Multi Bullion Dollar Gold Company “Ripe” for Takeover

Even with the price of gold rising towards $1,800, Kinross Gold Corp. (NYSE: KGCdropped 19% in January when management of Kinross said the it would take a big non-cash write-down on the expansion of its Tasiast gold mine project in Mauritania. The project is said to face delays of up to nine months.

Data provided by Capital IQ

KGC closing price for Friday, February 3, 2012 was $11.20, down -1.67% (-0.19).
KGC traded volume of 6,837,006.

KGC Six Month Chart:

Rising costs coupled with delays at key growth projects have driven down KGC stock price leaving one of Canada’s top miners ripe for a takeover. Analysts believe current goodwill, which stands at $4.6-billion, would not come as a surprise if the entire amount was written off.

Tasiast’s high capital costs could adversely affect the project’s output dropping production which is estimated to average 1.1 million ounces over the first five years down about 400,000 ounces annually. KGC price target has been slashed for the mining company’s U.S.-listed shares to $15 from $20 since Kinross is not expected to have any production growth for more than two years and is vulnerable to rising costs.

The $7.1-billion acquisition catapulted KGC into the big leagues of mining companies but the deal has dragged on the miner. Its shares fell more than 35% last year and its market cap is currently back near the level it was just prior to the takeover.

KGC would be an attractive target for an elite handful of top mining companies like Barrick Gold, Newmont Mining and AngloGold Ashanti.

KGC expects to produce 2.6 million-2.8 million gold equivalent ounces this year.

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