The Tasiast mine in Mauritania is a giant black cloud over Kinross Gold Corp. for a long time.
The company badly overpaid for Tasiast in 2010, if this spent an astounding US$7.1 billion to purchase Red Back Mining Inc. (the mine’s former owner). And since then, there has been a steady flow of not so good news, writedowns and uncertainty plaguing Tasiast as Kinross has struggled to put a practical expansion plan in position.
Now there may finally be some positive news coming. Kinross will announce is a result of economic studies on Wednesday that contemplate a two-step “phased” method of expanding gold output at Tasiast. The organization has expressed some optimism about these studies recently, and investors are keen to see the outcomes. The studies have to demonstrate a powerful economic return for Kinross to proceed with development.
BMO Capital Markets analyst Andrew Kaip said he expects the studies demonstrates a “constructive step forward” for Tasiast, while “balancing the size and timing of future capital commitments.”
Kaip calculated that Kinross trades at 1.3 times net asset value, that is a major discount to many of their senior gold mining peers. He suspects that a part of that discount is a result of investor skepticism about Tasiast.
“Demonstration of an economically viable phased development plan could inspire a positive re-rate of (Kinross) shares, in our opinion,” he explained.
