Kinross Gold (NYSE:KGC) finalized the sale of its Fruta del Norte Project in Ecuador for $150 million in cash and 26.2 million shares of Fortress Minerals Corp. issued at C$4.00 (~$3.44). Investors will recall that the Fruta del Norte Project was shut down after the Ecuadorian government imposed a punitive tax on the project.
As a result of this, I assumed that the project likely had little value in February, and I assigned it no value in my analysis of Kinross shares. This means that the value received is a positive development from my standpoint.
Unfortunately, Kinross has been one of the worst performers. In spite of the fact that it has been growing production and getting its costs under control, more so than other major gold miners, investors want nothing to do with the company given its sizable exposure to Russia. Roughly 20% of the company's gold production comes from its Russian assets. But it gets worse since Kupol/Dvoinoye are among the company's lowest cost producers, meaning that the company is probably getting more than half of its cash-flow from them. With this in mind, the market doesn't care too much about the rest of the company.
Given this market fixation, and given the blood in the streets mentality with respect to Russian assets more generally, Kinross remains attractive in my mind. The stock will likely remain stagnant until the gold price resumes its uptrend, but once this takes place Kinross is one of my favorite majors going forward.
