(Figures in U.S. dollars)
OTTAWA, Sept 26 A long-anticipated asset swap
between Kinross Gold Corp (K.TO) and Goldcorp Inc (G.TO) will
yield benefits for both miners as they consolidate their stakes
in several mines, analysts said on Wednesday.
Under a deal announced late Tuesday, Goldcorp will buy a 49
percent stake in the Porcupine mines and 31.9 percent share of
the Musselwhite mine from Kinross, to gain full ownership of
the Ontario gold mines.
In turn, Goldcorp will give Kinross the 50 percent stake in
Chile's La Coipa silver-gold mine that it doesn't already own
and $200 million cash.
"This transaction should be beneficial for both parties in
the long term as consolidating ownership usually improves
efficiencies," Genuity Capital Markets analyst Chantal Gosselin
said in a note.
Such streamlining translates into less management time per
ounce of gold produced, UBS analyst Tony Lesiak said in a
The asset swap, widely expected after Goldcorp acquired
Placer Dome assets last year, was largely neutral to the net
asset value of both companies, several analysts said.
Goldcorp will gain production of between 110,000 ounces and
120,000 ounces of gold and "significant" resource potential
under the deal, noted Lesiak, who notched his stock target up
to $36.50 from $36.
But the transaction will also increase Goldcorp's exposure
to a stronger Canadian dollar and higher operating cost
structure, he wrote.
For Kinross, the deal provides cash to help fund the
expansion of its Paracatu gold mine in Brazil, and development
projects at Kupol in Russia and Buckhorn Mountain in the United
States. The company expects to expand gold production by about
60 percent between 2007 and 2009 through those three
The deal may also provide synergies, as La Coipa is close
to the miner's Maricunga gold mine in Chile.
"On the downside, Kinross will produce approximately
110,000 to 120,000 ounces less gold per year and reserves and
resources have declined 1.2 million ounces and 2.1 million
ounces respectively with the deal," Lesiak wrote.
Kinross said the production decline will be balanced by
lower cash operating costs, higher margins and increased free
It will update its production guidance for 2008-2009 when
the transaction closes, which it expects in 60 days.
Blackmont Capital analyst Richard Gray said the increased
silver exposure at La Coipa makes up for the Ontario production
loss for Kinross.
Amid broad declines for mining stocks, Goldcorp shares fell
2.3 percent to C$29.18 on the Toronto Stock Exchange and 2.4
percent to $29.01 in New York. Kinross dipped 1.6 percent to
C$14.50 in Toronto and 2.2 percent to $14.42 in New York.