Kinross Gold Corp. K-T plans to sell its Ghana gold mine, as it continues on its quest to unload problem assets and reinvent itself as a less risky investment among the giants of the global gold sector.
Kinross, Canada’s second-biggest gold miner by production, said on Monday that it plans to sell its 90-per-cent stake in the Chirano mine for US$225-million to Asante Gold Corp., a Vancouver-based junior development company. The Ghana government, which owns the remaining 10 per cent of the mine, said it has no objections to the transaction.
Toronto-based Kinross will receive US$50-million in Asante shares before closing, US$115-million in cash at the close, and the balance in deferred cash payments over the subsequent two years.
Chirano is one of Kinross’s smallest operations, producing 155,000 ounces of gold last year, compared with the company’s overall output of just more than two million ounces. Kinross acquired the mine more than a decade ago after its acquisition of Red Back Mining Inc. Earlier this year, a contractor’s truck carrying mining explosives en route to Chirano was involved in a massive accident in a residential area that led to the deaths of at least 17 people.
Kinross is in the midst of a fundamental reshaping and trimming of its mine portfolio, some of which it orchestrated, and some of which has been out of its control. After the Ukrainian invasion this year, scores of Western companies announced plans to exit Russia. This month, Kinross followed with a tentative deal to sell its Siberian gold mines to Russia’s Highland Gold Mining Ltd. for US$680-million. Kinross hasn’t indicated when the deal will close, and the transaction is subject to the approval of the Russian government.
By and large, investors have welcomed Kinross’s plans to exit Russia and now Ghana. Even though the large Kupol complex in Russia had been a low-cost, high-margin operation, investors have long been concerned about the political risk of operating in Russia.
As a result its share-price valuations had been punished compared to peers with mines in safer jurisdictions. Agnico Eagle Gold Mines Ltd., which last year produced less gold than Kinross, has consistently been valued far above it. Agnico’s portfolio is predominantly weighted toward Canada and Australia.
West Africa has been a tough jurisdiction for Kinross. Tasiast, a giant mine in Mauritania, which Kinross also inherited with the Red Back acquisition, has fallen short on production and profit expectations over the years. Last year, a mill fire at Tasiast severely curtailed production.
Heralding the company’s evolving “new look,” Fahad Tariq, an analyst with Credit Suisse, wrote in a note that Kinross is moving in the right direction, with the sale of both Chirano and its Russian operations. “Kinross’s geographical footprint is materially different – and improved in our view from an ESG [environmental, social and governance] and operational risk perspective,” he said.
Before Russia forced its hand, Kinross had already taken a major step toward reinventing itself. Late last year, the company announced the acquisition of junior development company Great Bear Resources Ltd. for $1.8-billion.
Kinross bought Great Bear after outbidding at least four other major mining companies, including Barrick Gold Corp. Great Bear had been one of the top-performing junior gold stocks in the world because of its giant new gold discovery in Red Lake, Ont.
However, years of development work still is ahead for Kinross to ascertain how much economical gold can be mined from the project, and production isn’t likely before the end of the decade. However, if the Great Bear acquisition ends up being a success, a significant amount of Kinross’s future production will come from Canada.
Some observers believe Kinross may not be around to see through the development of Great Bear. A trio of analysts at Scotia Capital Inc. recently speculated that Barrick Gold could pounce on Kinross in an opportunistic takeover, especially in light of persistent weakness in the shares. For Barrick, buying Kinross would see it regain the position as the world’s biggest gold producer, a distinction it lost a few years ago to U.S. competitor Newmont Corp.
Other analysts believe Kinross will continue as a standalone. RBC Dominion Securities Inc’s. Josh Wolfson said in a recent note that Kinross has too many problems to make business sense for anyone to buy it.
“We believe discussion over Kinross as a potential acquisition target is unfounded,” Mr. Wolfson wrote, citing operational problems at Tasiast, pit wall stability issues at a Nevada mine, and balance sheet concerns owing to $1-billion in additional debt accumulated after the Great Bear transaction.
Shares in Kinross fell by 2.9 per cent on the Toronto Stock Exchange on Monday to close at $6.75 apiece.
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Niall McGee