Tasiast, a massive but troubled gold mine in Mauritania, will steal the spotlight this week when Kinross Gold Corp. reports second quarter earnings – minus Tye Burt.
Kinross promised in May to provide an update on the mine Aug. 8, and investors are keen to know whether the miner has a better grasp of the project after a massive writedown earlier in the year.
Fears that more bad news could be on the way were compounded last week when Kinross dismissed Mr. Burt, the former investment banker who led the company through the acquisition of Tasiast’s owner, Red Back Mining, in the summer of 2010.
“In our view Tye Burt staked his reputation on Tasiast when he asked investors to trust him that it was worth the $7-billion purchase price,” Credit Suisse analyst Anita Soni wrote in a report on Aug. 1. “Thus, we believe that the decision to replace him cannot be viewed in isolation and must be a call on the value of the asset.”
The Kinross purchase of Red Back was the largest acquisition in the company’s 19-year history. The price was controversial, but Tasiast has been touted as the engine that will thrust Kinross into the ranks of the world’s fastest growing gold companies. So far, however, it is the source of its biggest-ever loss after a $2.49-billion writedown on the project earlier this year. Ms. Soni believes that this week’s news on the mine will be “biased to the negative.”
Kinross said when it ousted Mr. Burt that a new chief executive was needed to guide the company through cost cutting and capital allocation efforts at Tasiast and two other development projects, Lobo-Marte in Chile and Fruta del Norte in Ecuador.
Kinross, like its peers in the resource sector in general, is fighting booming costs at Tasiast and its other projects for everything from materials to labour, energy, engineering and equipment.
In the first quarter, the company said profit fell by more than half from the year-ago period, to $105.7-million (U.S.) from $250.1-million. On a per share basis, it earned 9 cents, down from 22 cents per share a year ago.