Kinross Gold Corp. (KGC, Financial) informed the market of the completion of the sales of two South American assets to Goldcorp Inc. (GG, Financial) through a news release published on its Web site June 9.
The assets in question are the 25% interest that Kinross Gold held in the Cerro Casale project and the 100% interest in Quebrada Seca exploration project in Chile.
The Quebrada Seca exploration project is only a few kilometers from the undeveloped gold deposit of Cerro Casale.
For the development of the Chilean gold deposit Goldcorp formed a 50-50 joint venture with Barrick Gold Corp. (ABX, Financial), the completion of which was also announced by the two companies through their Web sites last week June 9. Here is the link to Barrick Gold’s news release while the link to Goldcorp’s news release can be found here.
Thanks to the just completed new business entity the companies will also take action in the Capische project. The acquisition is going to be completed by Goldcorp through the takeover of Exeter Resource Corp. (XRA, Financial).
Concerning the sale of its interest stakes in the South American assets, Kinross Gold received cash of $260 million from Goldcorp at the closing of the transaction. This amount of cash is composed of $240 million for the sale of the 25% interest stake in the Cerro Casale project and $20 million for the sale of the 100% interest stake in Quebrada Seca.
Kinross Gold will get a further cash payment of $40 million from Goldcorp subject to a positive building decision concerning Cerro Casale.
Kinross Gold also says that Goldcorp is obliged to pay cash of $20 million to Barrick, subject to the commencement of commercial production at the Chilean Cerro Casale plus a royalty of 1.25% that will be computed “on 25% of gross revenues from all metals sold at Cerro Casale and Quebrada Seca.” Kinross will precede Goldcorp with a cash payment of $10 million to Barrick Gold.
Thanks to the proceeds that came from this transaction, Kinross Gold will strengthen its balance sheet that as of the first quarter of 2017 could rely on $832.4 million in cash on hand and securities plus a line of credit of $1.43 billion.
Kinross Gold’s total available liquidity amounted to $2.26 billion as of March 31. Plenty of funds that the miner can use to advance the projects in which it is engaged.
At Tasiast (in Mauritania) the miner expects to produce 400,000 ounces of gold equivalent every year at an all-in sustaining cost (AISC) per ounce of $760 once the development project’s phase one is completed. Kinross expects to start the production in the second quarter of fiscal 2018. At Tasiast Kinross is also exploring the possibility to increase the annual production of equivalent gold to 780,000 ounces at an AISC of $665 per ounce. A feasibility study is going to be completed sometime during the third quarter.
Kinross is exploring the possibilities to further extend the life of mine and to upgrade the amount of gold resources at Bald Mountain and Round Mountain. At Bald Mountain Kinross holds 2.133 million ounces in proven and probable gold reserves while at Round Mountain the miner has an availability of 1.267 million ounces of gold and 1.232 million ounces of silver in proven and probable reserves over an expected mine life of 10 years.
Kinross is also advancing projects at Kupol and Dvoinoye – combined operations in Russia – from where the miner expects to upgrade its assets base with high-margin ounces. Kinross also aims to extend the life of mine from the initially expected 2020 to 2021.
In addition, thanks to the phase seven of the exploration program that Kinross is following at La Coipa in Chile, the company’s exploration team has defined a new mineralized zone and targeted new mineralized extensions. At La Coipa the miner declared 1.747 million ounces of gold and 64.234 million ounces of silver at the end of December 2016.
Kinross Gold is trading at $4.33 with a price-sales (P/S) ratio of 1.53, a price-book (P/B) ratio of 1.26 and an EV to EBITDA ratio of 6.21.
Disclosure: I have no positions in any stock mentioned in this article.
