Kinross sells Russian gold mines for US$680 million
Kinross Gold Corp. (K-TSX, KGC-NYSE) said Tuesday it has struck a definitive deal to sell 100% of its Russian assets to the Highland Gold Mining group of companies for US$680 million in cash.
Prior to the announcement, Kinross shares had jumped almost 20% from their lows on February 29, 2022, soon after Russia invaded Ukraine in a move that triggered sanctions and corporate departures.
On Tuesday, Kinross shares, eased 1.6% or 12 cents to $7.38 on volume of 3.44 million. The shares are currently trading in a 52-week range of $10.05 and $6.32.
Kinross is a Canadian senior gold mining company with mines and projects in the U.S., Brazil, Russia, Mauritania, Chile, Ghana and Canada.
Kinross operates the underground Kupol mine in the Chukotka region of Russia. Ore stockpiles from the Dvoinoye operation, where mining activities ceased in 2020, are processed at the Kupol mill. Russian production amounted to 511,000 ounces of gold equivalent in 2020.
The Udinsk project in Khabarovski Krai, is currently in the feasibility study stage.
Highland Gold is one of the largest gold mining companies in Russia and operates several mines in the country, including the Chukotka and Khabarovsk region where the Kupol mine and Udinsk project are located.
As part of the transaction, Kinross will receive a total of US$400 million in cash for the Kupol mine and surrounding exploration licenses, which includes a payment of US$100 million upon closing, as well as additional payments of US$150 million before the end of 2023, US$100 million before the end of 2024, and US$50 million before the end of 2025.
Kinross will also receive US$280 million cash for its Usinsk project, which includes payments of US$80 million before the end of 2025, US$100 million before the end of 2026, and US$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. All payments under the agreement are in U.S. dollars.
The transaction is subject to the approval of the Russian government and the finalization of certain ancilliary agreements.
News of the divestment plan comes just weeks after Kinross responded to the war in Ukraine and subsequent U.S. sanctions by suspending operations in Russia that currently account for 13% of its global gold production.
Kinross has said it refines gold production from its Russian mines in country and retains flexibility to sell its gold domestically and internationally. In 2022, Kinross expects approximately 13% of its global production to come from Russia. The company’s operations are located in the Russian Far East and are approximately 7,000 kilometres away from Ukraine.