Canadian Mining company Kinross Gold Corporation (KGC) plans to invest $1.1 billion in its Fruita Del Norte project in Ecuador until 2016.
The Fruita Del Norte Project is likely to produce 410,000 gold equivalent ounces on an average each year during its life. The life expectancy of the mine is about 16 years. According to Kinross, the project possesses proven and probable mineral reserves of estimated 6.8 million ounces of gold and 9.1 million ounces of silver.
Ecuador, which is an OPEC oil producing country, intends to diversify its economy by encouraging mining. Ecuador thus expects that five projects will be signed in the next few months. The investment in these projects is expected to be around $7 billion.
Kinross, along with Canadian junior Ecuacorriente and U.S.-based International Resources will sign agreements by the middle of 2011, with two other deals due for completion next year. Ecuacorriente, an affiliate of Canada’s Corriente Resources, also plans to start building a copper mine in Ecuador with an initial investment of $631 million.
In addition, Kinross plans to invest US$2.5 million to build and help equip a new Medical Emergency Center in Mauritania. The new emergency centre will be part of Mauritania’s Grand National Hospital located in Nouakchott, the nation’s capital. The emergency center will be a boon not only for the residents of Nouakchott, but also for the neighbouring parts in the country which depend on Nouakchott for heath care services.
Currently, Nouakchott has only limited emergency treatment facilities, which are required to handle all emergency medical cases in the country.
Kinross’ strategic focus is to maximize net asset value and cash flow per share through a four-point plan built principally on: delivering mine and financial performance; attracting and retaining the best people in the industry; achieving operating excellence and delivering future value through profitable growth.
A few days back, the company received pre approval from the Russian commission to acquire the remaining 25% stake in 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%.
For 2011, Kinross anticipates producing 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 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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