Financial results from two of Canada’s gold giants proved a mixed blessing for investors Wednesday, as Goldcorp Inc. topped analysts’ expectations while Kinross Gold Corp. suffered its biggest quarterly loss to date as because of a writedown against its most-promising mine.
As gold miners struggle with rising labour, energy and raw-materials costs that are crimping earnings and stock prices, Goldcorp, Canada’s second-biggest producer, beat the Street’s expectations, despite seeing its fourth-quarter net income fall by more than one-fourth to $405-million (U.S.).
But Kinross’s $2.9-billion non-cash goodwill writedown on its Tasiast mine in Mauritania left it with a $2.78-billion loss for the quarter, and even its adjusted share earnings of 17 cents, which excluded the charge and other one-time items, fell short of analysts’ estimate of 21 cents.
The writedown reflects a recognition that the current value of the asset no longer measures up to the value the company attributed to it when it acquired it as part of the Red Back Mining Inc. acquisition in 2010.
Kinross lost more than a fifth of its value on Jan. 17 after it announced that it planned to write down Tasiast, and that it could delay development at Tasiast, Fruta del Norte in Ecuador and Lobo-Marte in Chile. But the company remains committed to Tasiast’s potential.
“Tasiast is our top development priority,” Tye Burt, Kinross’s president and chief executive officer, said in a telephone interview Wednesday. “We firmly believe that Tasiast, in the long term, will be one of the world’s most prolific gold districts. That won’t be clear for 10 or 15 years.”
Kinross is also scaling back its investment plans for this year, allocating $1-billion for growth projects, compared with $1.3-billion previously.
“That reflects prudent and tight capital management as we move Tasiast to the front of the pipeline,” Mr. Burt said. “We’re determined to do this project-construction suite in a conservative and prudent way, even as we watch other peers in the industry struggle against rising capital costs and rising construction costs and a very tight construction market.”
Despite the quarterly loss, Kinross announced a 33-per-cent increase in its common-share dividend, to 8 cents semi-annually from 6 cents, citing “strong operational performance and cash flow.”
Goldcorp’s adjusted earnings per share totalled 66 cents, exceeding the 60 cents expected by analysts.
“Strong, low-cost gold production and another year of gold reserve growth provided a great finish to another solid year for Goldcorp,” Chuck Jeannes, the company’s president and chief executive officer, said in a statement.
While Goldcorp forecast last month that it will produce more gold this year than last year, Kinross said its production could be unchanged, and that costs may surge by as much as 19 per cent.