Kinross' New Purchase Should Not Affect Ability to Self-Fund - Credit Suisse Analyst

Kinross Gold Corp.’s (KGC) purchase of the Lobo-Marte gold project for about $250-million, plus a royalty, should not impact the company’s ability to fund itself through 2009, according to Credit Suisse analyst Anita Soni.

Kinross is buying the northern Chile mine, which lies between its Maricunga and La Coipa projects, from Teck Cominco Ltd. (TCK) and Anglo American plc. (AAUK). Lobo-Marte contains 5.4 million ounces of indicated gold resources.

Ms. Soni estimates that the transaction is valued at $44 per resource ounce and $88 per reserve ounce. Including the royalty payments to Teck that are tied to future production and assuming a gold price of $900 per ounce, those figures climb to $50 and $100 per ounce, respectively. The analyst told clients that this represents “fair to good” value.

Kinross had $706-million in cash and cash equivalents at the end of the third quarter. Its fourth quarter and 2009 capital cost and debt repayment commitments, along with cash flow projections based on $700 gold and $9.50 per ounce silver, Ms. Soni said the acquisition should not affect Kinross’ ability to self-fund for the next 15 months.