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I Was So Wrong On Kinross Gold


Kinross Gold buys 2 mines from Barrick for $610 million in cash.

The deal makes the company more vulnerable to gold price downside.

I have previously been skeptical on such a deal and I have not changed my mind.

On November 11, I wrote an article on Kinross Gold's (NYSE: KGC) third-quarter results. In this article I stated: "The recent news from Kinross Gold about the possible Tasiast expansion and a development of La Coipa may signal that the company decided against buying assets in the current gold price environment". I viewed this as a positive signal, as I was skeptical about the possible deal between Barrick Gold (NYSE: ABX) and Kinross Gold.

However, the deal was announced the next day after my article was published. Kinross Gold announced that it had entered into an agreement to acquire 100% of Bald Mountain gold mine and 50% of the Round Mountain mine from Barrick Gold for $610 million in cash. Kinross Gold expects that the transactions will increase its production by 430,000 gold equivalent ounces annually over the first three years. Also, Kinross Gold acquired a Bald Mountain land package...