Days after suspending operations, Kinross mulls a ‘full exit’ from Russia

Kinross Gold (TSX: K; NYSE: KGC) may permanently exit from Russia after operating in the country for about 25 years, a BMO metals and mining analyst said, as the nation continues to attack Ukraine. 

On Mar. 2, Kinross announced that it would suspend its Russian operations following Western sanctions. However, in a research note to clients on Mar. 6, BMO analyst Jackie Przybylowski stated that the company is “likely to pursue a full and permanent exit from Russia — including potential sale of its assets in the country.”  

The analyst, who recently spoke to Kinross management, also expects potential buyers to be limited to “Russian-based public or private miners.”  

“We are in the process of evaluating next steps to land on the appropriate transition plan,” Louie Diaz, a spokesperson for Kinross Gold, told The Northern Miner by e-mail, when asked if the company had decided to exit Russia.  

The news of Kinross Gold’s possible exit from Russia comes days after Moscow spelled out the terms and obligations for foreign companies operating in the country. Russia said firms could either stay, transfer their shares to Russian partners until they return to the market later, or permanently terminate operations, close production and dismiss employees. 

While a number of Western companies have announced that they were quitting, some continue to operate.  

BMO has removed Kinross Gold’s Russian operations from its estimates, but maintains the company’s ’outperform’ rating.  

“Even with Russia entirely removed from our model, we still calculate a US$10.50/share one-year target; which still represents a nearly 100% return to target,” wrote Przybylowski. “We continue to see significant value from Kinross’s flagship Tasiast mine, as well as Dixie (recently acquired with Great Bear Resources).”  

Kinross has been operating in Russia for about 25 years and operates the Kupol underground mine and mill in Russia’s Far Eastern region of Chukotka, about 7,000 km from Ukraine. The mine produced 481,108 gold-equivalent oz. last year. 

In January 2020 Kinross acquired the Chulbatkan licence, also in Russia’s Far East. Drilling there has focused on the Udinsk resource pit, which is the first project it expects to develop on the licence, with first production forecast to start in 2025. 

In 2013, the company expanded the mill from 3,500 to 4,500 tonnes per day to process additional ore from the Dvoinoye mine, about 100 km to the north, where mining activities ceased in 2020. Stockpiles from Dvoinoye are expected to be processed until about 2024. 

In a press release on Feb. 23, Kinross said that it expected approximately 13% of its global production to come from Russia in 2022.  

At presstime in Toronto, Kinross Gold’s shares were trading at $6.88 within a 52-week trading range of $6.32 to $10.05. The company has 1.2 billion common shares outstanding for a market cap of $8.2 billion.