evidencing such shares pursuant to the
procedures set forth in PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES;
(ii) the Letter of Transmittal, properly completed and duly executed, with any
required signature guarantees; and (iii) any other documents required under the
Letter of Transmittal.
We will pay all stock transfer taxes, if any, payable on the transfer to us of
shares purchased pursuant to the offer. If, however, payment of the purchase
price is to be made to any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of all stock transfer
taxes, if any (whether imposed on the registered holder or the other person),
payable on account of the transfer to the person will be deducted from the
purchase price unless satisfactory evidence of the payment of the stock transfer
taxes, or an exemption therefrom, is submitted.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES
In order for a holder of shares of Kinam preferred stock to validly tender
shares pursuant to the offer, the Letter of Transmittal, properly completed and
duly executed, together with any required signature guarantees and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of the addresses set forth on the back cover of this offer and
either: (i) the share certificates evidencing tendered shares must be received
by the Depositary prior to the expiration date; or (ii) the tendering
shareholder must comply with the guaranteed delivery procedures described below.
If your stock is held in a brokerage account or in the name of a bank, trust, or
other holder on your behalf, you need to instruct such holder to tender your
shares on your behalf or obtain a certificate registered directly in your name.
As a result of delays inherent in obtaining a certificate registered directly in
your name, you may be unable to submit your certificates to the Depositary prior
to the expiration date if you elect this method. In such event, your shares
would not be accepted for purchase.
A SHAREHOLDER WHO HOLDS SHARES THROUGH A BROKER OR BANK IS URGED TO CONSULT THE
BROKER OR BANK TO DETERMINE WHAT TRANSACTION COSTS ARE APPLICABLE IF THE
SHAREHOLDER TENDERS SHARES THROUGH THE BROKER OR BANK AND NOT DIRECTLY TO THE
DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, WE RECOMMEND USING PROPERLY INSURED,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY TO THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Exchange Act (an "Eligible Institution")
except in cases where shares are tendered: (i) by a registered holder of shares
(which term, for purposes of this section, will include any participant in The
Depository Trust Company (the "Book-Entry Transfer Facility")) who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal; or (ii)
for the account of an Eligible Institution. If a share certificate is registered
in the name of a person other than the signer of the Letter of Transmittal, or
if payment is to be returned to a person other than the registered holder(s),
then the share certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the share certificate, with the signature(s) on such share
certificate or stock powers guaranteed by an Eligible Institution.
In all cases, payment for shares tendered and accepted for payment pursuant to
the offer will be made only after timely receipt by the Depositary of
certificates for the shares (or a timely confirmation of the book-entry transfer
of the shares into the Depositary's account at the Book-Entry Transfer Facility
as described below), a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile of the Letter of Transmittal), an
Agent's Message (as defined below) in the case of a book-entry transfer or the
specific acknowledgment in the case of a tender through the Automated Tender
Offer Program of the Book-Entry Transfer Facility, and any other documents
required by the Letter of Transmittal.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect to
the shares for purposes of the offer at the Book-Entry Transfer Facility within
two business days after the date of this offer, and any financial institution
that is a participant in the Book-
Entry Transfer Facility's system may make book-entry delivery of the shares by
causing the Book-Entry Transfer Facility to transfer shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for transfer. Although delivery of shares may be effected through a
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, either (1) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile of the Letter of Transmittal), with
any required signature guarantees, an Agent's Message in the case of a
book-entry transfer or the specific acknowledgment in the case of a tender
through the Automated Tender Offer Program of the Book-Entry Transfer Facility,
and any other required documents must be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this offer to
purchase before the expiration date; or (2) the guaranteed delivery procedure
described below must be followed. Delivery of the Letter of Transmittal and any
other required documents to the Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering shares that such participant has received and agrees
to be bound by the terms of the Letter of Transmittal and that Kinross may
enforce such agreement against the participant.
Participants in the Book-Entry Transfer Facility may tender their shares in
accordance with the Automated Tender Offer Program to the extent it is available
to them for the shares they wish to tender. A shareholder tendering through the
Automated Tender Offer Program must expressly acknowledge that the shareholder
has received and agreed to be bound by the Letter of Transmittal and that the
Letter of Transmittal may be enforced against the shareholder.
GUARANTEED DELIVERY. If a shareholder desires to tender shares of Kinam
preferred stock pursuant to the offer and the certificates evidencing the
shareholder's shares are not immediately available, or the shareholder cannot
deliver the share certificates and all other required documents to the
Depositary prior to the expiration date, the shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(a) the tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form included with this offer, is received prior
to the expiration date by the Depositary as provided below; and
(c) the certificates, in proper form for transfer, together with the
Letter of Transmittal, properly completed and duly executed, with any required
signature guarantees, and any other documents required by the Letter of
Transmittal are received by the Depositary within three trading days after the
date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery.
In all cases, payment for shares tendered and accepted for payment pursuant to
the offer will be made only after timely receipt by the Depositary of the share
certificates evidencing such shares, and the Letter of Transmittal, properly
completed and duly executed, with any required signature guarantees, together
with any other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the number of shares to be
accepted, the validity, form, eligibility (including time of receipt), and
acceptance for payment of any tender of shares will be determined by us in our
discretion, which determination shall be final and binding on all parties. We
reserve the absolute right to reject any and all tenders determined by us not to
be in proper form or the acceptance for payment of which may, in the opinion of
our counsel, be improper. We also reserve the absolute right to waive any
condition of the offer or any defect or irregularity in the tender of any shares
of any particular shareholder, whether or not similar defects or irregularities
are waived in the case of other shareholders. Neither we, nor any other person
will be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. Our
interpretation of the terms and conditions of the offer, including the Letter of
Transmittal and the instructions thereto, will be final and binding.
LOST, DESTROYED, OR STOLEN CERTIFICATES. If any certificates for the shares have
been lost, destroyed, or stolen, shareholders should contact the Depositary
immediately at the address and telephone number set forth on the back cover of
this offer to purchase. In such event, the Depositary will forward additional
documentation necessary to be completed in order to surrender effectively such
lost, destroyed, or stolen certificates. The purchase price with respect to the
relevant shares will not be paid until the procedures for replacing lost,
destroyed, or stolen certificates have been followed.
TO PREVENT BACKUP UNITED STATES FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO
PAYMENT OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH
PERSON WHO IS A UNITED STATES SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH THE
SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP
FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE FORM W-9 INCLUDED WITH THE
LETTER OF TRANSMITTAL OR ESTABLISH THAT IT IS ENTITLED TO AN EXEMPTION FROM
BACKUP WITHHOLDING IN THE MANNER REQUIRED. NON-UNITED STATES SHAREHOLDERS SHOULD
SUBMIT A COMPLETED IRS FORM W-8BEN TO AVOID BACKUP WITHHOLDING IN THE UNITED
STATES. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE
DEPOSITARY IS REQUIRED TO WITHHOLD 30% OF ANY PAYMENTS THAT WOULD OTHERWISE BE
MADE TO THE SHAREHOLDER.
TENDERING SHAREHOLDER'S REPRESENTATION AND WARRANTY; OUR ACCEPTANCE CONSTITUTES
AN AGREEMENT. A tender of shares pursuant to any of the procedures described
above will constitute your acceptance of the terms and conditions of the offer,
as well as your representation and warranty to us that you own the shares, free
and clear of any claim or encumbrance, and have full right and authority to sell
the shares to us without the consent of any other person. Our acceptance for
payment of shares tendered pursuant to the offer will constitute a binding
agreement between the tendering shareholder and us according to the terms and
conditions of the offer.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO US. ANY SUCH DOCUMENTS DELIVERED TO US
MAY NOT BE FORWARDED TO THE DEPOSITARY AND THEREFOR WILL NOT BE DEEMED TO BE
PROPERLY TENDERED.
WITHDRAWAL RIGHTS
The tender of shares of Kinam preferred stock into the offer is irrevocable
except that tendered shares may be withdrawn at any time prior to the expiration
date and, if not accepted for payment by us pursuant to the offer, may be
withdrawn at any time after April 20, 2002. If we extend the offer, if we delay
in our acceptance for payment of shares, or if we are unable to accept shares
for payment pursuant to the offer, the Depositary may, nevertheless, on our
behalf, retain tendered shares, and the shares may not be withdrawn except to
the extent that tendering shareholders are entitled to withdrawal rights as
described in this section.
For a withdrawal to be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be received by the Depositary in a timely
manner at the address set forth on the back cover of this offer. Any notice of
withdrawal must specify the name of the person who tendered the shares to be
withdrawn, the number of shares to be withdrawn and the name of the registered
holder of the shares, if different from that of the person who tendered the
shares. If certificates evidencing shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
these certificates, the certificate number shown on the certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless the shares have been
tendered for the account of an Eligible Institution.
All questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by us, in our reasonable discretion, and
our determination will be final and binding. We are not under any duty to give
notification of any defects or irregularities in any notice of withdrawal and we
will not incur any liability for failure to give any such notification.
Any shares properly withdrawn will thereafter be deemed not to have been validly
tendered for purposes of the offer and, if certificates representing such shares
have been submitted, they will be returned in accordance with the instructions
of the withdrawing shareholder. Withdrawn shares may be re-tendered for purposes
of the offer prior to the expiration date by following one of the procedures
described in PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
CONDITIONS OF THE OFFER
If you elect to tender any of your shares, you must tender all of your shares.
Notwithstanding any other provision of the offer, it is conditioned on, and we
shall have the right to amend or terminate the offer and not accept for payment
or pay for any shares tendered if any of the following conditions exist:
(1) There shall have been threatened, instituted, or pending any action
or proceeding by any government or governmental, regulatory, or administrative
agency, authority, or tribunal, or any other person, domestic, or foreign,
including any holder of the Kinam preferred stock, before any court, authority,
agency, or tribunal that directly or indirectly: (i) challenges the making of
the offer, the acquisition of some or all of the shares pursuant to the offer,
or otherwise relates in any adverse manner to the offer; or (ii) in our
reasonable judgment, could materially and adversely affect the business,
condition (financial or otherwise), income, operations, or prospects of Kinam or
us or otherwise materially impair in any way the contemplated future conduct of
Kinam's or our business.
(2) There shall have been any action threatened, pending, or taken, or
approval withheld, or any statute, rule, regulation, judgment, order, or
injunction threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced, or deemed to be applicable to the offer or Kinross or any of its
subsidiaries, by any court or any authority, agency, or tribunal that, in its
reasonable judgment, would or might directly or indirectly: (i) make the
acceptance for payment of, or payment for, some or all of the shares illegal or
otherwise restrict or prohibit consummation of the offer; (ii) restrict our
ability to accept for payment or pay for some or all of the 894,600 shares
subject to the offer; or (iii) materially and adversely affect the business,
condition (financial or otherwise), income, operations, or prospects of Kinam or
us or otherwise materially impair in any way the contemplated future conduct of
Kinam's or our business.
(3) There shall have occurred: (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange,
national quotation system, or in the over-the-counter market in the United
States or Canada; (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or Canada; (iii) the
commencement of a war, armed hostilities, or other international or national
calamity, directly or indirectly involving the United States or Canada; (iv) any
limitation (whether or not mandatory) by any governmental, regulatory, or
administrative agency or authority on, or any event that, in its reasonable
judgment, might materially and adversely affect the extension of credit by banks
or other lending institutions in the United States or Canada; (v) any change in
the general political, market, economic, or financial condition in the United
States or Canada or abroad that could, in our reasonable judgment, have a
material adverse effect on the business, operations, or prospects of Kinam or
us; or (vi) in the case of any of the foregoing existing at the time of the
commencement of the offer, a material acceleration or worsening thereof.
(4) A tender or exchange offer for the shares of Kinam preferred stock
on terms more favorable to the shareholders, or any merger, business
combination, or other similar transaction with or involving Kinam shall have
been proposed, announced, or made by any person.
(5) (i) Any entity, person or "group" (as that term is used in Section
13(d)(3) of the Exchange Act), other than Kinross or its affiliates, shall have
acquired or proposed to acquire beneficial ownership of more than 5% of the
outstanding shares of Kinam preferred stock; (ii) any such entity, group, or
person who has filed a Schedule 13D or Schedule 13G with the Securities and
Exchange Commission on or before the expiration date of the offer shall have
acquired or proposed to acquire beneficial ownership of an additional 2% or more
of the outstanding shares of Kinam preferred stock; or (iii) any person, entity,
or group shall have filed a Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a
public announcement reflecting an intent to acquire Kinross or any of its assets
or securities other than in connection with a transaction authorized by its
board of directors.
(6) Any change or changes shall have occurred in the business,
financial condition, assets, income, operations, prospects, or stock ownership
of us or Kinam that, in our reasonable judgment, may have a material adverse
consequence to us.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time prior to the
expiration date in our reasonable discretion. Our failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of that right;
the waiver of any right with respect to particular facts and circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each right shall be deemed an ongoing right that may be asserted at any time and
from time to time prior to the expiration date.
BENEFICIAL OWNERSHIP OF KINAM PREFERRED STOCK
We own, indirectly through the Purchaser, 945,400 shares of the Kinam preferred
stock, representing 51.4% of the issued and outstanding Kinam preferred stock.
Neither we nor Kinam is aware of any other shareholder owning 5% or more of the
Kinam preferred stock.
PRICE RANGE OF KINAM PREFERRED STOCK
The Kinam preferred stock is listed and principally traded on the American Stock
Exchange under the symbol KGC^B. Prior to August 1, 2001, the Kinam preferred
stock was listed on the New York Stock Exchange. The following table sets forth
the closing price of the Kinam preferred stock as reported by the American Stock
Exchange or by the New York Stock Exchange, as applicable, for the fiscal
quarters indicated:
Quarter Ended High Sale Low Sale
------------- --------- --------
March 31, 2000 $ 30.50 $ 25.69
June 30, 2000 $ 26.75 $ 22.50
September 30, 2000 $ 24.44 $ 7.44
December 31, 2000 $ 8.81 $ 7.00
March 31, 2001 $ 8.40 $ 6.25
June 30, 2001 $ 12.20 $ 5.75
September 30, 2001 $ 11.75 $ 9.75
December 31, 2001 $ 11.41 $ 7.26
January 1 through February 15, 2002 $ 15.76 $ 8.41
On February 1, 2002, the last trading day prior to our announcement that we were
considering a tender offer at $16.00 per share, the last reported sale price of
the Kinam preferred stock on the American Stock Exchange was $15.70. On February
19, 2002, the day before the commencement of this tender offer, the last
reported sale price of the Kinam preferred stock on the American Stock Exchange
was $15.25. YOU ARE URGED TO OBTAIN CURRENT MARKET PRICES FOR THE KINAM
PREFERRED STOCK PRIOR TO TENDERING YOUR SHARES.
SOURCE OF FUNDS FOR AND EXPENSES OF THE OFFER
If all 894,600 shares held by the non-affiliated holders are tendered into the
offer, the purchase price to be paid by us would be an aggregate of $14,313,600.
The Purchaser currently has cash reserves sufficient to pay this purchase price.
Kinross, however, would not have commenced the tender offer without receiving
the approximately $18.5 million of net proceeds from its recent Canadian public
offering. See SPECIAL FACTORS--BACKGROUND OF THE TENDER OFFER.
We have retained Georgeson Shareholder Securities Corporation to act as Dealer
Manager in connection with the offer. Georgeson Shareholder Securities
Corporation will receive usual and customary fees in connection with this offer,
including reimbursement for certain expenses for its services as Dealer Manager.
Georgeson Shareholder Securities Corporation will also be indemnified against
certain liabilities in connection with its engagement as Dealer Manger,
including certain liabilities under the federal securities laws.
We have retained Georgeson Shareholder Communications Inc. to act as Information
Agent and Alpine Fiduciary Services, Inc., to act as Depositary in connection
with the offer. The Information Agent and Depositary will receive reasonable and
customary compensation for their services, will be reimbursed by us for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities in connection with the offer, including certain liabilities under
the federal securities laws.
The Kinam special committee retained Raymond James to act as financial advisor
in rendering an opinion that the price of $16.00 per share was fair, from a
financial point of view, to the holders of the Kinam preferred stock.
In connection when this offer, we will also incur costs for professional
services, printing, mailing, filing fees with regulatory agencies, and other
miscellaneous expenses. The following is an itemized list of all expenses
incurred or estimated to be incurred in connection with the offer, all of which
have or will be paid by Kinross:
Fees to Dealer Manager $ 67,000
Fees to Information Agent 7,500
Legal Fees 250,000
Accounting Fees 25,000
Printing and Mailing Expenses 20,000
Miscellaneous Expenses 60,500
----------
Total $ 430,000
==========
In addition, the Kinam special committee retained independent counsel and
Raymond James to provide the special committee with a fairness opinion. Kinam
agreed to pay Raymond James $77,500.00 in connection with the services provided
by it and the special committee anticipates incurring costs of approximately
$50,000.00 in connection with the legal services it received. The fees payable
to Raymond James and the costs of legal counsel to the special committee will be
paid by Kinam.
We will not pay brokerage commissions in connection with the purchase of shares
tendered into the offer. Registered holders of Kinam preferred stock that tender
their shares directly to the Depositary will not incur any brokerage
commissions. Shareholders holding shares through brokers or banks are urged to
consult the brokers or banks to determine whether transaction costs are
applicable if shareholders tender shares through such brokers or banks and not
directly to the Depositary. We will, upon request, reimburse brokers, dealers,
and commercial banks for customary mailing and handling expenses incurred by
them in forwarding the offer and related materials to the beneficial owners of
shares held by them as a nominee or in a fiduciary capacity. We will pay or
cause to be paid all stock transfer taxes, if any, on our purchase of shares,
except as otherwise provided in this offer.
INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING THE
SHARES
None of the officers or directors of Kinross or Kinam own any shares of the
Kinam preferred stock.
In the summer of 2000, our management determined to focus on developing
strategies for restructuring our balance sheet as a means of enhancing
shareholder value. We considered a number of strategies for doing so, including
the acquisition of Kinross' outstanding convertible debentures and the shares of
the Kinam preferred stock in exchange for senior convertible debt obligations of
Kinross through a general tender offer or through private transactions. In the
course of our examination, we identified certain holders of significant numbers
of preferred shares including the Franklin Funds. The Franklin Funds held over
40% of the issued and outstanding shares of the Kinam preferred stock.
In December of 2000, through a representative, we approached the Franklin Funds
with a proposal to exchange their Kinam preferred shares for convertible debt
obligations of Kinross on the basis of an exchange ratio that the Franklin Funds
valued at $10.00 per preferred share. The Franklin Funds rejected this proposal
and indicated that, in their view, the shares of the Kinam preferred stock were
worth at least $14.00 per share. The Franklin Funds indicated that they would be
prepared to participate in an exchange of their preferred shares for convertible
debt securities of Kinross, if the preferred shares were valued at $20.00 per
share. The Franklin Funds also indicated that they were considering what legal
recourse might be available to them in respect of their holding of Kinam
preferred stock. For a number of reasons, including a concern over the
threatened legal action and the value demanded by the Franklin Funds, Franklin
Funds' counterproposal was not acceptable to Kinross and negotiations on this
proposal ceased.
In March of 2001, representatives of our senior management and representatives
of the Franklin Funds commenced preliminary discussions regarding a possible
exchange of the shares of the Kinam preferred stock held by the Franklin Funds
for Kinross common shares. We internally set a target of negotiating an exchange
ratio based on a value of $16.50 for each share of Kinam preferred stock held by
the Franklin Funds. Based on the market price for our stock in mid-March of
2001, of $0.51 to $0.64 per share, we decided that, if an agreement could be
consummated, Kinross would issue 21,500,000 common shares in exchange for the
800,000 shares of Kinam preferred stock owed by the Franklin Funds. In addition,
while we did not believe that the Franklin Funds had any basis for a successful
claim against us, in order to facilitate our negotiations, we agreed to extend
any limitation period within which the Franklin Funds may have been permitted to
assert a claim against us, Kinam, or any related parties arising from their
ownership of the shares of the Kinam preferred stock. Negotiations with the
Franklin Funds continued through April, May and early June of 2001.
On June 12, 2001, we entered into a letter agreement with the Franklin Funds,
pursuant to which we agreed to purchase 800,000 preferred shares from the
Franklin Funds in exchange for 21,500,000 of our common shares. On June 12,
2001, the closing price of our common shares was $0.96 per share, which
attributed a value of $25.80 to each share of the Kinam preferred stock held by
the Franklin Funds. Upon the closing of the transaction, we and the Franklin
Funds executed mutual releases from any possible claims.
After the announcement of the transaction with the Franklin Funds, we were
approached by Capital Pro International, Inc. and The Tell Fund to purchase an
aggregate of 145,400 preferred shares in consideration of the issuance of an
aggregate of 2,686,492 common shares of Kinross. We utilized a value of $17.74
per share of Kinam preferred stock in fixing the number of Kinross common shares
to be issued. These agreements were announced on June 18, 2001, when the closing
price of our common shares was slightly higher, or $0.99 per share, which
attributed a value of $18.92 to each share of Kinam preferred stock that we
acquired from these shareholders.
We have not participated, and none of the officers or directors have
participated, in any transaction in the Kinam preferred stock during the
preceding 60 days.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following summary of material United States federal income tax
consequences of the purchase of shares pursuant to this offer applies to
shareholders who are "United States Persons" (as defined below) only and is
based on the Internal Revenue Code of 1986, as amended to date (the "Code"),
applicable proposed and final Treasury Regulations, judicial authority and
current administrative rulings and practice, all of which are subject to change.
This summary is included for general information purposes only and does not
attempt to describe all of the possible tax consequences that could result from
this offer. Your tax treatment may vary depending upon your individual
circumstances and you are strongly advised to consult your own tax advisor with
respect to the specific tax consequences to you of participating (or not
participating) in the offer.
Sales of shares of Kinam preferred stock by shareholders pursuant to the offer
will be taxable transactions for United States federal income tax purposes as to
United States Persons. The transaction likely will also be a taxable transaction
under applicable state, local, and foreign tax laws that apply to you. No ruling
as to any matter discussed in this summary has been requested or received from
the United States Internal Revenue Service.
UNITED STATES TAX TREATMENT OF UNITED STATES PERSONS. As used herein, the term
"United States Person" means a beneficial owner of shares of Kinam preferred
stock that is: (i) a citizen or resident of the United States; (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof; (iii) an estate, the income
of which is subject to United States federal income taxation regardless of its
source; or (iv) a trust which is subject to the supervision of a court within
the United States and the control of a United States fiduciary as described in
Section 7701(a)(30) of the Code.
Under the Code, a sale of shares by a United States Person pursuant to the offer
generally will be treated as a taxable transaction with respect to the tendering
shareholder. Such a tendering shareholder will recognize gain or loss equal to
the difference between the amount of cash received by the shareholder pursuant
to the offer and the shareholder's adjusted basis in the shares sold. Recognized
gain or loss will be capital gain or loss, assuming the shares were held as
capital assets, and will be long-term capital gain or loss if the shares have
been held for more than one year. Certain types of shareholders (including
insurance companies, tax-exempt organizations, financial institutions, broker
dealers, shareholders who are not United States Persons, shareholders who
acquired their shares upon the exercise of options or otherwise as compensation,
and shareholders who hold their shares as part of a straddle, hedging, or
similar transaction), may be subject to special rules not discussed herein.
Capital gain recognized by a United States Person who is an individual upon the
sale of a capital asset that has been held for more than one year will generally
be subject to United States federal income tax at a rate not to exceed 20%.
Capital gain recognized from the sale of a capital asset held by such an
individual for one year or less will be subject to tax at ordinary income tax
rates. In addition, capital gain recognized by a corporate taxpayer that is a
United States Person will be subject to tax at the regular tax rates applicable
to the corporation.
Capital losses recognized by an individual upon the sale of capital assets are
allowed only to the extent of capital gains from the sale of capital assets plus
$3,000.00 for any tax year. Capital losses not utilized in any taxable year by
an individual may be carried forward indefinitely and allowed to offset capital
gains plus $3,000.00 of annual ordinary income in any future taxable year.
Capital losses recognized by a corporation upon the sale of capital assets are
allowed only to the extent of gains from the sale of capital assets. Capital
losses not utilized in any taxable year by a corporation generally must first be
carried back and applied against capital gains in the three preceding taxable
years and then may be carried forward and allowed to the extent of capital gains
in the five succeeding taxable years.
UNITED STATES BACKUP WITHHOLDING. "Backup withholding" at a rate of 30% will
apply to payments made to shareholders pursuant to the offer unless: (i) in the
case of a United States Person, the shareholder has furnished the shareholder's
taxpayer identification number in the manner prescribed in applicable Treasury
Regulations, has certified under penalties of perjury that such number is
correct, has certified as to no loss of exemption from backup withholding, and
meets certain other conditions; or (ii) in the case of a shareholder that is not
a United States Person, the shareholder has furnished proof of its non-United
States Person status. Any amounts withheld from payments made to shareholders
pursuant to the offer under the backup withholding rules generally will be
allowed as a refund or a credit against such shareholder's United States federal
income tax liability, provided the required information is furnished to the IRS.
To avoid the imposition of the backup withholding, shareholders who are United
States Persons should submit to the Depositary the Form W-9 included with the
Letter of Transmittal, and shareholders who are non-United States Persons should
submit to the Depositary Form W-8BEN. Shareholders should consult their tax
advisors to determine whether or not they will be treated as a United States
Person for purposes of backup withholding.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND
IS BASED ON THE UNITED STATES FEDERAL INCOME TAX LAW AND OTHER RELEVANT
AUTHORITIES NOW IN EFFECT, WHICH ARE SUBJECT TO CHANGE, POSSIBLY RETROACTIVELY.
THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING SHAREHOLDER.
NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, , LOCAL, NON-UNITED STATES OR
OTHER TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE OFFER AND THE
EFFECT OF THE RULES DESCRIBED ABOVE.
LEGAL MATTERS; REGULATORY APPROVALS
Neither Kinam nor Kinross is aware of any license or regulatory permit that it
believes is material to its business that might be adversely affected by its
purchase of the Kinam preferred stock as contemplated herein or of any approval
or other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
purchase by us of the Kinam preferred stock as contemplated herein. Should any
such approval or other action be required, Kinam and Kinross presently
contemplate that such approval or other action will be sought. Kinam and Kinross
are unable to predict whether the acceptance for payment of, or payment for,
shares tendered pursuant to the offer will be required to be delayed pending the
outcome of any such matter. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that the failure to obtain any such approval or other
action might not result in adverse consequences to the business of Kinam or
Kinross.
On March 7, 2002, we received a letter from Reginald H. Howe, which stated that
he represents two holders of the Kinam preferred stock who hold a total of 6,500
shares. In his letter, Mr. Howe states that his clients intend to pursue legal
action with respect to our tender offer if we do not amend the Offer to Purchase
and make certain material changes to its terms, including the offering price.
Mr. Howe's letter sets forth various potential legal arguments with respect to
our tender offer for the Kinam preferred stock and our purchases of Kinam
preferred stock from three shareholders in July of 2001. See the discussion in
the Offer to Purchase entitled SPECIAL FACTORS--HISTORY; THE OFFER: INTERESTS OF
DIRECTORS AND OFFICERS; TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES.
We do not believe that Mr. Howe states any grounds on which his clients would be
entitled to relief and we intend to vigorously defend any legal action that may
be brought by Mr. Howe, if and when such legal action is filed. As of the date
hereof, Mr. Howe has not commenced any legal action, nor has he indicated an
intent to commence legal action prior to the expiration of the tender offer. We
anticipate that any legal action that may be filed may not be resolved for a
significant period of time. While Mr. Howe's threatened litigation gives us the
right to terminate our offer pursuant to the conditions contained in the Offer
to Purchase, we currently do not intend to exercise such right, and intend to
continue with the tender offer according to its terms. Although we do not
currently anticipate any change, we will make a public announcement concerning
any change in our position with respect to termination of the tender offer on
account of Mr. Howe's letter or other developments if and when such change
occurs. See the discussion in the Offer to Purchase entitled THE
OFFER--CONDITIONS OF THE OFFER.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
We expressly reserve the right, in our discretion, and at any time or from time
to time, to extend the period of time during which this offer is open. We also
expressly reserve the right, in our discretion, to provide a subsequent offering
period during which shares tendered would be immediately accepted and not
subject to withdrawal. There can be no assurance, however, that we will exercise
our right to extend this offer ;or to provide a subsequent offering period.
During any extension, all shares previously tendered will remain subject to the
offer, except to the extent that such shares may be withdrawn. We also expressly
reserve the right, in our discretion, (a) to terminate the offer and not accept
for payment any shares not theretofore accepted for payment or, subject to
regulations under the Exchange Act, which require us either to pay the
consideration offered or to return the shares tendered promptly after the
termination or withdrawal of the offer, to postpone payment for shares upon the
occurrence of any of the conditions specified above in CONDITIONS OF THE OFFER
by giving oral or written notice of such termination to the shareholders by
making a public announcement thereof and (b) at any time or from time to time,
amend the offer in any respect. Amendments to the offer may be effected by
public announcement. Without limiting the manner in which we may choose to make
public announcement of any termination or amendment, we will have no obligation
(except as otherwise required by applicable law) to publish, advertise or
otherwise communicate any such public announcement, other than by making a press
release or a report on form 8-K. In the event of an extension of the offering
period or our election to provide a subsequent offering period, we will issue a
press release or other public announcement, which notice will be issued no later
than 9:00 a.m., Eastern Time, on the next business day after the previously
scheduled expiration date. Material changes to information previously provided
to holders of the shares in this offer or in documents furnished subsequent
thereto will be disseminated to holders of shares to the extent required by
Rules14d-4 and 14d-6 under the Exchange Act.
If we materially change the terms of this offer or the information concerning
the offer, or if we waive a material condition of the offer, we will extend the
offer to the extent required by Rule14e-1 under the Exchange Act. This rule
prescribes the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer.
The length of such minimum period will depend on the facts and circumstances,
including the relative materiality of such terms or information. In a published
release, the Securities and Exchange Commission has stated that, in its view, an
offer should remain open for a minimum of five business days from the date that
notice of such a material change is first published, sent or given. The offer
will continue or be extended for at least ten business days from the time we
publishe, send, or give to holders of shares a notice that we
will (a) increase or decrease the amount of the consideration payable or (b)
increase (except for an increase not exceeding 2% of the outstanding subject
shares) or decrease the percentage of subject shares sought.
ADDITIONAL INFORMATION
Kinross and Kinam are subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, file with the Securities and Exchange
Commission periodic reports, proxy statements and other information relating to
their business, financial condition and other matters. Kinross and Kinam are
required to disclose in such reports certain information, as of particular
dates, concerning their respective operating results and financial condition,
officers and directors, principal holders of securities, any material interests
of such persons in transactions with Kinross or Kinam and other matters. These
reports and other informational filings required by the Exchange Act are
available for inspection at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549 and also are available for inspection and
copying at the regional offices of the commission located at Citicorp Center,
500 West Madison Street, Chicago, Illinois 60611. Copies of such material may be
obtained by mail, upon payment of the Securities and Exchange Commission's
customary fees, from the Securities and Exchange Commission's principal office
at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Purchaser
is a wholly-owned subsidiary of Kinross and is not subject to any independent
informational filing requirements. The financial position and results of
operations of the Purchaser are included in the consolidated financial
statements of Kinross.
The Securities and Exchange Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission, such as Kinam. The Securities and Exchange Commission's web site
address is HTTP://WWW.SEC.GOV. Information regarding Kinam may also be obtained
at the offices of The American Stock Exchange, 86 Trinity Place, New York, New
York 10006.
Kinross is a "foreign private issuer" for the purposes of filing information
with the Securities and Exchange Commission, and files its information reports
and statements according to the multijurisdictional filing requirements, and as
such, its filings are not available on the Securities and Exchange Commission
web site. Kinross' filings with the securities regulatory authorities in Canada
may be found at WWW.SEDAR.COM. Information regarding Kinross may also be
obtained at the offices of The American Stock Exchange, 86 Trinity Place, New
York, New York 10006.
The Securities and Exchange Commission allows Kinam to incorporate by reference
other documents filed with the Securities and Exchange Commission, which means
that it can disclose important information to you by referring you to other
documents. The documents that are incorporated by reference are legally
considered to be a part of this tender offer. The documents incorporated by
reference are:
o Annual Report on Form 10-K for the year ended December 31, 2000;
o Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2001, June 30, 2001, and September 30, 2001;
o Interim report on Form 8-K dated February 4, 2002; and
o Any filings with the Securities and Exchange Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between
the date of this tender offer and the expiration of the offer.
You should rely only on the information included in this offer or incorporated
herein by reference. We have not authorized anyone to provide you with any
different information.
The information contained in this offer about Kinam should be read in
conjunction with the information contained in the documents incorporated by
reference.
We will provide without charge to each person to whom a copy of this offer is
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to 52nd Floor, Scotia Plaza,
40 King Street West, Toronto, Ontario, Canada M5H 3Y2, Attention: Shelley Riley
(telephone: (416) 365-5123). In order to ensure timely delivery of the documents
prior to the expiration date, any such requests should be made by March 14,
2002.
This offer constitutes part of a Tender Offer Statement on Schedule TO filed
with the Securities and Exchange Commission by Kinross and the Purchaser
pursuant to Section 13 of the Exchange Act and the rules and regulations
promulgated thereunder. The Schedule TO and all other exhibits thereto are
incorporated by reference into this offer.
SCHEDULE A
DIRECTORS AND OFFICERS OF KINROSS, KINROSS GOLD U.S.A., AND KINAM
KINROSS GOLD CORPORATION DIRECTORS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Robert M. Buchan Chairman, CEO & Director
52nd Floor, Scotia Plaza (May 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Arthur H. Ditto President, COO & Director
52nd Floor, Scotia Plaza (May 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian/United States
John A. Brough Director President, Torwest Inc. (February 1998
c/o Windsor (January 1994 to present) to present); Executive Vice President
3125 Windsor Blvd. and CFO, iStar Internet Inc. (Prior to
Vero Beach, FL 32963 February 1998)
Canadian
John M.H. Huxley Director Principal, Algonquin Power Corporation
2845 Bristol Circle (May 1993 to present)
Oakville, ON L6H 7H7
Canadian
Cameron A. Mingay Director Partner, Cassels Brock & Blackwell LLP
Suite 2100, Scotia Plaza (January 2001 to present) (June 1999 to present) Partner, Smith
40 King Street West Lyons (prior to June 1999)
Toronto, ON M5H 3C2
Canadian
John E. Oliver Director Executive Managing Director and Head
Suite 2100 (March 1995 to present) of U.S. West, Bank of Nova Scotia
580 California Street
San Francisco, CA 94109
Canadian
John A. Keyes Director Retired, Mining Executive, (January,
10 Windhaven Drive (November 2001 to present) 2001 to present); President & COO,
The Woodlands, TX 77381 Battle Mountain Gold (prior to January
Canadian 2001)
KINROSS GOLD CORPORATION OFFICERS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Robert M. Buchan See above
Arthur H. Ditto See above
John W. Ivany Executive Vice President
52nd Floor, Scotia Plaza (June 1995 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Scott A. Caldwell Sr. Vice President, Mining Operations Operations Consultant, Newmont Mining
52nd Floor, Scotia Plaza (June 1998 to present) (April -June 1998); Vice President,
40 King Street West Operations, Echo Bay Mines Ltd. (Sept.
Toronto, ON M5H 3Y2 1996 to April 1998)
United States
Brian W. Penny Vice President, Finance and CFO
52nd Floor, Scotia Plaza (May 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Richard A. Dye Vice President, Technical Services and
802 E. Winchester Project Development
Suite 100 (April 1994 to present)
Murray, UT 84107
United States
Jerry W. Danni Vice President, Environmental Affairs Vice President, Environmental Affairs,
802 E. Winchester (August 2000 to present) Cyprus Climax Metals Company (prior to
Suite 100 August 2000)
Murray, UT 84107
United States
Christopher T. Hill Vice President, Treasurer Assistant Treasurer, Barrick Gold
52nd Floor, Scotia Plaza (May 1998 to present) Corporation (prior to May 1998)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Gordon A. McCreary Vice President, Investor Relations and
52nd Floor, Scotia Plaza Corporate Development
40 King Street West (May 1993 to present)
Toronto, ON M5H 3Y2
Canadian
Allan D. Schoening Vice President, Human Resources and Vice President, Human Resources,
52nd Floor, Scotia Plaza Community Relations Barrick Gold Corporation (prior to May
40 King Street West (May 1998 to present) 1998)
Toronto, ON M5H 3Y2
Canadian
Shelley M. Riley Corporate Secretary
52nd Floor, Scotia Plaza (June 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
KINROSS GOLD U.S.A., INC. DIRECTORS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Arthur H. Ditto President and Director
52nd Floor, Scotia Plaza (January 1981 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
John W. Ivany Director
52nd Floor, Scotia Plaza (July 1997 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Brian W. Penny Treasurer and Director
52nd Floor, Scotia Plaza (June 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
KINROSS GOLD U.S.A., INC. OFFICERS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Arthur H. Ditto President and Director
52nd Floor, Scotia Plaza (January 1981 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Christopher T. Hill Vice President Assistant Treasurer, Barrick Gold
52nd Floor, Scotia Plaza (August 2001 to present) Corporation (prior to May 1998)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Brian W. Penny Treasurer and Director
52nd Floor, Scotia Plaza (June 1993 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Shelley M. Riley Secretary
52nd Floor, Scotia Plaza (April 1996 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
KINAM GOLD INC. DIRECTORS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
John A. Brough Director President, Torwest Inc.
c/o Windsor (June 1998 to present) February 1998 to present); Executive
3125 Windsor Blvd. Vice President and CFO, iStar Internet
Vero Beach, FL 32963 Inc. (Prior to February 1998)
Canadian
John M.H. Huxley Director Principal, Algonquin Power Corporation
2845 Bristol Circle (June 1998 to present)
Oakville, ON L6H 7H7
Canadian
Cameron A. Mingay Director Partner, Cassels Brock & Blackwell LLP
Suite 2100, Scotia Plaza (March 2001 to present) (June 1999 to present) Partner, Smith
40 King Street West Lyons (prior to June 1999)
Toronto, ON M5H 3C2
Canadian
Brian W. Penny Vice President, Finance and CFO See above
52nd Floor, Scotia Plaza & Director
40 King Street West (June 1998 to present)
Toronto, ON M5H 3Y2
Canadian
Arthur H. Ditto President, COO & Director See above
52nd Floor, Scotia Plaza (June 1998 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
KINAM GOLD INC. OFFICERS
Name, Business Address, Current Position and Other Occupations for Previous
and Citizenship Dates of Service Five Years, If Applicable
- ----------------------------------------------------------------------------------------------------------------------
Arthur H. Ditto President & Director See above
52nd Floor, Scotia Plaza (June 1998 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Brian W. Penny Treasurer & Director See above
52nd Floor, Scotia Plaza (June 1998 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
John W. Ivany Vice President See above
52nd Floor, Scotia Plaza (March 2001 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Shelley M. Riley Corporate Secretary See above
52nd Floor, Scotia Plaza (June 1998 to present)
40 King Street West
Toronto, ON M5H 3Y2
Canadian
Other than the following, none of the foregoing persons: (i) has been convicted
in a criminal proceeding in the past five years; or (ii) has been a party to any
judicial or administrative proceeding during the past five years that resulted
in a judgment, decree, or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws:
John Ivany, the Executive Vice President of Kinross and Kinam and a director of
Kinross Gold U.S.A., Inc., was the subject of enforcement proceedings by the
Alberta Securities Commission IN RE CARTAWAY RESOURCES CORP. In its order dated
February 22, 2001, the Alberta Securities Commission found that Mr. Ivany, as
Chief Executive Officer of Cartaway Resources Corp., had allowed the issuance of
a press release that contained a material factual error in violation of the
securities laws of the Province of Alberta. As a result, Mr. Ivany was
prohibited from acting as a director or officer of any "junior issuer" for a
period of five years and ordered to pay costs in the amount of CDN$20,000.
Kinross is not a junior issuer under the applicable Alberta Securities
Commission provisions, and Kinross Gold U.S.A., Inc. and Kinam are not subject
to regulation by such Commission.
THE DEPOSITARY FOR THE OFFER IS:
ALPINE FIDUCIARY SERVICES, INC.
BY MAIL: BY FACSIMILE TRANSMISSION BY HAND:
(FOR ELIGIBLE INSTITUTIONS ONLY):
Alpine Fiduciary Services, Inc. 17 State Street - 28th Floor
c/o Georgeson Shareholder Communications, (201) 559-1162 New York, NY 10004
Inc. Attn: Mark Zimkind
P.O. Box 2065 CONFIRM FACSIMILE TRANSMISSION
South Hackensack, NJ BY TELEPHONE:
07606-9974
(201) 460-2213
Questions or requests for assistance or for additional copies of this offer, the Letter of Transmittal, or other offering materials
may be directed to the Information Agent at its address and telephone number set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
GEORGESON [LOGO] SHAREHOLDERS
GEORGESON SHAREHOLDER COMMUNICATIONS, INC.
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
GEORGESON SHAREHOLDER SECURITIES
GEORGESON SHAREHOLDER SECURITIES CORPORATION
17 STATE STREET, 10TH FLOOR
NEW YORK, NEW YORK 10004
Banks and Brokers: (212) 440-9800
All Others Call Toll Free: (800) 445-1790
MARCH 14, 2002