January 17, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Kinross Gold (NYSE: KGC ) plunged 17% on Tuesday after the gold miner said that the construction of its Tasiast mine in Africa will be delayed by months.
So what: Kinross now sees an additional six to nine months of planning to determine the optimal processing mix to reduce operating costs, which is naturally triggering a ton of uncertainty over the project among investors. Management noted that more half of Tasiast's $7.1 billion book value is considered goodwill, suggesting that the extent of the required writedown could be quite significant.
Now what: Kinross also provided some guidance for 2012, expecting flat to slightly higher year-over-year production of about 2.7 million gold equivalent ounces. However, due to higher labor costs and an expected decline in grades at some mines, management also forecast a worrisome jump in expenses of 12%-19%. Given all the uncertainty surrounding Kinross at this point, stocks like Newmont and Goldcorp might be safer ways to bet on gold.
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