After years of delays, Kinross Gold Corp. finally greenlighted a US$300-million expansion of its crucial Tasiast mine in March. But less than three months after that announcement, production at the Mauritania-based operation has been suspended due to a controversy over work permits for expat employees.
BMO Capital Markets analyst Andrew Kaip said the suspension adds “another level of near-term uncertainty” to Kinross, which is already struggling to reach a collective bargaining agreement with Tasiast workers ahead of the expansion. Workers went on strike for nearly three weeks in late May and early June after the two sides could not reach a deal.
“If prolonged, the labour issues in Mauritania have the potential to impact share price performance on a go-forward basis, particularly given the year-to-date performance of the stock,” Kaip said in a note.
The stock has jumped 150 per cent this year amid a rally in gold prices and continuing strong performance by the company.
Kaip said a short-term suspension at Tasiast should not have a major impact on his estimates for Kinross, but he warned there would be a “more material” impact if the expansion project gets delayed. Toronto-based Kinross said it does not expect this issue to affect the expansion.
Kaip has an outperform rating on the stock and a price target of $6.50 a share.
