Editorial: Writedowns and the damage done

Another week, and we present yet another issue filled with talk of writedowns, dividend cuts and CEO exits among the majors. It’s been the theme of much of the producers’ side of the industry these past few months.

The latest multi-billion dollar writedowns by Barrick and Kinross owing to ill-considered investments in Africa — obvious to even the most casual observers at the time — point to a chronic problem of deeply flawed decision-making at the pinnacle of Canadian corporate life, and show there is very little consequence for those responsible for destroying so much shareholder value in their fleeting care.

As for the latest CEO to crawl out of the corporate wreckage with a smile and a golden parachute, this week it was Marius Kloppers stepping down as CEO of BHP Billiton after six years. His “retirement” at age 50 was announced after the world’s biggest miner tabled a 58% fall in half-year profits to US$5.7 billion for the July-to-December 2012 period, from US$10 billion a year earlier, largely due to US$3 billion in writedowns on its aluminum and nickel businesses. Kloppers will be replaced on May 10 by Andrew Mackenzie, 56, who has been the chief executive of BHP’s non-ferrous metals division.

Kloppers joins the list of CEOs recently departed from Anglo American, Xstrata, Rio Tinto, Barrick and Kinross, among others.

The massive writedowns and revolving doors in the executive suites are inflicting untold damage on the mining industry, undoing so much of the credibility that was restored by the introduction of the National Instrument 43-101 standards more than a decade ago.

• Geologists around the world saw their university geology textbooks come alive with the thrilling news of a meteorite hitting near Chelyabinsk, Russia, a little after 9 a.m. local time on Feb. 15.

Scientists at the National Aeronautics and Space Administration in the U.S. have revised upwards their estimate of the meteorite’s size to 17 metres in length and around 9,000 tonnes, or a thousand times larger than first thought. (To visualize that amount of material, think of it filling twenty 500-ton trucks at a modern open-pit mine.)

Monitoring stations around the world as far as Antarctica measured the impact’s infrasound shock waves (the largest on record), allowing scientists estimate it released 500 kilotons of energy upon exploding as a fireball about 15 km above the earth, moving in a southwesterly direction. That’s about 30 times the energy released by the atomic bomb at Hiroshima.

The sonic boom shattered windows for miles around, with nearly 1,500 suffering minor injuries, mostly from shattered or falling glass, as there were no reports of anyone actually being hit by meteorite fragments.

This ranks it as the largest object to hit the Earth since the 1908 meteorite impact at Tunguska in Siberia, which flattened some 80 million trees.

Thanks in large part to the latest Russian trend of mounting video cameras on vehicle dashboards to document possible traffic incidents — including fist fights and faked accidents — there was extensive, utterly spectacular video footage of the fireball and contrail, perfectly recording the once-in-a-lifetime event.

The Wall Street Journal reports that scientists at the Ural Federal University in Yekaterinburg had so far collected 53 fragments of the chondritic (or “stony”) meteorite, the largest of which was only 7 millimetres, but were relatively easy to spot in the white snow covering the area. Chondrites are the most common kind of meteorite, having been formed out of the fusing together of dusty particles present at the beginning of the solar system 4.5 billion years ago.

The most significant meteorite impacts in Earth’s history are the one that smashed into the Sudbury area to create the nickel-rich Sudbury basin, and the impact in the Yucatan Peninsula that looks to have wiped out the dinosaurs. There’s also speculation that an impact event on the Earth knocked a huge chunk of material into orbit to form the moon.