Kinross Deal Provides Multiple New Exploration Targets

Sep. 9.07 | About: Kinross Gold (KGC)

Kinross Gold Corp.'s (NYSE:KGC) option agreement with Linear Gold [LRR/TSX] on its Ixhuatan property in Mexico offers an attractive offset to the political risk of the Kinross Kupol project in Russia, according to Blackmont analyst Richard Gray.

The partnership calls for Kinross to immediately pay Linear US$1.0 million and incur a minimum of US$15-million of expenditures directed at the property within a 24-month period.

Kinross will then have the option to acquire an initial 60% interest in the project by paying Linear US$45 million. It will have a further option to increase its interest to 70% by making an additional payment to Linear of US$55 million. Ixhuatan hosts a resource of 1.7 million ounces at the Campamento project.

Mr. Gray told clients in a note that Ixhuatan, which hosts a resource of 1.7 million ounces at the Campamento projects, offers Kinross multiple exploration targets in a politically safe country, complementing nicely the political risk associated with its Kupol project in Russia.

The analyst added that Kinross's initial investment outlay is modest and given the structure of the deal, the company "has time to properly explore the property before making a significant investment."

Mr. Gray maintained his "buy" rating and left his C$17 price target unchanged.

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