‘Uncertainties’ for Kinross Gold’s Russian operations amidst conflict — BMO

Naimul Karim | March 1, 2022 

Image: Kinross

Prolonged international sanctions might “slow or halt” the development of Kinross Gold’s (TSX: K; NYSE: KGC) operations in Russia, BMO’s metals and mining analysts said, as the country continues to attack Ukraine.


The first wave of sanctions on Russia were announced on February 22, after Moscow’s order to deploy troops to eastern Ukraine.

“As the Russia conflict continues to evolve, uncertainties around Kinross’s operations in-country continue to build,” BMO mining analyst Jackie Przybylowski wrote in a research note to clients. Przybylowski spoke to the Kinross team, including its CEO Paul Rollinson, at the ongoing 2022 BMO Global Metals and Mining Conference in Hollywood, Florida.

International sanctions limit the ability of Russian domestic banks to purchase Kinross’s produced gold and if gold were to accumulate at site for a prolonged period, Kinross could see a shortage of working capital, which could affect short-term operations, the analyst said.

The lack of sales could also slow or halt development of the company’s Udinsk project in southeast Russia, which is currently in the feasibility stage and is expected to be funded by cash generated from the Kinross Gold’s Kupol mine in Russia.

Kinross Gold wasn’t immediately available for comment. However, in a press release on February 23, the company said that its operations in Russia were “operating according to plan” and remained “unaffected by U.S. sanctions.”

Kinross has been operating in Russia for about 25 years, and currently operates the Kupol underground mine and mill in Russia’s Far Eastern region of Chukotka, about 7,000 km from Ukraine. The mine produced 481,108 gold-equivalent oz. last year.

In 2013, the company expanded the mill from 3,500 to 4,500 tonnes per day to process additional ore from the Dvoinoye mine, about 100 km to the north, where mining activities ceased in 2020. Stockpiles from Dvoinoye are expected to be processed until about 2024.

In January 2020 Kinross acquired the Chulbatkan licence, also in Russia’s Far East. Drilling there has focused on the Udinsk resource pit, which is the first project it expects to develop on the licence, with first production forecast to start in 2025.

In 2022, Kinross expects approximately 13% of its global production to come from Russia.

The company’s stock is down 29% year to date, which is “significantly worse than other gold companies under BMO’s coverage,” said Przybylowski.

However, BMO believes that the company is taking reasonable measures to “balance risk from exposure to Russia with commitments to its local stakeholders and its operations.”

“In the near term, maintaining operations is important to ensure the long-term viability of the regional business. Kinross has a responsibility to the community; it maintains employment of its ~2,000 workers and numerous stakeholders in country (Russia),” wrote Przybylowski.

(This article first appeared in The Northern Miner)