Market has no patience for exploration/ development from cash flow only. 5% interest is small price to pay to accelerate production. Dollar is dead, Euro close behind for the next few years Gold is King. If this moves production up by a couple of years even with Gold at $1,000, this is a no brainer....... as long as the gold is there.
On the point of a depreciating dollar, sometimes I wonder if Apple Computer should buy many tons of gold to diversify their cash holdings which are currently around $75 Billion and are on a trajectory to reach over $100 Billion soon.
I have no problem with Kinross borrowing as much as they can at reasonable interest rates. The other positive right now for Kinross is the fact that gold is trading at over $400 an ounce greater than their average selling price in Q2. With Kinross selling around 2.7 million ounces/year going forward, that translates into additional revenue of close to $1 Billion to Kinross on the rise in gold prices alone over the average of Q2.
When it costs KGC 500-600 bucks to produce an oz of gold & it sells for 1700+ per OZ, why not just take a few truckloads to the market to sell ? Their end product is as close to cash as you will ever get- a real mystery .......
I think with all the development projects in the pipeline, a debt offering was pretty much a given. It certainly beats them issuing more shares and the interest rates look pretty favourable. My guess is that in 5 years the 2021 and 2041 bonds are going to look like a bargain for Kinross.
Assuming that all of these big projects come online and on schedule in 2013-14, then cash flow problems will become a thing of the past. I expect that their margins will be greater than $1000 per ounce of gold in 2014, and production should be close to 5 million ounces on an annual basis. Free cash flow should be pretty amazing.