Kinross Gold Corporation (KGC Quick QuoteKGC - Free Report) and Yorbeau Resources Inc. have inked a non-binding letter of intent, providing Kinross the option to purchase a 100% interest in the Rouyn property in Quebec, Canada from Yorbeau. 

 

Yorbeau, a Canada-based company dedicated to identifying world-class gold deposits, is currently focusing on the Rouyn property. This property has demonstrated substantial prospect for a major gold deposit discovery as well as a mine. Spread over 2,700 hectares, it is situated in a politically and socially stable environment with access to good infrastructure and skilled mining personnel. 

 

The letter of intent specifies certain mutually acceptable conditions, pursuant to which Kinross can acquire a 100% interest in the property. To earn the purchase option, Kinross has to complete a resource estimation for the property after funding exploration expenditures of C$12 million over 4 years, including a commitment to spend C$3 million in the first 18 months, and conduct diamond drilling of minimum 12,500 meters. Although Kinross will be the operator and project manager during the option period, Yorbeau will have representation in the technical committee that will oversee the work being carried out. 

 

On completion of the resource estimate, Kinross will have the option to acquire a 100% interest in the property by making a single cash payment to Yorbeau. The payment consists of $25 million as well as 2% of the current gold price multiplied by the total number of gold ounces in measured, indicated and inferred resources identified by Kinross. The gold price will be determined based on the 30-day trailing average set forth by the London Bullion Market Association in U.S. Dollars. 

 

Additionally, Yorbeau will retain a 2% net smelter return on gold ounces produced in excess of the quantity identified by Kinross in the resource estimate, or the production of any other minerals from the property. 

 

Kinross has also agreed to participate in a $1 million private placement of units in Yorbeau upon signing the definitive option agreement. 

 

Kinross reported a net loss of $13.9 million for the first quarter of 2016, wider than a net loss of $6.7 million in the year-ago quarter. Loss widened particularly due to lower gold prices. The figure includes one-time items including foreign exchange losses of $2.8 million and acquisition-related costs of $7.6 million.

 

Adjusted earnings (excluding one-time items) were $1.4 million or breakeven per share, compared with adjusted earnings of $15.3 million or a penny per share recorded in the year-ago quarter. Analysts polled by Zacks were expecting a loss of a penny per share on an average.

 

Revenues of $782.6 million were almost in line with the year-ago quarter as higher gold sales were partly offset by lower average realized gold prices. Revenues, however, missed the Zacks Consensus Estimate of $796 million.

 

Kinross currently carries a Zacks Rank #3 (Hold).

 

Some better-ranked gold mining companies are B2Gold Corp. (BTG Quick QuoteBTG - Free Report) , Pretium Resources Inc. and Golden Star Resources Ltd. , all sporting a Zacks Rank #1 (Strong Buy).

 

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