Friday, August 8, 2008

Lou,

What are your thoughts on Kinross Gold.

Thanks,
Mark

Hi Mark,

Kinross Gold Corp, K TSX, has done a great job building a diversified portfolio of mines that are forecast to produce 1.91M -2M ounces of gold in 2008 rising to 2.5-2.6M in 2009.Kinross has two projects coming on stream this year and an expansion project scheduled for completion in 2008 as well.

In late July Kinross announced that it was making an all stock bid for Aurelian Resources in what they are calling a friendly combination. The offer price has some Aurelian shareholders mad as a hornets nest. They are saying that Kinross is stealing the company.

What Aurelian is doing is assuming some political risk. Aurelian's assets are in Ecuador and there has been a ban on mining in that country since April as new mining legislation is developed and comes into law. If you look at the chart of ARU you can see it taking a beating on the news.

If everything works out with the deal Kinross has a very attractive deposit to work on. Kinross is of the mind that their experience developing the Kupol project in Russia has prepared them for the political risks associated with international mine development.

The charts are telling me that Kinross has been tracking the price of gold lower. From my view the retreat is not so much that investors are put off by the ARU deal. Although as with any combination the deal isn't done till its final. Think of the BCE drama and there is talk of competing bids. The breakup fee with Kinross would not be a barrier if a big foot wants to up the bid for ARU.

Monitor the MACD as it has generated accurate signals on the lift in August of 2007 and the drop in March of 2008. Right now the MACD isn't telling us the downtrend is over. Look for support to hold at $16 if not it will test $14. If it doesn't hold $14, K will really get put in the penalty box.

Happy Capitalism!

http://www.happycapitalism.com/sotd/