Analyst Actions: Credit Suisse Downgrades Kinross Gold Corp, Down Nearly 6%

Credit Suisse downgraded Kinross Gold Corp. (K.TO) to Neutral from Outperform on Tasiast capex. It also revised estimates and lowered the target price to $19 from $24.

Downgrading to Neutral ( from Outperform) on capex increases and delays: "We are revising our 2011/2012 EPS estimates to $0.74/$0.74 from $0.71/$0.75). We have revised our target price to $19.00 from $24.00 and reduced our rating to Neutral from Outperform. This is based on a revision to our DCF to 16.58/sh (from $18.42), largely the result of incorporating revised capex guidance at Tasiast. Additionally, we have revised our multiple to 1.1x (from 1.2x) to reflect our belief that with increasing capital cost numbers and a delayed feasibility study, investors will be less interested in owning the name until these issues are resolved. We now believe the Kinross re-rating horizon has been pushed out beyond one year, justifying a downgrade to Neutral (from Outperform)."

Tasiast capex creep continues, scope unchanged: "Tasiast capex guidance has increased to $3.2-$3.7B (from $2.7B) representing a 18-37% increase over prior guidance. The increase is being attributed to cost inflation the areas of labour, equipment and commodity input prices, while the scope of the project (60-68ktpd) remains largely unchanged."

Tasiast feasibility study delayed 9 months: "Kinross announced it will be delaying the release of the Tasiast feasibility study to Q2/12 from Q3/11 in order to better optimize the project economics and incorporate additional drill data. K has maintained Tasiast's development schedule, with construction expected to start mid-2012 and first production in Q1/14."

"Tasiast increases total global resources to 21.6Mozs and indicated further potential to extend the pit significantly (400-600m) below the current limits. We now mine 21.6Mozs in our model, vs. 20Mozs previously. Thus we are already attributed upside to exploration as we normally only mine reserves plus 50% of M&I (~12Mozs). On the positive side, K has now breached 20Mozs of total global resources at Tasiast of which, 9.05Mozs is now in the M&I category."

Dividend bump: "K announced a 20% increase to its semi-annual dividend."

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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