Kinross study results should be ‘constructive step forward’ for Tasiast

The Tasiast mine in Mauritania has been 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 buy 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 place a practical expansion plan in place.

Now there might finally be some positive news on the horizon. Kinross will announce is a result of economic studies on Wednesday that contemplate a two-step “phased” approach to expanding gold output at Tasiast. The organization has expressed some optimism about these studies in recent months, and investors want to determine the results. The studies have to demonstrate a strong economic return for Kinross to proceed with development.

BMO Capital Markets analyst Andrew Kaip said he expects the studies will demonstrate a “constructive step forward” for Tasiast, while “balancing the size and timing of future capital commitments.”

Kaip calculated that Kinross trades at 1.Three times net asset value, which is a major discount to most of their senior gold mining peers. He suspects that a part of that discount is due to investor skepticism about Tasiast.

“Illustration showing a fiscally viable phased development plan could inspire a positive re-rate of (Kinross) shares, in our view,” he explained.