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Mark Blinch/Reuters

Canada’s Kinross Gold Corp is putting future deals in Russia on hold after snapping up a development project in a country hit by Western sanctions.

The Toronto-based miner in July acquired the undeveloped Chulbatkan asset from closely held N-Mining for $283 million in cash and shares.

The acquisition will add 3.9 million indicated ounces of gold to Kinross’ books, according to the company.

Foreign investment in new mining projects in Russia has grown scarce due to Western sanctions levelled after the 2014 annexation by Russia of Crimea from Ukraine.

The deal with N-Mining does not breach any sanctions but still requires Russian approval.

The deal follows a years-long effort by Kinross chief executive Paul Rollinson to cultivate ties in Russia even as diplomatic relations with the West – including Canada – have soured.

“If you own our stock, by definition you’re comfortable with Russia, but that doesn’t mean we want to go overboard,” Rollinson told Reuters.

Kinross was offered several larger assets in Russia over the last couple of years but was not willing to spend too much on the country, a source familiar with the matter told Reuters.

Kinross considered buying a gold project from Highland Gold Mining Ltd, another gold producer in Russia, but the companies did not agree on the price, an industry source told Reuters. Highland Gold declined to comment.

Russian operations accounted for one-fifth of 2018 revenue for Kinross, according to Refinitiv data.

Kinross has poured more than $3.5-billion into Russia since 1995, making it the biggest foreign investor in the country’s gold sector and the third-largest producer of gold equivalent behind Polyus and Polymetal International Plc, according to Russia’s gold producers’ union, a non-government lobby group.

Russia’s anti-monopoly regulator told Reuters last week that it had recently extended the review of the Chulbatkan acquisition by two months.

A Kinross spokesman said it expects the deal to close as scheduled early next year.

The Russia asset has a six-year mine life with an initial development cost of $500 million, Kinross said. But production will not start for at least five years, and some analysts said the company will need to show sizable finds during exploration to make it add value.

Buoyed by gold’s rally above $1,500 per ounce, investors have pushed Kinross shares up by a third since the deal was announced, versus a 7 per cent rise in the VanEck Vectors Gold Miners exchange-traded fund.

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