TORONTO (miningweekly.com) – Tye Burt, the CEO of Toronto-based gold-miner Kinross, was not giving anything away on Wednesday about his plans for a 9,4% stake in West Africa-focused Red Back Mining, announced late the previous day.

“It's too early to say. We can't give a direction on the future, but what we've got is a seat at the boardroom table, a strategic investment in a company now that has the cash available to start looking at their next steps,” he told reporters after Kinross' annual shareholders meeting in Toronto.

Red Back has two operations, the Tasiast gold mine, in Mauritania, and the Chirano operation, in Ghana, and has made considerable strides in the last couple of years to expand both deposits, and Tasiast in particular, where the company announced a 64% increase in reserves this year, to five-million ounces.

Kinross, which has mines in the US, Russia, Brazil and Chile, has signalled its interest in West Africa for at least two years, Burt said, so the C$600-million cash investment for 9,4% of Red Back should not come as a big surprise.

The firm had extra cash on its balance sheet after selling half of its 50% interest in the Cerro Casale project, in Chile, to Barrick Gold.

“And we think that, compared to holding cash and T-bills, holding a 9,4% stake in an exciting growing gold producer is a good use of our cash.” Burt said.

But some analysts queried the wisdom of buying a chunk of a company that could be viewed as expensive, and is already trading at a good premium to its peers.

Kinross could potentially be looking to come in with a full takeover offer down the road, or to sell the shares at a premium if another buyer makes an offer for Red Back.

Shares in Kinross fell 5,7% on Wednesday, to C$17,97 apiece by 14:54. Red Back rose 2%, to C$24,96 a share.

But Burt shrugged off the initial responses to the deal.

“My bottom-line view is we've made a strategic move in the right direction for the long term,” he said.

“And I'm frankly not going to worry too much about the short-term market reaction.”

On the question of price, “we obviously believe there's long-term accretive potential," Burt said.

“Much more upside than downside.”

Kinross was drawn to West Africa because it views it as an important growth region for the global gold sector, he said.

Proven and probable gold reserves in the region have almost doubled in the last four or five years, to almost 90-million ounces.

But Burt remained adamantly noncommittal on what Kinross could do with the stake.

“It's too early to say,” he repeated.

He also emphasised that an investment in West Africa is not the same as investing in sub-Saharan countries like Zimbabwe or the Democratic Republic of Congo, where Kinross sold some assets about five years ago.

Nor is it the same as Tanzania, where larger rival Barrick recently spun out its own mines into a new company, he said.

Red Back expects to produce between 485 000 oz and 525 000 oz of gold this year, increasing to some 800 000 oz by 2012, the firm said in January.

In June 2009, the company signed an agreement to buy Moto Goldmines, but was later squeezed out by a competing offer from another West African gold-miner, Randgold Resources, and its partner AngloGold Ashanti.

Moto agreed to support the Randgold offer and paid Red Back a termination fee.

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