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Kinross (KGC) Completes Acquisition of Chulbatkan for $283M

Zacks Equity Research

Kinross Gold Corporation KGC announced the completion of its earlier disclosed acquisition of Chulbatkan from N-Mining Limited for an aggregate fixed consideration of $283 million.

Notably, Chulbatkan is situated in the Khabarovsk region of Far East Russia. It is a high-grade, heap leach development project and is anticipated to have significant upside potential.

The acquisition is anticipated to build on Kinross’ extensive operational and development experience as well as successful 25-year track record in Russia.

Notably, the first installment of $141.5 million, plus $3.1 million of ordinary course working capital adjustments, representing around 50% of the $283 million purchase price, was paid in compliance with the acquisition agreement.

The agreement was amended to allow the first installment to be paid all in cash, mitigating the dilution of share and leveraging the strong liquidity profile of Kinross. The amendment also specifies that 60% (which can be extended up to 100% at Kinross’ sole discretion) of the second (and final) installment of $141.5 million, due on the first anniversary of closing, can be paid in Kinross’ shares.

Kinross now started a detailed exploration drilling program in Chulbatkan to update the existing resource base by the end of 2020. The company anticipates spending $10 million on initial exploration drilling at Chulbatkan in the year.  

Moreover, it plans to convert estimated mineral resources into estimated mineral reserves, and comIt also and aims for subsequent
plete pre-feasibility and feasibility studies for the project within roughly three years. It also aims for subsequent construction duration of two years.

Currently, Kinross forecasts around 3.9 million ounces of gold in indicated mineral resources and 80,000 ounces of gold in estimated inferred mineral resources for the project, based on extensive due diligence work and internal analysis.

Shares of the company have rallied 45.2% in the past year compared with the industry’s 33% rally.

 

 

In November 2019, Kinross stated that it is on track to attain the production target of 2.5 million (+/- 5%) gold equivalent ounces for 2019. All-in sustaining costs are expected to be $995 (+/- 5%) per gold equivalent ounce.

The company also expects to meet the lower end of its 2019 production cost of sales guidance of $730 (+/- 5%) gold equivalent ounces and the higher end of its 2019 capital expenditure projection of $1,050 million (+/- 5%).

Kinross Gold Corporation Price and Consensus

 

Kinross Gold Corporation Price and Consensus

Kinross Gold Corporation price-consensus-chart | Kinross Gold Corporation Quote

Zacks Rank & Stocks to Consider

Kinross currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. DQ, Pan American Silver Corp. PAAS and Sibanye Gold Limited SBGL.

Daqo New Energy has a projected earnings growth rate of 315.4% for 2020. The company’s shares have rallied 91.2% in a year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pan American Silver has an estimated earnings growth rate of 46.7% for 2020. It currently flaunts a Zacks Rank #1. The company’s shares have gained 49.4% in a year.

Sibanye Gold has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 587.5% for 2020. The company’s shares have soared 245.8% in a year.

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