Kinross Completes Crixas Sale

Gold miner Kinross Gold Corporation ( KGC - Analyst Report ) has completed the sale of its 50% interest in Brazil's Crixas gold mine to AngloGold Ashanti Ltd. ( AU - Snapshot Report ) in an all cash deal worth $220 million. Kinross announced its intention of divesting the Crixas asset late last month, and the deal was expected to close in the ongoing quarter itself.

The divestment of Crixas is in line with Kinross’ philosophy of focusing on its core assets in a bid to improve its production profile by turning its attention towards more important assets. Kinross' share of Crixas' proven and probable gold reserves was about 375,000 ounces as of December 31, 2011. The mine was expected to produce about 70,000 gold equivalent ounces in 2012.

According to Kinross, the sale of Crixas will not have a major effect on its production targets for the year. The company remains on track to produce 2.6–2.8 million attributable gold equivalent ounces in 2012.

Moreover, the sale is also in conjunction with Kinross’ strategy of optimizing its capital expenditure program. It is focused on spending cash on development moves only out of its available capital. Hence, the proceeds from the deal will help Kinross in developing its primary growth projects at Tasiast and Dvoinoye.

Kinross has performed inconsistently over the past year, missing the Zacks Consensus Estimate twice by a wide margin, while beating it quite handsomely on two occasions. Its growth profile has been threatened by bottlenecks at the Fruta del Norte mine and delays at Tasiast.

The company’s first-quarter 2012 adjusted earnings (excluding one time items) of 18 cents a share missed the Zacks Consensus Estimate of 21 cents. It also saw its gold production drop by 6% during the quarter due to declining grades and lower production. But Kinross is trying to get its act together by focusing on assets that would help it deliver better value to shareholders and the latest move of selling Crixas is a step in that direction.

We currently have a long-term Neutral recommendation on Kinross. The company, which competes with Barrick Gold Corporation ( ABX - Analyst Report ) and Newmont Mining Corp. ( NEM - Analyst Report ) , maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.