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Kinross Declares Sale of Interest in Cerro Casale Project
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Kinross Gold Corporation (KGC - Free Report) has agreed to sell its 25% interest in the Cerro Casale project in Chile and its full interest in the Quebrada Seca exploration project located adjacent to Cerro Casale to Goldcorp Inc. .
The considerations for the transaction include $260 million in cash, payable at closing (including $20 million for Quebrada Seca); $40 million in cash, payable following a construction decision for Cerro Casale; $20 million payment obligation under the existing Cerro Casale shareholders agreement, which is payable when commercial production at Cerro Casale starts and a 1.25% royalty from Goldcorp based on 25% of gross revenues from all metals sold at Cerro Casale and Quebrada Seca, with Kinross foregoing the first $10 million.
Post the closure of the deal, Kinross will enter into a water supply agreement with the Cerro Casale joint venture. The deal will grant Kinross the rights to access the unused water from the Cerro Casale joint venture. The company intends to use this water for its Chilean assets. Kinross will be responsible for the incremental capital costs to accommodate the supply of water along with its pro rata share of operating and maintenance costs.
Kinross plans to use the net proceeds from the sale for its organic development projects and to strengthen its balance sheet further. The sale is expected to be completed in the second quarter of 2017, subject to customary closing conditions.
Kinross has underperformed the Zacks categorized Mining-Gold industry over the past six months. The company’s shares have declined around 9% over this period, compared to roughly 12.4% gain recorded by the industry.
Kinross posted a loss in the fourth quarter of 2016. Revenues rose by double digits year over year, and beat expectations. The company saw higher gold production in the quarter. Kinross is making steady progress in advancing the projects that give it a strong growth profile among leading gold producers.
Kinross, in February, said that it has been progressing as planned with the Phase One expansion of the Tasiast mine and commercial production is expected to begin in the second-quarter 2018. The Phase Two feasibility study is progressing well and is expected to conclude by the third-quarter 2017. The company also received a new permit at Bald Mountain and has now doubled proven and probable mineral reserves before schedule.
Two of Kinross’ projects in Russia, Moroshka and September Northeast, are also progressing per schedule. Stripping at September Northeast has started and mining at Moroshka is expected to begin in the first half of 2018. A feasibility study for Phase W of the Round Mountain is expected to be completed by third-quarter 2017.
The company also remains focused on managing costs and improving cash flow. Kinross’ aggressive cost management actions helped it to generate free cash flows of $465 million in 2016.
However, the company remains exposed to a sluggish global economy and volatile gold prices. Prospects of a more hawkish stance from the U.S. Federal Reserve in 2017 are weighing on gold prices. The company’s falling reserve base is another concern.
BHP Billiton has an expected long-term growth of 5.6%.
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Kinross Declares Sale of Interest in Cerro Casale Project
Kinross Gold Corporation (KGC - Free Report) has agreed to sell its 25% interest in the Cerro Casale project in Chile and its full interest in the Quebrada Seca exploration project located adjacent to Cerro Casale to Goldcorp Inc. .
The considerations for the transaction include $260 million in cash, payable at closing (including $20 million for Quebrada Seca); $40 million in cash, payable following a construction decision for Cerro Casale; $20 million payment obligation under the existing Cerro Casale shareholders agreement, which is payable when commercial production at Cerro Casale starts and a 1.25% royalty from Goldcorp based on 25% of gross revenues from all metals sold at Cerro Casale and Quebrada Seca, with Kinross foregoing the first $10 million.
Post the closure of the deal, Kinross will enter into a water supply agreement with the Cerro Casale joint venture. The deal will grant Kinross the rights to access the unused water from the Cerro Casale joint venture. The company intends to use this water for its Chilean assets. Kinross will be responsible for the incremental capital costs to accommodate the supply of water along with its pro rata share of operating and maintenance costs.
Kinross plans to use the net proceeds from the sale for its organic development projects and to strengthen its balance sheet further. The sale is expected to be completed in the second quarter of 2017, subject to customary closing conditions.
Kinross has underperformed the Zacks categorized Mining-Gold industry over the past six months. The company’s shares have declined around 9% over this period, compared to roughly 12.4% gain recorded by the industry.
Kinross posted a loss in the fourth quarter of 2016. Revenues rose by double digits year over year, and beat expectations. The company saw higher gold production in the quarter. Kinross is making steady progress in advancing the projects that give it a strong growth profile among leading gold producers.
Kinross, in February, said that it has been progressing as planned with the Phase One expansion of the Tasiast mine and commercial production is expected to begin in the second-quarter 2018. The Phase Two feasibility study is progressing well and is expected to conclude by the third-quarter 2017. The company also received a new permit at Bald Mountain and has now doubled proven and probable mineral reserves before schedule.
Two of Kinross’ projects in Russia, Moroshka and September Northeast, are also progressing per schedule. Stripping at September Northeast has started and mining at Moroshka is expected to begin in the first half of 2018. A feasibility study for Phase W of the Round Mountain is expected to be completed by third-quarter 2017.
The company also remains focused on managing costs and improving cash flow. Kinross’ aggressive cost management actions helped it to generate free cash flows of $465 million in 2016.
However, the company remains exposed to a sluggish global economy and volatile gold prices. Prospects of a more hawkish stance from the U.S. Federal Reserve in 2017 are weighing on gold prices. The company’s falling reserve base is another concern.
Kinross Gold Corporation Price and Consensus
Kinross Gold Corporation Price and Consensus | Kinross Gold Corporation Quote
Kinross currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked companies in the basic material space include Arkema S.A. (ARKAY - Free Report) and BHP Billiton Limited (BHP - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arkema has an expected long-term growth of 12.4%.
BHP Billiton has an expected long-term growth of 5.6%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>