Like multiple other companies from different sectors and countries, Kinross Gold Corporation (NYSE: KGC) has decided to exit Russia and sell off its businesses there.
Shares of the Canadian gold digger declined 2.7% to close at $5.86 on Tuesday. Interestingly, a 0.3% gain was recorded in the extended trading session.
With its headquarters in Toronto, the company operates its properties in the United States, Brazil, Ghana, Chile, and Mauritania.
Inside the Headlines
As disclosed, Kinross has agreed to divest all its Russian businesses to the Highland Gold Mining group of companies and its associates. The latter is a Russian gold mining company with several properties, including those situated in the Khabarovsk and Chukotka regions.
The value of this divestment has been fixed at $680 million in cash. The entire amount is to be settled in the U.S. currency.
Of the total amount, Kinross’ Kupol mine and nearby exploration licenses have been valued at $400 million. Of this, $100 million will be received at the time of closing the divestment, while $150 million before 2023-end, $100 million before 2024-end, and $50 million before the end of 2025.
Kinross’ Udinsk project has been valued at $280 million, with $80 million due before 2025-end, $100 million before 2026-end, and $100 million before 2027-end.
The conclusion of this divestment is subject to the fulfillment of certain conditions and receipt of approvals from Russian authorities.
It is worth mentioning here that Kinross first suspended its operations or part of its operations in Russia in early March. Later in the month, the company announced its plan to fully dispose of its Russian businesses.
Kinross had anticipated Russian operation to account for 13% of its gold production in 2022.
Stock Rating
A few days ago, Christopher LaFemina, an analyst at Jefferies, maintained a Hold rating on Kinross while increasing the price target to $6 (2.39% upside potential) from $5.50. The analyst is highly optimistic about the growth prospects of the mining group in the years ahead.
Another analyst, Josh Wolfson of RBC Capital, reiterated a Buy rating on Kinross with a price target of $6.
Despite the company’s exit from Russia, the Street is optimistic about the growth prospects of Kinross and has a Strong Buy consensus rating based on 11 Buys and three Holds. Kinross’ average price forecast of $7.38 suggests 25.94% upside potential from current levels. Over the past year, shares of Kinross have fallen 19.2%.
Hedge Fund Activity
The TipRanks’ Hedge Fund Trading Activity tool reveals a Very Positive stance on Kinross. The Hedge Fund holdings in KGC have increased by 4 million shares in the last quarter.
Conclusion
It is quite evident that Kinross’ gold production abilities and financial performance will be adversely impacted due to its exit from Russia.
However, the company may use the funds from the divestment to build its potential in the long term and benefit from a hike in gold prices, since the onset of the Ukraine-Russia war, in the near term.
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