Kinross Gold (K-T, KGC-N) is investing $600 million for a 9.4% stake in Red Back Mining (RBI-T) through a private placement that is expected to help finance the expansion of Red Back’s CIL plant and develop a heap leach operation at its Tasiast gold project in Mauritania.
Kinross is purchasing 24 million shares of Red Back at $25 per share. Rick Clark, Red Back’s president and chief executive, said in a statement that the company is now “financially secure” for future development plans.
“As a result of the private placement we have assumed an accelerated development plan for Tasiast and now expect production from the expanded CIL circuit could commence in 2013, instead of our previous estimate of 2014,” Dan Rollins, an analyst at UBS Investment Research, writes in a note to clients.
“Although RBI has not formally announced plans to increase the size of the existing CIL plant (3 million tonnes per year), we continue to assume a second CIL plant with a capacity of 5 million tonnes per year could be built south of the existing plant at a cost of US$600 million.”
Rollins argues a larger CIL circuit would be justified given his assumption that an additional 5 million oz. of reserves could be added by 2012 with further reserve additions beyond 2012 likely.
Rollins has a buy on Red Back with a 12-month price target of $30 per share and expects annual gold production from both the company’s Chirano gold mine in Ghana and from Tasiast will exceed 500,000 oz. gold by 2012. He also forecasts that given Red Back’s recent acquisition efforts, the company will “remain an active player on the consolidation front.”
At presstime the unhedged gold producer was trading at $24.69 per share. Red Back has a 52-week trading range of $8.20-26.98 and has 232.4 million shares outstanding.
Be the first to comment on "Red Back Mining gets boost from Kinross Gold"