By Jeff Lewis and Polina Devitt
CALGARY/MOSCOW, Sept 30 (Reuters) - Canada's Kinross Gold
Corp is putting future deals in Russia on hold after
snapping up a development project in a country hit by Western
sanctions.
The Toronto-based miner in July acquired the undeveloped
Chulbatkan asset from closely held N-Mining for $283 million in
cash and shares.
The acquisition will add 3.9 million indicated ounces of
gold to Kinross' books, according to the company.
Foreign investment in new mining projects in Russia has
grown scarce due to Western sanctions levelled after the 2014
annexation by Russia of Crimea from Ukraine.
The deal with N-Mining does not breach any sanctions but
still requires Russian approval.
The deal follows a years-long effort by Kinross Chief
Executive Paul Rollinson to cultivate ties in Russia even as
diplomatic relations with the West – including Canada – have
soured.
"If you own our stock, by definition you’re comfortable with
Russia, but that doesn’t mean we want to go overboard,"
Rollinson told Reuters.
Kinross was offered several larger assets in Russia over the
last couple of years but was not willing to spend too much on
the country, a source familiar with the matter told Reuters.
Kinross considered buying a gold project from Highland Gold
Mining Ltd, another gold producer in Russia, but the
companies did not agree on the price, an industry source told
Reuters. Highland Gold declined to comment.
Russian operations accounted for one-fifth of 2018 revenue
for Kinross, according to Refinitiv data.
Kinross has poured more than $3.5 billion into Russia since
1995, making it the biggest foreign investor in the country's
gold sector and the third-largest producer of gold equivalent
behind Polyus and Polymetal International Plc
, according to Russia’s gold producers’ union, a
non-government lobby group.
Russia's anti-monopoly regulator told Reuters last week that
it had recently extended the review of the Chulbatkan
acquisition by two months.
A Kinross spokesman said it expects the deal to close as
scheduled early next year.
The Russia asset has a six-year mine life with an initial
development cost of $500 million, Kinross said. But production
will not start for at least five years, and some analysts said
the company will need to show sizeable finds during exploration
to make it add value.
Buoyed by gold’s rally above $1,500 per ounce,
investors have pushed Kinross shares up by a third since the
deal was announced, versus a 7% rise in the VanEck Vectors Gold
Miners exchange-traded fund.
(Reporting by Jeff Lewis and Polina Devitt; Editing by Lisa
Shumaker)
