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Kinross Gold Corp. is close to announcing the acquisition of Northern Ontario gold development company Great Bear Resources Ltd., two sources familiar with the situation said.

Vancouver-based Great Bear has been one of the best-performing junior gold companies in the world over the past few years, owing to spectacular drilling results at its Dixie gold project at Red Lake, in Northwestern Ontario. Some analysts have speculated that Dixie could contain as much as 20 million ounces of gold, which would put it on par with some of Canada’s biggest gold mines.

Both companies declined comment.

Inside the intense bidding war for Great Bear Resources that saw Kinross Gold emerge as winner

On Wednesday, shares in Great Bear closed up 3.4 per cent on the Toronto Venture Exchange at $22.93 apiece, giving the company a market value of $1.2-billion.

Toronto-based Kinross is Canada’s second biggest gold company by production with annual output of more than two million ounces.

The Globe and Mail is not identifying the sources, as they were not authorized to speak publicly.

For Kinross, the acquisition of Great Bear would help the company reduce its exposure to geopolitically dicey Russia and West Africa, and increase its exposure to Canada, one of the safest mining jurisdictions. Kinross’s stock has historically traded at a discount compared to peers that have a heavy weighting towards Canada, such as Toronto-based Agnico Eagle Gold Mines Ltd.

If Kinross succeeds in acquiring Great Bear, it would be after going head to head with the world’s second biggest gold producer, Barrick Gold Corp. The sources said that Barrick, also Toronto-based, was also involved in talks at potentially acquiring Great Bear.

Barrick did not immediately respond to a request for comment.

Unlike typical Red Lake deposits, which tend to have gold that is randomly dispersed and extremely difficult to mine, early studies show that a large section of Great Bear’s Dixie’s ore is dispersed in a uniform fashion, potentially making it straightforward to extract.

While there is a lot of excitement over Great Bear, history also shows that gold companies need to be cautious before paying top dollar to acquire early-stage exploration companies. In 2008, Vancouver-based Goldcorp Inc. bought Red Lake development company Gold Eagle Mines Ltd. for $1.5-billion. Like Great Bear, Gold Eagle had very promising drill results, but it had not conducted a 43101 report on the project. A 43101 is a rigorous study carried out by independent geologists estimating the grade and quantity of gold in the ground. The Gold Eagle acquisition ended up being a disaster for Goldcorp, with no large mine ever built.

Over the past few years, the Canadian gold industry has consolidated rapidly with several multibillion-dollar deals consummated, including Barrick Gold Corp.’s US$10-billion takeover of Randgold Resources Ltd. in 2019 and Agnico Eagle Mines Ltd.’s $13-billion purchase of Kirkland Lake Gold Ltd., which was approved by shareholders a few weeks ago.

Single-asset companies, those with only one mine or project, have also been scooped up in a rapid clip. Most recently, Australia’s Newcrest Mining Ltd. announced plans to acquire British Columbia gold miner Pretium Resources Inc. for $3.5-billion.

After falling out of favour in the late 2000s, Red Lake is in the midst of a renaissance, and has seen its fair share of mergers and acquisitions. Last year, Australia’s Evolution Mining Ltd. paid US$475-million to acquire the Red lake mines formerly owned by Canada’s Goldcorp Inc. And earlier this year, Evolution acquired Battle North Gold Corp., a junior developer that resurrected a troubled gold mine formerly operated by Rubicon Minerals Corp.

Great Bear chief executive officer Chris Taylor had to raise money from family and friends in order to buy the Dixie project in 2017. Back then, the gold industry was in the doldrums. Over the past few years, the precious metal has tested new all-time highs, benefiting in part from a surge in uncertainty owing to the COVID-19 pandemic.

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