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Kinross May Sell Stake in Mines

Zacks Equity Research

According to reports, gold miner Kinross Gold Corporation (KGC) wants to sell its 50% stake in the Crixas gold mine in Brazil and 25% stake in the Cerro Casale gold-silver-copper project in Chile. The company stated that the sale is part of its ongoing portfolio review process and not aimed to fund growth per say.

The Crixas mine consists of two operating underground gold mines and is located in the State of Goias, approximately 161 miles (260 kilometers) northwest of the capital city of Brasilia. Kinross had acquired its ownership interest in the mine with the acquisition of TVX on January 31, 2003.

The remaining 50% stake in the Crixas mine is enjoyed by South African gold miner AngloGold Ashanti Ltd. The Crixas mine produced 66,583 gold equivalent ounces in fiscal 2011, contributing 7% of the total production in South America.  As of December 31, 2011, Kinross’s share in Crixas’ proven and probable reserves stands at 0.38 million ounces.

The Cerro Casale mine is one of the largest undeveloped gold/copper deposits in the world. It is located 90 miles (145 kilometers) southeast of Copiapó in northern Chile. Kinross acquired a 49% interest in Cerro Casale, in 2007, through its acquisition of Bema Gold. The remaining 51% stake was held by Barrick Gold Corporation (ABX).

In 2010, Kinross sold 25% of its interest in the project to Barrick Gold for a total deal value of $474.3 million. Currently Kinross has 25% of the project and Barrick the remaining 75%. As of December 31, 2011, Kinross’ share in the mine’s proven and probable reserves stands at approximately 5.8 million ounces of gold, 14.7 million ounces of silver and 14.4 billion pounds of copper.

Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation and Newmont Gold Mining (NEM), benefits from rising gold prices. We expect Kinross’ exploration projects and acquisitions to boost its top line going forward. Currently, Kinross Gold has a short-term (1 to 3 months) Zacks #3 Rank (Hold) supported by our long-term Neutral recommendation.

Headquartered in Ontario, Canada, Kinross Gold Corporation is primarily involved in the exploration and operation of gold mines. Kinross, catering to a diverse clientele, has facilities in the U.S., Canada, Brazil, Chile, Russia and Africa.

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