Kinross continues to grapple with Tasiast

Unpopular mergers were behind some tough news for two of Canada’s largest gold miners on Wednesday.

On the same day that Barrick Gold’s (ABX-T, ABX-N) chief executive was being ousted for his part in an ill-advised takeover, another unpopular merger continued to haunt Kinross Gold (K-T, KGC-N).

Wednesday began with the announcement that Barrick’s chief executive Aaron Regent was being replaced by the company’s chief financial officer Jamie Sokalsky. Regent’s tenure has largely been defined by the $7.3 billion acquisition of Equinox Minerals and its copper assets….a move that many market participants considered over priced and out-of-step with alleged Barrick’s gold focus.

Down the road at Kinross headquarters, management was contending with some more bad news from the former apple of its acquisition eye: Tasiast.

The company has already weathered a barrage of negative sentiment over its expensive takeover of Red Back Mining and the Tasiast project in Mauritania.

While that merger wrapped up in September of 2010, it grabbed fresh headlines earlier this year when the gold miner was forced to take a $2.49 billion write-down on the assets acquired in the deal. Indeed Kinross’s share price has fallen steadily since the acquisition as in September of 2010 its shares closed as high as $19.43, but in Toronto on June 6, those same shares were trading for just $8.84.

Although investor dissatisfaction over the acquisition had to do with the price Kinross agreed to pay, other issues at the site are now creeping to the surface.

The latest burr in the company’s saddle comes in the form of a labor dispute at Tasiast.

While the company is in the midst of studying significant expansions at the site, Tasiast is already a considerable mine with roughly 200,000 oz. of gold production last year. But reaching those production totals will be tough to do this year if the illegal strike at the mine persists for any length of time.

Kinross says that both its mining and milling operations have come to a halt due to its 600 workers walking off. The company says the majority of those workers are unionized.

At this point it isn’t clear what the workers demands are as Kinross has only said that they have raised “a number of issues” and that negotiations are ongoing.

Strikes at the site are nothing new, as a brief strike over pay and working conditions got underway in May of last year. In that instance the matter was resolved in just a single day.

Despite such issues Kinross has long touted Tasiast’s long term potential. While it is currently studying on the best method to mine lower grade material at the site its considerable resources do bode well for the project’s future.

Tasiast has proven and probable reserves of 128.9 million tonnes grading 1.8 grams gold for 7.5 million oz. of gold; measured and indicated resources of 403 million tonnes grading 0.86 grams gold for 11.1 million oz. and inferred resources of 78 million tonnes grading 0.74 grams for 1.9 million oz.

But the project has been plagued by delays in its expansion plans, largely due to rising project costs.

In its effort to focus more of its attention on Mauritania the company announced last month that it would sell its 50% stake in the Serra Grande Crixas gold mine in Brazil to AngloGold Ashanti (AU-N) for $220 million in cash.

The deal will let AngloGold take full ownership of the mine.