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LONDON — When you buy a share in Canada’s Kinross Gold Corp., you are not just betting on gold prices; you are betting on the outcome of the great geopolitical standoff between the West and Vladimir Putin’s Russia, which may or many not evolve into a new Cold War.
So far, the bet has gone massively in Mr. Putin’s favour – Kinross shares are so low that they seem to be awarding virtually no value to Kinross’s two big, and profitable, gold mines in Russia’s far east. In 2010, Kinross was a $20 stock. Today, it trades at about $3.20 and has been as low as $2.27. But haven’t all gold companies been slaughtered along with the gold price?
Yes, but Toronto-based Kinross is in a submarine class all of its own and when its executives and shareholders are in a masochistic mood, they call up a few Goldcorp charts. Vancouver’s Goldcorp Inc. is of roughly equal size yet its market value is more than four times higher than Kinross’s ($18.5-billion versus $3.6-billion). Eldorado Gold Corp., whose production is less than a third of Kinross’s, is worth $5-billion. Ouch! Whip us again! Kinross’s problem can be summed up in one wretched word: Russia.
“We’re getting doubly hammered because of the gold price and the situation in Russia,” says Kinross CEO Paul Rollinson, who was in London this week trying to convince investors and brokers that the economic sanctions against Russia were not endangering Kinross’s mines.
The effort had at least partial success. In Toronto trading on Tuesday, after Mr. Rollinson finished his investor therapy sessions, Kinross shares rose more than 10 per cent, a far bigger gain than its rivals’, reducing the one-year loss to 34 per cent.
Mr. Rollinson meets me at the St. James bar of the elegant Sofitel hotel, the former Cox & Co. bank building, from 1923, at Waterloo Place, near Piccadilly. The bar is dark, buzzy, expensive – a glass of plonk costs £10 or about $17.50 – but uses some wit to distance itself from the building’s dour past. The ceiling features a massive portrait of a rooster clad in a red coat military uniform.
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