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Kinross Gold’s Q3 2018 Preview: The Tasiast Update

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KGC’s underperformance

After significantly outperforming its peers (GDX)(NUGT) in 2017, Kinross Gold (KGC) has underperformed this year. Its stock returned -33.8% through October 17. KGC’s YTD (year-to-date) return is lower than that of its close peers Newmont Mining (NEM), Barrick Gold (ABX), and Goldcorp (GG), which have returned -14.4%, -12.1%, and -14.7%, respectively.

Kinross Gold’s second-quarter results were in line, but its lower revenues due to lower production disappointed investors. Its costs were also higher than expected. It announced a temporary halt to expansion work at its Tasiast Phase Two mine in Mauritania following a request from the government to talk about improving the country’s economic benefits from KGC’s activities. These geopolitical uncertainties are keeping analysts and investors at bay.

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Update regarding Tasiast Expansion Phase 2

On May 8, the company’s application for the conversion of its Tasiast Sud exploration permit into an exploitation permit was rejected again by the government of Mauritania, which stated its desire to enter into mutually beneficial discussions.

Because KGC is currently in negotiations with the government, it has temporarily halted its Phase Two activities. Also, it’s exploring alternative approaches to expand the Tasiast mine to maintain optionality. The second phase was expected to boost daily processing to 30,000 tons per day. Investors hope for a speedy negotiation process because this is Kinross’s main project, not only to replace its maturing production but also for future production growth.

In the next article, let’s look at Yamana Gold’s (AUY) key expectations for its third-quarter results.

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