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Kinross Set To Close Down 6% on Red Back Bid; Releases Q2 Earnings Wednesday

Credit Suisse has reiterated a Neutral rating and US$21 target price on Toronto-based Kinross Gold Corp. (K.TO) after it bid $7.1 billion for Vancouver-based Red Back Mining. (RBI.TO).

Kinross stock is down $1.07 at 15.80, having earlier touched a day low of 15.62, giving it a new year low level. The previous year low was 16.08.

Kinross is slated to announce tomorrow second quarter share profit of 15 US cents, up from 12 US cents the previous year.

The brokerage said it has taken a preliminary analysis of the deal.

"We ascribe a value of $20.54 to the potential Newco at this stage. While we believe the transaction could eventually be accretive to K shareholders on a NAV and production growth basis, we do not believe the 30% return to the implied target price is sufficient for investors to consider owning the stock in the near term. Additionally, the deal is far from done and thus we are maintaining our target price and Neutral rating. We re-iterate our view that K needs near term production growth, as growth from 2010 to 2013 is only 9%.

On Valuation, Credit Suisse said its Target price of US$21.00 is based on a Target P/NAV multiple of 1.1 times its DCF of $17.98/sh with net cash of $1.36/sh added at par.

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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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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