Open season on Kinross: First a downgrade and legal probe, then someone drops $72 million on it
US securities litigation firm Holzer Holzer & Fistel announced on Wednesday it is investigating potential violations of federal securities laws by Kinross Gold Corporation (NYSE: KGC), specifically whether Kinross knowingly overstated gold grades at its Tasiast property over the last year.
Kinross was trending lower on Wednesday morning, losing 1.5% to trade at $10.55 by midday after broker CIBC downgraded the stock over impaired valuations for several Kinross projects. However, by 1:30pm EST the stock had changed direction and popped into positive territory in Toronto after a single trade of 6.59 million shares went through at $11.00. That's worth $72 million and compares to average trading volumes in Kinross of only 27,000. Kinross eventually closed up 5.5% at $11.30.
The $12 billion Canadian company with projects around the world has now lost some $3 billion of its worth on the Toronto stock market. The miner got hammered last week after announcing a material charge relating to the $4.6 billion goodwill it recorded for the Tasiast mine in Mauritania it acquired as part of its takeover of Red Back Mining in September 2010 for $7.1 billion. The company also said it needs an additional 6 to 9 months for the feasibility study and mine plan, and warned of cost escalations of some 25%.
NewsyStocks is reporting CIBC World Markets slashed its price target on Kinross to US$15 from US$20:
Barry Cooper, an analyst at CIBC, said delays to projects and continued uncertainty as to scope and cost of development for several of KGC's key projects have impaired valuations and will hurt company multiples.
The Globe and Mail reports the share price moves over the last week that came on the back of a 35% fall in 2011 following the Red Back buy has made Kinross an attractive target:
The decline “has left Kinross exposed to a takeover bid,” said Paradigm Capital analyst Don MacLean in a note to clients on Wednesday.
With a diversified portfolio of assets, strong mid-term growth and long-life mines, Kinross would be an attractive target for an elite handful of top mining firms like Barrick Gold, Newmont Mining and AngloGold Ashanti , he said.
Bloomberg spoke to analysts who also mentioned Russia's Polyus, in the process of putting together a London IPO worth $1 billion, as a potential acquirer of Kinross:
“This is a company whose management team has made some aggressive, disappointing decisions,” Keith Wirtz, who oversees $14.6 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “Every dollar lower pushes the stock higher up the list of potential takeovers. That will attract the sharks in the water.”