Kinross Gold to suspend Russia operations, after saying unaffected by sanctions

slovegrove/iStock Editorial via Getty Images

Kinross Gold (NYSE:KGC) says it is suspending all activities at its Russia operations, including the Kupol gold mine in Siberia and the Udinsk development project north of Mongolia.

The Kupol mine, which employs more than 2,000 people, produced 481.1K gold equiv. oz. in FY 2021, 23% of the company's total output; overall, Kinross has said it expected its Russian operations to account for 13% of total production in 2022.

The Udinsk development project, purchased less than three years ago, was expected to produce ~2M oz of gold over a seven-year mine life, at an extremely low all-in sustaining cost of $580/oz with production forecast to begin late in 2025.

Noting that Russian exposure has held down Kinross' stock price performance, RBC analyst Josh Wolfson said earlier this week that Russia's war with Ukraine is "a key overhang for shares and at risk of impacting prior outlined capital allocation, but presenting low fundamental risks to Kinross' business and appropriately reflected in valuation today."

Just a week ago, Kinross said its Russian operations were unaffected by sanctions imposed on the country.

Comments

[33557645]

My frustrating 18 month history (of cutting KGC slack) as originally an investor and now obviously a speculator reminds me of "The Gang That couldn't Shoot Straight". Where do we go from here? Good luck to all my fellow travelers.

[rusty13]

@33557645 I'll be adding at $5.08 and high $4's is where I'll go..

[ACG88]

KGC is down 2.5%. So looking like news was mostly priced into the shares. This is a very cheap company even without any Russian production.

[msm516725]

A few points to consider..

1) How many gold mining companies produce more than 2 million ounces annually?(Kinross ex Russian assets does)

2) Kinross imo essentially front ran this by using Russian asset value to help bid for Great Bear last fall

3) Kinross could potentially sell Russian assets to Chinese miner, 50 cents on the dollar would be a billion+ USD

4) Disagregating global asset markets is likely very bullish gold. See point number 1. Other majors are ~8-9 billion market cap value per 1 million of ounces produced. Kinross is at 3.5 billion per million gold ounces produced. If you believe in higher gold price, Kinross is much better play at these levels and again this math is all ex Russian assets and assigning 0 value to Great Bear asset..

[bill h illify]

Unfortunately the Russian government is going to torture their citizens…hopefully the Russian people remove the Russian government…and then the citizens will flourish…

[NonsenseWorld]

They are doing the right thing for the right reason. Family first. This is not about profit, it’s all about value. They will find fair winds and following seas very soon!

[badford's IRA]

Such a sad company. It just never seems to make any money and the price just keeps falling. I am glad I sold all my shares back in Nov. for $6.42 each( $1000 Loss). I put the money into KRRGF and FSM and SBSW and those stocks have taken off and are looking good. Cheers!

[ContyC]

The question is, why are they suspending operations? They are unable to operate, or they just want to be the "good guys" by destroying shareholder value?

[P M D]

If you would even read the article, it's having operations in Russia that is depressing the value of its stock to shareholders.

Like it or not, Putin's Russia is no longer an investable country. It doesn't even merit inclusion in the emerging market index now.

[Net Income]

@P M D Probably the market anticipating a stupid move like this. Kinross now is down on the news, so if you were right, that it provides value to cease operations, then it would stand to reason the market would value the stock higher now, not lower.

[George Jimas]

Is Russian exposure not why we dropped 10% the other day?

[Stock-Research & Analysis]

Kinross will have to walk away and write this to 0....expect stock to go to $3

[Au pif]

@Stock-Research & Analysis Maybe, and it will time to buy.

[Tulip hoard]

3.5 Billion Dollars spent in Russia by KGC since 1995. KUPOL is one of the most profitable mines in the world noting the conversion from Rubles to Dollars once the ore is processed and exported. Just a week ago management came out said they were "unaffected" by the situation. Evidently Guido taped them on the shoulder in the last couple days - Dio Mio🥴

[long-short]

good reinforcement of how limited kgc russian exposure really is. the stock’s already gone down more than 13%. yet i very much doubt it makes any sense to mark down the russian assets to zero. i will buy more tomorrow at these prices. kgc is massively undervalued.

[Tulip hoard]

@long-short it will become even thar much more "undervalued' tommorow, with any luck the market will oversell and a textbook Buffet moment will present itself. My cost basis is $2.75 , the closer we get back there the better. Wash, rinse, etc.....

[Tulip hoard]

@long-short and in all fairness 90 percent of my Gold assets are physical this is why😁

[Cbl416]

@long-short 13% of production does not equal 13% of revenues or EBITDA. Th

[Julian Beatty]

Tough pill to swallow, but commend their efforts.

[Downtown10]

Not gonna be pretty tomorrow.

Another reminder why mines in Tier-1 jurisdictions get higher valuations.

[Tulip hoard]

@Downtown10 I suspect once the shakeout is done could approach $4-$4.50.

[Downtown10]

@Tulip hoard Sounds about right. Fortunately KGC is one of my smaller mining positions (and it’s about to get smaller…).

Any thoughts about selling it is probably on hold now.

[long-short]

@Downtown10 do you own kgc? or are you short? either way please sell on the open—i’d love to buy more at the low for the day. spoiler alert, this news came out around 630pm est and is already in the stock price based on after hours trading. tho i hope you’re right about a 930am buying opportunity.
my biggest holding overall is gdx which i started buying a few years ago in the low $17 range. and most recently increased in mid feb at 32.47. second biggest in miners is ngd, started at 70-80 cents and most recently increased over the holidays at 1.50-1.52.
started buying kgc in the low $4’s and unfortunately bought more at 5.50-5.70 recently on a strong conviction it was undervalued. would love to buy more on a weak opening—are you offering?!