Kinross Gold (TSX: G; NYSE: KGC) said on Wednesday it had sold its Kupol mine and Udinsk project in Russia to Highland Gold Mining for a total of $340 million in cash, half of the price announced in April.
The Canadian miner suspended operations in Russia in early March to both comply with Western sanctions against Moscow over its invasion of Ukraine and avoid reputational damage by staying in the country.
Kinross, which has been operating in the federation for about 25 years, said the price adjustment followed a review by the recently formed Russian sub-commission on the Control of Foreign Investments.
Country authorities in March said that any transaction between Russians and foreign counterparties required permission from the commission, to ensure decisions to exit were not driven by political pressure.
The assets sold to Highland Gold, one of the Russia’s largest bullion miners, were the Kupol underground mine and the surrounding exploration licenses in the country’s Far Eastern region of Chukotka, about 7,000 km from Ukraine.
It also included Udinsk, the first project Kinross expected to develop on the Chulbatkan licence, acquired in 2020. Kinross had envisioned beginning production at the pit in 2025.
“We view this announcement as mildly positive as Kinross has finally exited Russia with $300 million in cash today (the market had been concerned that KGC would not receive any cash), with only a small deferred portion for next year,” Scotiabank said on Wednesday.
The Kupol gold mine is in Russia’s Far Eastern region of Chukotka. (Image courtesy of Kinross Gold | Flickr.)
Leaning on Tasiast and Paracatu
“After the completed divestment of our Russian business, Kinross’ rebalanced portfolio maintains a substantial production outlook anchored by its two tier one assets – Tasiast and Paracatu – as well as a strong portfolio of mines in the Americas, a growing business in Chile, and the large, world-class Great Bear project in Canada,” President and CEO Paul Rollinson said in the statement.
Before Moscow’s invasion of Ukraine, Kinross had forecast that about 13% of its global production would come from its operations in the country.
Analysts had described Kinross’s move as positive, but were wary about the relatively long payment schedule spread evenly over the 2022-2027 period.
“We note that a heavily staggered payment plan mutes the immediate benefits to Kinross,” Jackie Przybylowski, a BMO analyst, wrote in a research note to clients on Apr. 5.
Highland Gold is one of the largest gold producers in Russia, with a portfolio of assets located in four mining regions — Chita, Kamchatka, Chukotka and Khabarovsk. The company is also commissioning the Ozernoe mine in Buryatia.
The transaction is the first sale of a Western company’s assets in Russia since the start of the war in Ukraine.
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