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Kinross Gold Corporation Message Board

  • investora2z investora2z Apr 9, 2013 12:46 PM Flag

    Strategic acquisition of Revolution Resources

    KGC recently increased its stake in Revolution Resources by buying another 3.6 million units of Revolution Resources (TSE:RV) for $250K in a private placement financing. This is part of the company's strategy to boost its exposure to "quality" exploration plays. The acquisition price was 7 cents, and the current purchase makes the total stake to be around 9.7 percent. Revolution is a company focused on gold and silver exploration in Mexico and the United States. Such acquisitions have been common in the gold mining industry with bigger companies buying stakes in smaller companies with good assets or future potential. In a similar transaction Coeur d'Alene Mines (CDE) bought stake in Pershing Gold Corporation (PGLC) as part of its strategy to improve its position in the gold mining industry. PGLC is about to start production in 2014, and this stake will help CDE reap rewards very soon. PGLC will be able to produce around 50K ounces of gold in the first year, and is currently available at very low valuation. KGC is also awaiting government reforms in Ecuador to invest $1 billion for development of its Fruta del Norte project. Fruta is the largest gold project in Ecuador with reserves estimated at 6.7 million ounces of gold and 9.0 million ounces of silver. Overseas investments are fraught with political risks, and KGC recently bore an impairment charge of $3.2 billion on account of goodwill and property, plant & equipment related to two projects in Mauritania and Ghana. It failed to win dismissal of a US lawsuit related to these mines. The case relates to KGC's $7.1 billion acquisition of a company Red Back Mining Inc in 2010, which gave it control of the mines. The stock has been on a downtrend for quite some time now and made its 52 week low recently. The decision on the lawsuit only accelerated the decline.

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