Kinross Gold CorporationKGC has agreed to acquire around 19.9% interest in White Gold Corp. by selling its full stake in the White Gold exploration project in the Yukon Territory to White Gold Corp.
Kinross is expected to benefit from the deal that will provide it with future optionality in the highly prospective White Gold District, and in the larger Yukon Territory. Agnico Eagle Mines Limited AEM also holds around 19.9% stake in White Gold. With this deal, both Kinross and Agnico Eagle are expected to support White Gold's exploration and development opportunities in Yukon, including the White Gold exploration property.
The sale of Kinross' interest in the White Gold exploration property includes certain considerations which include cash payment of around $7 million, payable upon deal closing. It also includes a total of 17.5 million common shares of White Gold, representing roughly 19.9% of the pro forma issued and outstanding shares of White Gold, with a current market value of around $26 million.
Kinross will also receive deferred payments of roughly $11 million payable in three equal payments of around $3.7 million upon announcement, by White Gold Corp., of a preliminary economic assessment, the completion of a feasibility study and a positive construction decision for the White Gold exploration project.
Along with this, Kinross will enter into an investor rights agreement with White Gold that will help the former maintain its ownership through participation in equity financings. Kinross will also have the right to nominate a board member in White Gold.
The agreement is expected to complete during the second quarter of 2017, subject to customary conditions of closing, as well as the completion of a private placement to Agnico Eagle to maintain its proportionate interest in White Gold.
Kinross has outperformed the Zacks categorized Mining-Gold industry over the past six months. The company's shares have rallied around 22.7% over this period compared with roughly 8.7% gain recorded by the industry.
Kinross' adjusted earnings for first-quarter 2017 was $23.4 million or 2 cents per share. Earnings beat the Zacks Consensus Estimate by a penny. Revenues of $796.1 million in the quarter rose around 1.7% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $781 million.
For 2017, Kinross reaffirmed its previous gold production guidance range of 2.5-2.7 million gold equivalent ounces. The overall production cost of sales is expected in the range of $660-$720 per gold equivalent ounce, while all-in sustaining cost is estimated to be $925-$1,025.
Kinross is making steady progress in advancing the projects that give it a strong growth profile among leading gold producers. The company also remains focused on managing costs and improving cash flows. Kinross' aggressive cost-management actions helped it to generate free cash flows of $465 million in 2016.
However, the company remains exposed to a sluggish global economy and volatile gold prices . Prospects of a more hawkish stance from the U.S. Federal Reserve in 2017 are weighing on gold prices.
Kinross Gold Corporation Price and Consensus
Kinross currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked companies in the basic material space include BASF SE BASFY and The Chemours Company CC . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
BASF has expected long-term growth of 8.6%.
Chemours has expected long-term growth of 15.5%.
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