Kinross reports ‘messy’ Q1 results as sale of Russian assets awaits approval 

Kinross Gold (TSX: K; NYSE: KGC) says that the company is in “uncharted territory” regarding the closure of the sale of its Russian assets. 

In April, the company announced that it had entered into a definitive agreement with the Highland Gold Mining group of companies to sell its Russian assets for US$680 million, weeks after Western nations announced sanctions on Russia after the country began its war on Ukraine.  

According to the deal, which Kinross said was secured by an extensive security package and would require the approval of the Russian government, the company is scheduled to receive its first set of payments before the end of 2023 and the last before the end of 2027.  

“We are in uncharted territory here, it’s a very fluid situation,” Paul Rollinson, Kinross CEO, said during the company’s quarterly results conference call, when asked if there are concerns about closing the sale of the company’s Russian assets and Highland paying in dollars.  

“We have pursued a process as laid out by the (Russian) government and so in terms of looking after our people, looking after the environment, finding a responsible buyer and following the process, we feel we have really done everything we can. But again, I would say we are in uncharted territory,” he added.  

Geoffrey P. Gold, the company’s executive vice-president, said that Kinross did not want to speculate on the outcome of the timing of Russia’s approval of the deal. “We have done everything we can. We have lodged our applications. We have obviously advanced our closing process and our ancillary agreement,” said Gold.  

Gold explained that the deal required a sign off from the Russia’s ministry of industry and trade. He further said that the transaction would also have to deal with a commission set up to approve foreign company transactions.  

“If and when those approvals show up and we are in a position to close, we will update the market at that time,” he said. 

Kinross produced 409,857 attributable gold-equivalent ounces from its continuing operations, which excludes production from its Russian assets, down from 436,525 oz. in the same quarter last year. Lower production at Round Mountain in Nevada, and Paracatu in Brazil were contributors to the weak production in the quarter. 

The Tasiast mine in Mauritania though produced 133,695 oz. gold during the quarter, up from 88,964 oz. in the same quarter last year due to higher grades, with higher mill throughput. The company aims to begin a prefeasibility study for the much talked about Great Bear gold project in Ontario next year.  

BMO analyst Jackie Przybylowski described the results of the first quarter as “messy” as it reflected the sale of a number of Kinross assets. But she believes the quarter wasn’t as weak as it first appeared.  

“We continue to expect that Kinross will deliver meaningful catalysts across a number of projects this year and into the medium-term as it refocuses its development efforts on the new Dixie (Great Bear) project and other assets in its portfolio,” Przybylowski wrote in a research note to clients. 

Aside from the Russian assets, Kinross also announced the sale of its 90%-owned Chirano mine in Ghana to Asante Gold (CSE: ASE) in a cash and shares deal worth US$225 million on Apr. 25.  

Scotiabank analyst Tanya Jakusconek said the results of the first quarter were in line with expectations and described them as neutral.      

“With the sale of the Russia and Ghana assets, the portfolio mix has shifted to the Americas (70% of production) and KGC does not feel any pressure to replace the production lost (~500,000 oz. of production) from the Russia or Ghana sale,” wrote Jakusconek in a research statement.  

Jakusconek added that Scotiabank believes the uncertainty in the closure of the sale of the Russian assets was “likely contributing to KGC’s continued underperformance and discounted valuation.”  

At press time in Toronto, Kinross Gold’s shares were trading at $5.58, down 5.4% or 32¢, its lowest value in a year beating the previous 52-week low of $5.81. The company has 1.2 billion common shares.