Kinross Gold Shares Dropped: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Kinross Gold (NYS: KGC) plunged 17% on Tuesday after the gold miner said that the construction of its Tasiast mine in Africa will be delayed by months.

So what: Kinross now sees an additional six to nine months of planning to determine the optimal processing mix to reduce operating costs, which is naturally triggering a ton of uncertainty over the project among investors. Management noted that more half of Tasiast's $7.1 billion book value is considered goodwill, suggesting that the extent of the required writedown could be quite significant.

Now what: Kinross also provided some guidance for 2012, expecting flat to slightly higher year-over-year production of about 2.7 million gold equivalent ounces. However, due to higher labor costs and an expected decline in grades at some mines, management also forecast a worrisome jump in expenses of 12%-19%. Given all the uncertainty surrounding Kinross at this point, stocks like Newmont and Goldcorp might be safer ways to bet on gold.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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