Kinross unloads Kubaka for US$15M (November 05, 2007)

Kinross Gold (K-T, KGC-N) is selling the formerly producing Kubaka gold-silver mine and related assets in Russia’s Far East to St. Petersburg-based silver major Polymetal for US$15 million in cash plus production royalties.

As one of the first Western entrants into post-Soviet Russia, U.S.-based Amax Gold built the open-pit mine during the mid-1990s in the remote Kolyma mountains, some 950 km north of Magadan, and kicked off commercial production in June 1997.

Amax merged with Kinross a year later, and Kinross later increased its ownership stake in the mine to today’s 98.1%.

While open-pit mining ceased in late 2002, the Kubaka mill continued processing low-grade stockpiles that were augmented by material from the underground mining of three veins.

Kinross had pondered extending the mine life by bringing a fourth mineralized vein into production, but ultimately decided against it, and closed the Kubaka facility and related assets at Birkachan, 28 km north of the mill, in June 2005.

At the end of 2005, Kubaka held reserves of about 80,000 tonnes grading 11.43 grams gold per tonne.

Kinross is by no means finished with Russia, and continues to develop its 75%-owned Kupol gold-silver project in Russia’s Chukotka region, acquired through its February 2007 takeover of Bema Gold.

The US$705-million Kupol mine is designed to produce 418,000 oz. gold equivalent annually, and is slated to begin production late next year.

Polymetal is the world’s fifth-largest, and Russia’s largest, silver producer, having cranked out 17.3 million oz. silver last year, behind Industrias Peoles (ipoaf-o, penoles-m)(47 million oz.), Polska Miedz (40 million oz.), BHP Billiton (bhp-n, blt-l) (37 million oz.) and Kazakhmys (22 million oz.).

Polymetal also produced 256,000 oz. gold last year.

From 2005 until February 2007, Polymetal was wholly owned by the Russian private company Nafta Moscow. In February, Nafta floated 24.8% of the company, which now trades publicly in London and Moscow.

A year ago, Polymetal entered into a 50-50 partnership with AngloGold Ashanti (AU-N, AGD-L) to jointly explore for gold in Russia.