The sale of a stake in the Crixas gold mine in Brazil may be the first of several divestitures by Kinross Gold Corp., as one of Canada’s largest miners knuckles down to develop its main deposits and fix a battered stock price trailing its peers.
Toronto-based Kinross said on Tuesday it agreed to sell its 50-per-cent stake in the Crixas gold mine for $220-million (U.S.), an idea also floated publicly at the Bank of Montreal metals and mining conference in Florida in March.
The proceeds are just a drop in the bucket compared with some $1.5-billion in planned annual investments by the miner in key projects across three continents over the next three years, but analysts say every million will count in funding Kinross’s ambitious plans.
“Crixas is a non-operated, non-core asset for Kinross,” said Tye Burt, the miner’s president and chief executive officer. “Its divestiture is consistent with our strategy of portfolio optimization, and focusing our resources on the company’s core operations and priority projects.”
Mr. Burt has signalled the company could also sell its 25-per-cent stake in Cerro Casale, a giant copper-gold deposit in northern Chile. The project is 75-per-cent owned by Barrick Gold Corp., which already bought a 25-per-cent stake from Kinross two years ago for $454-million in cash.
Analysts say the only incentive Kinross will need to sell its remaining stake is a willing buyer with cash on hand.
The sale of the Crixas stake to South Africa’s AngloGold Ashanti Ltd., which already owns the other half of the mine, also marks a trend where large gold miners are moving to divest non-controlling stakes in operations.
While the trend is not shareholder driven, it comes as gold company stock prices wallow, lagging gold prices that are still six times higher than they were about a decade ago. Analysts say the market has tended to favour companies that run their operations because they are not subject to the whims of majority partners.
Last year, for example, Toronto-listed Iamgold Corp. sold non-controlling stakes in two mines in Ghana to its majority partner as it sought to refocus efforts on operating mines.
“The sale of Crixas demonstrates a strategy to focus on core assets and to ease cash flow pressures during the current project development phase,” BMO Nesbitt Burns Inc. analyst David Haughton wrote in a research report.
In January, Kinross announced a plan to focus investment and expenditures on key projects and in order of priority, instead of firing on all cylinders for all of its projects simultaneously.
With Kinross shares down 60 per cent in the past eight months, Mr. Burt pledged earlier this month to focus the company’s efforts on four major growth assets: Tasiast, Dvoinoye, Lobo-Marte and Fruta del Norte. He said he would extend the development timeline on Lobo-Marte and Fruta del Norte.
The company’s top priority is developing Tasiast, a massive gold deposit in Mauritania that it acquired under the $7.1-billion takeover of Red Back Mining Inc in August, 2010. The asset is touted to be one of the world’s largest undeveloped gold finds of recent years, but has proven problematic for Kinross, which was forced to write down $2.49-billion on the project a year after it was acquired.
The sale of the Crixas stake will add to a the company’s cash position, which was about $1.5-billion as of its most recent quarter.