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Kinross Gold Corp. announced a $2.4-billion impairment charge because of lower gold price assumptions and a previously announced loss on an Ecuadorian project that the miner abandoned a few months ago. The latest charge brings the company’s writedowns to $8-billion over the past year and a half, exceeding Kinross’s market capitalization of about $6.1-billion.
The company cancelled its next semi-annual dividend payment, and raised the possibility that it would scrap the dividend altogether, depending on factors such as market conditions and its balance sheet strength.
Kinross also said Wednesday that it would delay a decision on whether to proceed with the construction of a new mill that processes the ore it mines at its Tasiast project in West Africa. That decision follows a commitment made just three months ago to proceed with the next phase of its expansion.
Kinross’s woes are emblematic of a struggling industry hampered by a slew of multibillion-dollar writedowns, cost cuts and share price slumps. Kinross shares are now worth just $5.34 apiece, down 78 per cent from their post-crisis peak, while Barrick Gold Corp.’s have fallen to $17 each – a low that was, until very recently, last seen in 1992.
In many cases, gold miners are being punished for ambitious acquisitions they made when commodity prices began to rebound in the aftermath of the financial crisis. In 2010, Kinross bought Red Back Mining Inc. for $7.1-billion. Today, much of that acquisition has been written off.
To shake things up, Kinross replaced former chief executive officer Tye Burt with Paul Rollinson last year, hoping that a new CEO could help to clean up the mess. But gold prices have since taken a big tumble, falling from their high of $1,900 (U.S.) an ounce to $1,324, making the miner’s projects much less profitable.
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