TORONTO (miningweekly.com) – Canadian gold miner Kinross Gold has agreed to buy exploration and development firm Underworld Resources in a friendly cash and shares deal that values Underworld at some C$139,2-million.

The deal comes just one day after the close of the annual Prospectors and Developers Association of Canada conference in Toronto, at which one of the pervading themes was the expectation that consolidation will ramp up this year in the mining sector, particularly in the case of seniors buying juniors.

Kinross said it already owns 8,5% of the smaller company, and will offer 0,141 of its own shares, plus C$0,01 in cash, implying an offer price of around C$2,62 a share based on closing prices on Wednesday.

Underworld's main asset is the White Gold project, in Canada's Yukon territory, where it has outlined indicated resources of one-million gold ounces, plus 407 000 oz in the inferred category.

The company's directors and management have agreed to back the deal and will tender their shares into the offer, which represents a 36% premium over the closing price on Wednesday, and a premium of 50,2% based on the two firms' 20-day volume-weighted average prices, up until March 10.

"The offer will provide Underworld shareholders with immediate value for Underworld's current assets and future growth potential," Kinross CEO Tye Burt said in a statement.

"It will also give Underworld shareholders the opportunity to participate in a senior gold producer with a proven track record and significant upside potential as we advance the next wave of our growth programme.”

Kinross owns mines in the US, Russia, Brazil and Chile. Last month, the company announced it would sell half of its 50% stake in the large Cerro Casale gold/copper project to partner Barrick, for $475-million.

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