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What Kinross Gold (T.K) has to lose if Russia seizes assets in tit-for-tat sanction battle

Stockhouse Editorial
5 Comments| March 26, 2014

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The following is an excerpt from Canaccord Genuity’s Morning Coffee report.

The Russian annexation of Crimea, the follow on sanctions and the retaliatory sanctions are enough to make anyone antsy over the investments in Russia.

As Zero Hedge highlights, “With the list of high-ranking U.S. officials running dry, it appears Russia has turned its attention, in the tit-for-tit sanction battle, to Canada.

Following Canada’s sanctions against 10 top Russian and Ukranian officials last week, Russia has placed travel bans on 13 Canadian lawmakers and officials.”

Kinross Gold Corp. (TSX: T.K, Stock Forum) continues to communicate to the government of Canada their desire to see a balanced approach to resolving this situation in a way that considers Canadian interest in the country. Kinross, one of the biggest Canadian investors in Russia, owns and operates the Kupol mine and Dvoinoye project in the Russian Far East.

According to Canaccord Genuity estimates, 24% of Kinross’ NAV is composed of Kupol and Dvoinoye. The Huffington Post UK recently reported that Russia could seize the assets of European and American companies operating in the country in retaliation for any economic sanctions imposed by the West amid tensions over the Ukraine crisis.

According to the report, Andrey Klishas, chairman of the upper house committee on constitutional law, told RIA Novosti that a team of lawyers are preparing a federal bill that would enable Russian president Vladimir Putin and the government to confiscate foreign-owned property in Russia, including assets owned by private companies.

Credit Suisse noted previously that Russia has much to lose from a possible imposition of trade sanctions – or, even worse, a seizure of Russian overseas assets (worth around $270 billion, or 13% of GDP, according to the IMF).

Last month, Kinross reported Q4/13 and provided a thorough review of its exploration program, particularly at Kupol and Dvoinoye. Canaccord Genuity Precious Metals Analyst Tony Lesiak was encouraged by the results.

High grade trenching and drilling intercepts at September proximal to Dvoinoye are impressive with multi-ounce intercepts over mineable widths.

According to Kinross, the Moroshka vein near Kupol has a minimum conceptual size of 0.4-0.6 million tonnes, grading 11.9-19.7 grams per tonne gold equivalent.

In 2012, the amount of direct Canadian investment in Russia was $4.8 billion, up from $1.2 billion in 2010l, according to Statistics Canada.

Kinross shares were down 5.4% to $4.73, leaving a market cap of $5.4 billion, based on 1.1 billion shares outstanding. The 52-week range is $8.12 and $4.50.

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