Gold miner Kinross Gold Corporation (KGC) recently announced that it has arranged for a new term loan and amended its existing unsecured revolving credit facility. The company has procured a three-year term loan worth $1 billion that will mature in August 2015. The term loan does not have any mandatory amortization payments.
In addition, Kinross has revamped its revolving credit facility to $1.5 billion from $1.2 billion. Moreover, the term of the facility has been extended to August 2017 from March 2015. Kinross also points out that the improvement in terms and conditions largely reflects its investment grade ratings that were attained after it last refinanced the credit facility on March 31, 2011.
The improvement in credit terms comes at a crucial time for Kinross as it is involved in the development of many projects. It intends to use the proceeds from these financings for general corporate purposes. The company is developing an army of new projects, the most important of them being Tasiast in Mauritania and Dvoinoye in Russia.
Also, Kinross has a few other projects in its portfolio. It is currently carrying on negotiations with the Ecuadorean government on an enhanced economic package at Fruta del Norte and is also continuing construction on the fourth Paracatu ball mill. The company’s capital expenses spiked in the recently reported second quarter due to project-related expenses incurred at Tasiast, Fort Knox and Round Mountain.
Moreover, keeping in mind Kinross’ rising production costs and objective of returning cash to shareholders, the improved financial terms will enable it to focus on its development projects while keeping its own liquidity intact to some extent.
Kinross, like other gold producers such as Barrick Gold Corporation (ABX) and Newmont Mining Corp. (NEM), benefits from rising gold prices. However, its results have been constrained chiefly by rising costs and lower grades, as we find in the case of its other counterparts in the industry.
Currently, we have a long-term (more than 6 months) Neutral recommendation on Kinross. The company currently holds a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating.
BARRICK GOLD CP (ABX): Free Stock Analysis Report
KINROSS GOLD (KGC): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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