Kinross Gold (KGC) (TSX:K, Financial) announced updates at some of its operations on Aug. 25.
Bald Mountain, Nevada
At Bald Mountain, the company has received a record of decisions from the U.S. Bureau of Land Management to allow expansion of existing mine facilities and provide significant flexibility for future growth. As a consequence of the decision the company may potentially increase the current 1.1 million ounces of gold mineral reserve estimate and extend the life of Bald Mountain’s mine.
The acquisition of Bald Mountain and 50% of Round Mountain on Jan. 11 will help Kinross to diversify its operations, increase its low-risk U.S. exposure, add about 430,000 ounces of gold over the first three years, lower its average all-in sustaining costs and deliver free cash flow to fund organic growth and expansions.
Tasiast (Mauritania, western North Africa)
At Tasiast, Kinross resumed normal mining and processing operation in mid-August after the company and the government of Mauritania finally reached an agreement, under Mauritanian law, on the number of local workers who have the necessary skills and experience to work at Tasiast.
At Tasiast, Kinross is proceeding with the Phase One expansion project. The first phase of the expansion is expected to increase mill throughput capacity and gold production to approximately 409,000 ounces at AISC of $760 per ounce:
Source: Kinross’ website
The Tasiast lands fall within the Inchiri and Dakhlet Nouadhibou Districts and are located in northwestern Mauritania, approximately 300 kilometers north of the capital Nouakchott and 250 kilometers southeast of the major city of Nouadhibou.
Source: Kinross’ website
Maricunga (Chile)
At Maricunga, the company decided to suspend mining earlier than originally planned.
The suspension of the mining activities that forced the company to lay off 300 employees came after a judicial decision in Chile concluding that the country's environmental regulatory authority's (SMA) revised June 24 sanction to substantially reduce water pumping at Maricunga was enforceable.
The advanced timing of suspension at Maricunga is not expected to affect the company's 2016 guidance on production (2.7 million to 2.9 million gold equivalent ounces) and cost (production cost of sales is between $675 and $735 per gold equivalent ounce, and all-in sustaining cost is between $890 and $990 per gold equivalent ounce). The company already planned to suspend activities at the mine in the last quarter due to “other capital priorities in its global portfolio.”
Kinross opposes the SMA's unprecedented actions and disagrees with the original resolution, relying on contested scientific findings on the causes of the drop in groundwater levels across the region. According to the company’s findings the cause is unrelated to the mine's operations but due to many years of drought that affected the Atacama Region, where Maricunga is located.
In the meantime Kinross will consider possible options for restarting mining.
After Thursday’s trading day, Kinross is up 11 per share (or 2.60%) closing at $4.34 on the NYSE versus an average analyst price target of $6.36. The stock gained 138.46% year to date, but it is down trending since the beginning of August.
The enterprise value/EBITDA is 8.48, and the price-book (P/B) is 1.26.
Disclosure: I have no position in Kinross Gold.
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