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Kinross Acquired Strategic Nevada Assets from Barrick


Nov. 18 2015, Published 1:13 p.m. ET

Acquisition deal for Nevada assets

On November 12, 2015, Kinross Gold (KGC) announced that it entered into a purchase agreement with Barrick Gold (ABX) to acquire 100% of the Bald Mountain gold mine and the remaining 50% of the Round Mountain gold mine in Nevada. The all-cash transaction would have proceeds of $610 million.

Barrick still retains 50% interest in certain exploration regions that fall outside the current mining area. The transaction is expected to close in January 2016. Kinross held a conference call on November 12 to discuss the details of the acquisition.

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Barrick, on the other hand, sold two more assets in addition to those sold to Kinross. Barrick reached an agreement to sell the company’s 70% interest in the Spring Valley project and 100% interest in the Ruby Hill mine to subsidiaries of Waterton Precious Metals Fund II Cayman LP (or Waterton) for $110 million in cash. This transaction is expected to be completed by the end of 2015. Newmont Mining (NEM) is also focusing on optimizing its portfolio to lower its costs.

The SPDR Gold Shares ETF (GLD) provides exposure to spot gold prices. Kinross makes up 4% of the Sprott Gold Miners ETF (SGDM).

Share price reaction

Barrick Gold’s (ABX) share price reacted positively to the news and closed 3.7% higher on November 12 while Kinross’s share price fell slightly by 0.6% on the same day. Although the market is happy about Barrick reaching its debt reduction target through non-core asset sales, it is probably concerned about Kinross paying a higher price for the acquisition and the resulting upside potential.

Series preview

Throughout this series, we’ll discuss the potential impact of this transaction on Kinross Gold’s production, cost, and financial leverage profile. We’ll analyze how Kinross Gold (KGC) is placed overall after this acquisition. We’ll also see how this acquisition contributes toward Barrick’s debt reduction efforts.


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