Kinross Gold Corporation – New Direct Bond

Key points:

1.     Kinross Gold Corporation (Kinross) 5.950% 15 March 2024 USD senior unsecured bond has been added as a DirectBond.

2.     Kinross is one of the largest gold producers in the world.

3.     The new foreign currency DirectBond is available to wholesale investors only in parcels of USD10,000.

Last week, the Kinross Gold Corporation 5.950% 15 March 2024 USD senior unsecured bond was added as a new foreign currency DirectBond, available to wholesale investors in parcels of USD10,000.

Company background

Kinross Gold Corporation (Kinross) is one of the largest gold producers in the world based on 2013 production volumes. Its market capitalisation was approximately US$3.5bn at the time of writing. Based in Toronto, Ontario, Kinross was formed in 1993 from three predecessor mining companies and now owns or has a joint venture interest in nine operating mines in Brazil, Chile, Russia, Mauritania, Ghana and the United States. Kinross has approximately 39.7m ounces of gold, 44.8m ounces of silver and 1.4bn pounds of copper in proven and probable mineral reserves based on its 2013 Mineral Reserve and Mineral Resource Statement.

Kinross’ principal product is gold, produced in the form of ore that is sent to refineries for final processing. The sale of gold represents approximately 95% of Kinross’ revenues with the remainder is driven by the sale of silver.

Kinross has the benefit of large scale across its operations, financial strength and strong liquidity, all of which provide financial flexibility to manage its operations in a lower gold price environment.

However, Kinross is highly leveraged to gold prices just like most gold producers. The company also carries a moderate amount of geopolitical risk relative to other gold miners with roughly half of production based in the Americas, a quarter in Russia and less than a quarter in West Africa. It is expected that production from mines in Russia, Brazil, Ghana and the USA will collectively generate almost 90% of Kinross’s total gross profit in 2014.

Details of the bond

• Senior unsecured USD dollar denominated bond issued by Kinross Gold Corporation
• Fixed coupon of 5.95% with a maturity on 15 March 2014
• The Notes are callable at any time, subject to a make whole payment
• Kinross Gold Corporation is rated Baa3 by Moody’s ratings agency, reflecting the global nature of the company’s operations, current financial strength and strong liquidity (cash at bank USD735m as at December 2013, unused revolving credit facility of USD1.5bn and minimal debt maturities until 2016)

Detailed below are the key (indicative) return and pricing details:

Benefits to investors

• The Kinross 5.95% March 2024 senior unsecured bond provides investors with an exposure to USD currency in an investment grade issue
• A high coupon makes the bond attractive to investors looking for income in USD dollars.
• An investment grade rating of BBB- (stable) by Standard & Poor’s and Ba3 (negative) by Moody’s.

Please speak to your FIIG representative if you are interested in the new DirectBond or would like further details.

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities. Kinross Gold Corporation bonds are only available to wholesale investors.

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