Kinross (K.to) (KGC) in LatAm and that old deja vu all over again feeling

 Oh, that's impressive. Bugger all PPS growth in a major gold miner over five 

years during the biggest baddest bull run for gold....like...ever

Last night we had news out of Kinross:

QUITO, March 30 (Reuters) - Canada's Kinross Gold (K.TO: Quote) will invest $1.1 billion in Ecuador's Fruta del Norte gold project until 2016 and could begin digging an underground mine next year, a company executive said on Wednesday.
Dominic Channer, a vice president of the Toronto-based firm, said gold production could begin at the site in 2014.
Kinross says Fruta del Norte has proven and probable mineral reserves estimated at 6.8 million ounces of gold and 9.1 million ounces of silver, and that it should produce 410,000 gold equivalent ounces on average each year during yada yada continues here

All glorious thrusting stuff from Kinross and it immediately reminded your author of another Reuters news story he'd read....back in April 2007.

Kinross Gold expects Cerro Casale development- CEO

(Reuters) - Kinross Gold Corp. (K.TO) expects to develop the big Cerro Casale gold and copper deposit in Chile, with remaining questions centering on when and how, not if, the company's chief executive said on Wednesday.
The Canadian miner acquired a 49 percent stake in the property when it acquired Bema Gold earlier this year. It is one of the world's largest undeveloped gold and copper deposits, with estimated reserves of 23 million ounces of gold and 6 billion pounds of copper.
"I think realistically if it takes a year to get sorted out on the plan, then it takes two years in construction, so you start thinking about it in production terms 3-4 years out," CEO Tye Burt told Reuters in yada yada continues here.

Golly gosh, Cerro Casale must be producing gold and selling it at $1400+/oz now, right? We're almost exactly four years on from that "3 to 4 years out" prediction from Kinross CEO Tye Burt, after all.

What's that you say? Surely not! They sold a chunk to Barrick and only own 25% now, you say? And still no build decision made on Cerro Casale? That's strange, because it's hardly likely that the CEO of a world class gold miner would SPOUT UTTER BULLSHIT TO FOOL HIS AUDIENCE,  is it? 

But this time at Fruta del Norte it's different. Of course. Oh yes yes yes yes.

"Today I settle all family business"

And by the looks of the chart, it needed settling:

Kinross reaches agreement with B2Gold on Kupol East and West Exploration Licenses (Thurs July 22nd, 11:31pm)

Kinross Agrees in Principle to Sell Diavik Interest (Fri July 23, 8:23am)

Kinross Sells Harry Winston Shares (Fri July 23, 8:23am)

What's going on at Kinross (K.to) (KGC)?

Check the comparative chart of Kinross (K.to) (KGC) for yourself:

So what is it, Fruta del Norte problems? The fact that the market has finally recognized that Cerro Casale is an uneconomic dog of an asset? Paid too much for Underworld? Or perhaps something murky at Kupol? Whatever it is, N.Am's 4th biggest gold producer is seriously lagging its field. Inquiring minds, etc.........

The Cerro Casale 43-101 technical report

Cerro Casale is the big gold project 75% owned by Barrick (ABX) and 25% owned by Kinross (K.to) (KGC). Yesterday Kinross published its 43-101 compliant technical report on the project. After a brief scan, here are a few line items:

• Capex is put at a cool $4.184Bn
• Base case ($800 gold and $2/lb copper) IRR comes in at a horrid 5.5%
• IRR using U$960/oz gold and U$2.40/lb copper is still at meagre 9.9%
• If you want to go with current spot prices as your base (a very dangerous hobby), then $1,200/oz gold and $2.80/lb copper gives you a 14.7% IRR...feeling lucky, punk?
  
• The project is very opex-sensitive. Annual operating costs are slated at an impressively large $778m with the 43-101 model indicating a 10% rise in opex taking a third away from net cash flow.

People, don't hold your breath on a build decision for this thing. It might give Exeter (XRC.to) holders food for thought, too.

Chart of the day is........

....Kinross (KGC) 12 month price chart.......

.......because its 4q08 results sucked.

Yeah they did. Sorry. Even backing out the big charge Kinross took against the Bema acquisition the EPS of $0.09 missed by three cents. Here's the company PR if you fel like getting the sanitized version, but unless gold rockets today Kinross is going South.

Kinross (KGC), Andean Minerals (ADM.v) and gold in them Chilean hills

This is where

Yesterday's news that Kinross (KGC) was paying $250m (plus a royalty that RBC says is worth $30m) for the Lobo/El Marte goldmine in the hills of Chile got people talking about Andean Minerals (ADM.v) again. That's because ADM's Volcan property sits right next door to the land already owned by KGC up there and the main reason for holding ADM all this time has been the thought that KGC would buy them out (or some other miner, but KGC has always been the favourite).

I beg to differ.

Kinross is paying Teck and Anglo $250m for their interests in Lobo / El Marte and it's 5m+ ounces of inferred resource gold. Well that's fair enough. Personally I think KGC could have got the deal done cheaper, but CEO Tye Burt might well be taking into account the goodwill of doing a deal with two big miners; it never hurts to win brownie points with the big boys. All in all, it's probably a fair price considering the current market and all that jazz. So what about ADM at volcan?

Right now ADM.v is trading in the $0.50 to $0.60 range. With 85m shares out, I'm pretty sure Kinross could have snagged ADM for a buck a share (and that's being generous to ADM). So why did KGC pay $250m for one plot of land and not a maximum of $85m for another plot of land that's very close to the sold property and apparently contains roughly the same amount of gold?

The ADM.v five day chart (click to enlarge)

I think it has a lot to do with a point I made in this post on September 18th about the quality of the gold resource. I said back then that the gold is low grading and a lot of it is at depth (even ripped a cross section from one of the ADM presentations to illustrate). Since then I've had conversations with pro geologists who confirmed my suspicions. According to smarter people than Otto, the strip rate would be too high to make such low grades interesting.

At the time I thought ADM at a buck or so was a speculative flip play, but also cast doubts on the property ever becoming a mine. Since then of course we've had another very large leg down in this selloff and world financial sentiment is even worse. There's no flipping of marginal projects going on, not while other more promising projects have been beaten to death and are can be bought at extremely low prices. So ADM isn't on my shopping list. It doesn't look like it's on Tye Burt's either. So Otto sez avoid ADM.v. Don't buy it, don't short it, just avoid it. There are better junior golds out there imho. DYODD, dude.

Message to Tye Burt, CEO of Kinross

Dear Tye,

What is it with you guys up there? Can't you find another source of intelligence on Ecuador than this blog? I mean, I didn't mind so much how you Kinross-y people kept hitting this site while the Aurelian buyout was in full swing, but since that died down you would have thought a snarky little corner of cyberspace like this wouldn't be of much interest to a multi-mega squillion goldmine dude like yourself. But no! Every time I so much as mention the word Ecuador the site gets hit half a dozen times by people from your head office.

So here we go with my list of questions, Tye.

1) Are you reading me, your minions, or maybe a combo of the two?
2) You've been talking a lot about your "on the ground intelligence" in Ecuador (like at Denver the other day...nice speech, BTW). If that's based on this blog, you guys are in serious trouble cos what I write here is about 25% of what I know.
3) If things are so interesting here, how about you sponsor the site with and advert or something? Or better still, just send me money. You know it makes sense.
4) And what is it with the gold-coloured ties anyway?

It'd be great to hear from you, and maybe you can just cut out the middleman who's been feeding you all the Ecuador intel this way (or in other words, fire the guy who's been parrotting my posts to you all this time and pay me half his salary). Feel free to mail me at otto.rock1 (AT) gmail (DOT) com, Tye*. Or just go straight for the Paypal button. Have a nice day now, y'hear?

*tye...tie....gold....gold....Ahhhh!! I get it!

Kinross and Aurelian

I have to applaud Tye Burt and Kinross (KGC) for blind-siding the entire field and snagging nearly 75% of Aurelian (ARU.to) shares at a knock-down bargain price (which will rise to over 80% once the employee options go through the system). Once Ecuador's constitutional referendum is over and done with, the country's new mining law will hit the streets, the world will see that Fruta del Norte will have a a stable economic and political base on which it can move forward, and Kinross stock will undoubtedly benefit. Kinross has proved the old adage about fortune favouring the brave. Kudos, Tye Burt.

The losers are the small retail investors, and that includes me. The only silver lining that can be offered right now is to say that the band of brothers and sisters that formed around safeharbour and his agoracom bullboard will certainly become better investors thanks to this experience. I also applaud you all over there. Of course, there are still 20% of Aurelian shares untaken, so the remnant will still trade. No need to be a part of the Russian exposure to keep a hold of FDN (for the moment, at least).

As for Patrick Anderson, I'm going to refrain from saying a lot of the things I could say (there are posts already written, anyway). I'll limit myself to "not a good businessman", and be very clear about the fact that in the future I am very unlikely (and only because 'nevers' don't exist in CapMkts) to invest or to recommend investments in any company with him as a board member.