Kinross CEO Burt Says `Tiny Perfect Storm' Makes Deals Likely

By Stewart Bailey

Sept. 10 (Bloomberg) -- Kinross Gold Corp., the world's fourth-largest gold producer by market value, said smaller mining companies face a ``tiny perfect storm'' that has devastated share prices and opened the door for acquisitions.

So-called junior mining companies, which own only exploration concessions or smaller mines, will battle to raise money during the credit crisis and will struggle to gain the skills needed to develop their deposits, said Tye Burt, chief executive officer of Toronto-based Kinross.

``Juniors will have a tough time for a while raising money,'' Burt said in an interview yesterday in Denver. ``It's an opportunity-rich environment. There are lots of young companies we'd like to have a relationship with.''

Burt already has taken advantage of falling equity prices by agreeing in July to buy Aurelian Resources Inc. after a 44 percent plunge in that company's stock in the preceding year. Larger rivals like Newmont Mining Corp. and Goldcorp Inc. also have said they will turn their attention to floundering juniors.

Kinross dropped $1.62, or 11 percent, to C$12.68 yesterday in Toronto Stock Exchange trading, taking this year's decline to 31 percent. The 112-member S&P/TSX Global Mining Index, which tracks the performance of metal producers and explorers, has plunged 26 percent this year.

Kinross, digging mines in the U.S. and Chile, has about $800 million in cash and expects cash flow of as much as $500 million in 2008 and $800 million next year, when output is slated to increase by more than a third to 2.6 million ounces, Burt said.

Fruta del Norte

Aurelian's 13-million ounce Fruta del Norte deposit in Ecuador will add as much as an additional 500,000 ounces when it is developed, which Kinross expects in 2012.

Acquisitions should help the company add at least 300,000 ounces of output a year at a cash cost of about $300 an ounce each, Burt said. Kinross is interested in expanding into Mexico, he said.

Gold prices, down more than a fifth since a record in March, will rise as investors seek a hedge from market turmoil, Burt said, while declining to give a price target.

``Gravity will reassert itself in the right direction, so gold prices will come back,'' he said. ``All the signals are for the long-term strength of the metal.''

Barrick Gold Corp., Goldcorp and Newmont are the world's three-largest gold producers by market value.

To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.

Last Updated: September 10, 2008 09:44 EDT