Kinross Gold Corporation (USA) (KGC) Rises on Asset Sale

Kinross Gold Corporation (USA) (NYSE:KGC) shares are up 1% in morning trading after the company announced that it has agreed to sell its 100% interest in the Quebrada Seca exploration project and 25% interest in the Cerro Casale project to Goldcorp Inc. (USA) (NYSE:GG) for the following:

1) $260 million in cash,

2) $40 million in cash, payable following a construction decision for Cerro Casale, and

3) a 1.25% royalty from Goldcorp based on 25% of gross revenues from all metals sold at Cerro Casale and Quebrada Seca, with Kinross foregoing the first US$10 million.

In addition, Goldcorp, the buyer of both assets, has agreed to assume a $20 million payment obligation due to Barrick Gold under the existing Cerro Casale shareholders agreement. Kinross sold the two assets to further strengthen its balance sheet and to fund organic development projects. The deals are expected to close in Q2 of 2017.

With the rally today, the market is giving the thumbs up to management’s decision to deleverage a bit. In the long run, Kinross Gold Corporation (USA) (NYSE:KGC)’s fortunes still depend on where gold prices go, and given that the Federal Reserve has implied only two more interest rate hikes in 2017, there is potential for the yellow metal to show more upside. Gold prices could potentially rise further if the current tame inflation in the U.S. shows signs of accelerating meaningfully, or if the various geopolitical problems around the world get worse.

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According to our data, some smart money funds left Kinross in the fourth quarter but the collective ownership remained strong. Of the 742 elite funds we track, 23 funds owned $457.65 million of Kinross Gold Corporation (USA) (NYSE:KGC) and accounted for 11.80% of the float on December 31, down from 26 funds and $633.5 million respectively on September 30. Although Crispin Odey‘s Odey Asset Management Group cut its stake by 36% to 23.2 million shares, David Iben‘s Kopernik Global Investors