Kinross hits pause on Russia after gold project deal
CALGARY/MOSCOW – Canada's Kinross Gold 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 CEO 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 , 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 sizeable finds during exploration to make it add value.
Buoyed by gold’s rally above $1 500/oz, investors have pushed Kinross shares up by a third since the deal was announced, versus a 7% rise in the VanEck Vectors Gold Miners exchange-traded fund.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation