Gold miner Kinross Gold Corporation (KGC) announced that it has agreed to sell its 50% interest in Brazil's Crixas gold mine to AngloGold Ashanti Ltd for $220 million. The transaction is expected to close in the second quarter of 2012 and is subject to the receipt of regulatory approvals.
The deal will make AngloGold Ashanti the single owner of Crixas as the South African gold miner currently holds the remaining 50% in the mine. Kinross’ main aim is to focus on its core assets along with maximum optimization of its assets. Consequently, the company is selling off its non-core assets including Crixas. Kinross' share of Crixas' proven and probable gold reserves was about 375,000 ounces as of December 31, 2011. The mine was expected to produce about 70,000 gold equivalent ounces in 2012.
Few weeks back, Kinross released its financial results for the first quarter of 2012. The company reported an adjusted net income of $203.1 million or 18 cents per share in the first quarter of 2012, above last year’s earnings of $175.3 million or 15 cents per share. The EPS was lower than the Zacks Consensus Estimate of 21 cents.
Revenues jumped 11% year over year to $1,036.6 million, but missed the Zacks Consensus Estimate of $1,124 million. The growth was due to higher average realized gold price, which increased almost 24% to $1,644 per ounce in the quarter from $1,327 in the prior-year quarter.
Gold production decreased during the quarter by 6% to 604,247 gold equivalent ounces. The decrease in production was led by an expected decline in grade at Kupol along with an increased output of lower-grade stockpile ore at La Coipa and low production at Tasiast.
Kinross remains on track to produce 2.6–2.8 million attributable gold equivalent ounces in 2012. The average cost of sales per gold equivalent ounce is expected to be in the range of $670–$715.
Kinross Gold Corporation, like other gold producers, Barrick Gold Corporation (ABX) and Newmont Gold Mining (NEM), benefits from rising gold prices. We expect Kinross’ exploration projects and acquisitions to boost its top line going forward.
Currently, the company holds a Zacks #3 Rank, reflecting a short-term (1 to 3 months) ‘Hold’ rating. We have a long-term (more than 6 months) ‘Neutral’ recommendation on the stock.
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