Kinross Gold Shares Dropped: What You Need to Know

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.     

Interested in more info on Kinross? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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Read/Post Comments (2) | Recommend This Article (8)

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  • Report this Comment On January 17, 2012, at 4:47 PM, garifolle wrote:

    I was always surprised to see the high CAPS rating on KGC.

    I've been watching this stock for very long, but never with the intend to buy it: Why?

    The ETF HXD (Horizons BetaPro S&P/TSX 60 Bear Plus ), has been long on this one (right after RIM that still has the first place, but in less proportion then previously), since as long as I follow this ETF.

    I do not ask my self big questions, they know (as you do) better then me.

    So I never made "due diligence" on this one,

    I shorted it (on the TSX), every time I could, but never bought it.

    I just missed today's drop and I am disappointed, but shorting this stock was pretty rewarding in the past years.

  • Report this Comment On January 18, 2012, at 1:01 AM, BBLBBD wrote:

    I first got into this in August; it went up a bit, then down, so I doubled down on thinking I was getting a bargain. So, thereafter it seemed like I was right on the money, and all miners seemed to be going great--that was about September. Then gold busted and all miners did too. Since then this has been a drag on my holdings, including other miners. It seems like a great company, but something is holding it down.

    There seems to be a disagreement between the price and the opinions of this company.

    Does anyone have any idea or opinions about it ?

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