The Canadian mining company Kinross Gold Corporation (KGC) received pre approval from the Russian commission to acquire the remaining 25% stake in the Chukotka Mining and Geological Company (CMGC), which is currently the owner of the Kupol Mine and Kupol East-West exploration licences in the Russian Federation’s Far East Region.
This will increase the stake of the company in the Kupol gold mine to 100% from 75%.
Kinross will furnish further details upon completion of final documentation, including a share purchase agreement.
The company will fund the acquisition using the cash proceeds from its sale of shares in Harry Winston, announced earlier this week, as well as a non-recourse debt facility of about $200-million. Export Development Canada and a group of commercial banks expressed their eagerness to participate in the financing.
The company has not received the minutes of the Commission’s meeting as yet, which may or may not include conditions that apply to the proposed transaction.
Few days back the company sold its 8.5% equity interest in Harry Winston Diamond Corporation. The equity interest consisted of approximately 7.1 million Harry Winston common shares, on an underwritten block trade basis, for gross proceeds of CDN$100 (US$D102 million) million.
In December 2010, the company also completed the sale of its 1.8% interest in Osisko Mining Corporation, comprising approximately 6.8 million Osisko common shares, on an underwritten block trade basis, at a gross price of CDN$14.70 per share, for net proceeds of CDN$97.5 million. The transaction resulted in a gain of CDN$74.1 million.
The company enjoys a good financial position at present. In the fourth quarter of 2010, Kinross’ gold production increased 10% year over year to 676,635 ounces, mainly attributable to improved performance at the Paracatu expansion plant and the addition of new production from Tasiast and Chirano.
For 2011, Kinross anticipates production in the range of 2.5–2.6 million gold ounces at an average cost of sales per gold equivalent ounce of $565 – $610. Kinross also expects higher costs resulting from increased energy and labor costs, and lower average grades.
By 2015, Kinross expects production to grow in the range of 4.5–4.9 million ounces, as new projects start up in 2013 and 2014.
Kinross like other gold producers, Barrick Gold Corporation (ABX) and Newmont Gold Mining (NEM), benefits from rising gold prices. We expect Kinross’ exploration projects and acquisitions to boost its top line going forward.
Currently, Kinross Gold has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.
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