Do Its Recent Acquisitions Have an Exploration Upside for Kinross?



Potential upside

The potential upside from Bald Mountain and Round Mountain informs the acquisition of these assets by Kinross Gold (KGC). During its November 12, 2015, management call, Kinross noted that there were multiple sources of upside at Bald Mountain, which covers 373 square miles, making it one of the largest mine sites in the US.

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Bald Mountain

  • Bald Mountain is a large, underexplored area land package that is located on the southern extension of the highly prospective Carlin trend.
  • Kinross expects to convert 20% of the current estimated mineral resources to mineral reserves upon receipt of permits and modest infill drilling at Vantage in the South Zone. Also, based on historical conversion rates, it is assuming at least another 10% that would be converted within the remaining 100% areas, including the North Zone for a combined total of 30%.
  • It also presents a good opportunity to leverage Barrick’s geologic expertise through both companies’ exploration partnership.

Round Mountain

  • Kinross believes there is a meaningful upside to Round Mountain, which could lead to increased production and lower costs. The Process Solution Management (or PSM) program has been a success so far, and Kinross expects it to provide an upside going forward.
  • There is an additional opportunity in the form of Phase W. Phase W is a large zone of known mineralization that exists at depth and to the west of the main Round Mountain pit. Kinross intends to start a scoping study on its potential expansion in December 2015.
  • This potential increase is not included in Kinross’s mineral reserve and resource statement.

During its latest quarterly results, Kinross’s peer Newmont Mining (NEM) also reported that its Tanami Expansion could provide the company with a near-term production growth option. Meanwhile, Yamana Gold (AUY) is implementing exploration at various mines, which resulted in higher grade asset extensions in the past.

To get exposure to gold prices, investors can also consider gold-backed ETFs such as the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust ETF (IAU).

Investors might be interested in knowing how Kinross’s financial position has changed after this acquisition. We’ll explore this topic in detail in the final part of our series.


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