Kinross Gold Corporation was established in 1993 and has since grown to become the third largest primary gold producer in North America by reserves. Based in Canada, with nine mines in stable countries including the United States, Brazil, Chile and Russia, Kinross employs more than 5,000 people worldwide

BMO downgrades Kinross amid muted outlook

The note addressed the question of the expansion at the Tasiast mine in Mauritania, saying that BMO Research had removed the re-development of the mine from the company’s production profile on the grounds that the rate of return anticipated at current gold prices would be insufficient to justify what could amount to an investment of almost $3 billion.

Plunging metals prices have claimed another high profile scalp, with BMO Capital Markets downgrading Kinross Gold (TSE:K) (NYSE:KGC) from outperform to market perform Monday, citing a “muted outlook” in the wake of lower metal prices.

The analyst, David Haughton, also lowered the price target for the world’s fifth largest gold producer from $8.50 to $6.00.

Part of the note addressed the question of the expansion at the Tasiast mine in Mauritania, saying that BMO Research had removed the re-development of the mine from the company’s production profile on the grounds that the rate of return anticipated at current gold prices would be insufficient to justify what could amount to an investment of almost $3 billion.

A feasibility study is underway regarding the expanded Tasiast operation, site of 2012 proven and probable reserves of 7.97 million ounces, with completion scheduled for early next calendar year, after which Kinross will make a decision on whether to complete engineering and proceed with construction. “The decision will depend on a range of factors,” says a company statement on the subject, “including gold price assumptions and projections, expected economic returns, and various technical and other considerations.”

Haughton predicated his research note on the current 8,000 tonne per day plant continuing after the outlay of $650 million in the current year and the addition $180 million planned for 2014-2015.

“Kinross has made good strides to improve the costs at the existing assets and has beat consensus earnings for three successive quarters. However, BMO Research forecasts balance sheet pressure at prevailing metal prices in the absence of further cost reductions, capital conservation and possibly lower dividend.”

The downgrade comes in the midst of protracted low metals prices, with gold in particular – Kinross’ main commodity – enduring several record-setting dives this calendar year. Gold futures declined about 23 per cent in the second quarter on the Comex.

This has already been a bad year for the gold giant, which has suffered through three major writedowns, one of which concerned the mine singled out for mention in the BMO Capital Markets note, which cost Kinross more than $3 billion earlier this year. The same project was responsible for a $2.5 billion writedown the year before.

Kinross shares were trading down the day of the note’s publication, losing 2 cents from a previous