The sale of Kinross’ Kupol mine in Russia and Chirano in Ghana, is expected to significantly affect the gold miner’s output, resulting in a drastic reduction in its full year 2022 production guidance.
These two mines contributed more than 150,000 ounces of gold equivalent to total production in 2021. The Kupol mine contributed 116,179 ounces of gold while the Chirano mine contributed 34,561 ounces of gold.
This is despite the fact that, the company recently acquired the Great Bear Resource, which Kinross expects to declare an initial inferred mineral resources as part of its 2022 year-end results and commence a pre-feasibility study in 2023.
Kinross projected as part of its full-year 2021 results gold production of 2.65 million attributable Au eq. oz. (+/- 5%) from its operations, representing a 28 per cent increase from the Company’s 2021 production. The company further projected a further increase of its annual production to 2.8 million attributable Au eq. oz. (+/- 5%) in 2023.
“The Company expects to produce 2.6 million attributable Au eq. oz. in 2024 and has maintained its strong production profile of estimated average production of at least 2.5 million Au eq. oz. per year over the remainder of the decade.”
2021 Full-Year Report
Kinross’s Asset Divestment
The company’s asset divestment in Russia was triggered as a result of the ongoing Ukraine-Russia crisis. This followed an announcement of the sale on April 5, 2022, transferring its Russian assets to Highland Gold Mining for US$680 million, including deferred payments.
As part of the transaction, Kinross received a total of $400 million in cash for the Kupol mine and the surrounding exploration licenses, which included payment of $100 million upon closing, as well as additional payments of $150 million before the end of 2023, $100 million before the end of 2024, and $50 million before the end of 2025.
Kinross will also receive a total of $280 million in cash for its Udinsk project, which includes payments of $80 million before the end of 2025, $100 million before the end of 2026, and $100 million before the end of 2027. The deferred payments are secured by an extensive security package that includes share pledges, financial guarantees and an escrow account.
Furthermore, Kinross recently announced an agreement to sell its 90 per cent interest in the Chirano mine in Ghana to Asante Gold Corporation for $225 million in cash and shares. Specifically, this comprises a $115 million in cash and $50 million in common shares of Asante.
Kinross is entitled to receive a total deferred payment of US$60 million in cash, with 50% payable on the first anniversary of closing and balance payable on the second anniversary of closing.
Kinross will update its 2022 and three-year guidance to reflect the impact of the recently announced asset-sale transactions in Russia and Ghana as part of its upcoming Q1 2022 results, scheduled for May 10, 2022.
The Russia-Ukraine war continues to present tailwinds to gold prices as investors favoured the commodity due to the uncertainties in the market.
Gold miners have been facing higher costs, labor challenges, as well as supply chain disruptions, which could partially offset the impact of higher gold prices. However, on the other hand, persistent geopolitical tensions could support an increase in gold prices. Under the current circumstances, analysts see higher upside potential in Kinross stock over the next couple of months.
