(The following statement was released by the rating agency)
CHICAGO, November 12 (Fitch) Fitch Ratings views Kinross Gold Corporation's
(Kinross) planned acquisition of the remaining 50% interest in the Round
Mountain mine and a 100% interest in Barrick Gold Corp.'s (Barrick) Bald
Mountain mine as neutral to the company's ratings. Kinross has adequate
liquidity to fund the $610 million acquisition with cash on hand and its
liquidity plus cash generation should be sufficient to fund the remaining
development capex on the Bald Mountain mine.
The Bald Mountain mine is expected to be a net use of cash in the short run, but
a source of free cash flow in the long-run. The mine is expected to be on the
lower half of the global cash cost curve at roughly $560-700 per oz. for the
life of the mine beyond 2018, with an all-in sustaining cost of between $700-900
per oz. beyond 2018, lowering Kinross' overall cost profile. The additional
earnings are expected to be deleveraging on a total-debt-to-EBITDA basis
following the close of the transaction but will slightly increase
net-debt-to-EBITDA in the near term.
Kinross' ratings reflect its sizable reserves, average cost position, average
geopolitical risk position, and the potential for gradual deleveraging in the
next three years as production increases in combination with Kinross' commitment
to maintain a conservative capital structure given its exposure to gold prices.
In weak gold markets, the company has the ability to defer development and
exploration.
RATING SENSITIVITIES
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
--Gold prices and internally generated cash flow deteriorate without an equal
management response in the form of reduced spending, asset sales or the raising
of equity;
--Expectations that total debt/operating EBITDA will be greater than 3.0x on a
sustained basis;
--Significant disruption in operations of major operating sites, especially low
cost operations in Russia.
Positive: Not anticipated given production guidance and projections, but future
developments that may lead to a positive rating action include:
--FCF positive on average.
Fitch currently rates Kinross as follows:
--IDR 'BBB-';
--Revolving credit facility 'BBB-';
--Senior unsecured term loan due 2018 'BBB-';
--Senior unsecured notes 'BBB-'.
Contact:
Primary Analyst
Greg Fodell
Associate Director
+1-312-368-3117
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
Secondary Analyst
Monica M. Bonar
Senior Director
+1-212-908-0579
Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email:
alyssa.castelli@fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
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