Kinross Gold’s (K-T, KGC-N, KNRSF-O) Tye Burt joins the growing ranks of fallen CEOs at companies struggling to keep investors satisfied at a time of depressed share prices, cost inflation, project delays and internal reviews of assets.
The Toronto-based producer says Burt will be replaced by Paul Rollinson, the company’s former executive vice-president of corporate development.
Kinross closed Aug. 1 at $8.01 a share in Toronto, which is 56% off its 52-week high of $18.17 reached last September, and 31% down for the year to date.
In a statement published after the market closed, Kinross’ board thanked Burt for his seven-year tenure, but added that a new CEO was needed to guide the company through its capital- and project-optimization process announced early this year.
As part of that strategy, Kinross said it was reviewing its major advanced gold projects to improve economics at Tasiast in Mauritania, Lobo-Marte in Chile and Fruta Del Norte in Ecuador. It cautioned investors about project delays and divulged it might need more capital to advance the three projects down the road.
Commenting on Rollinson’s appointment, BMO Capital Markets’ analyst David Haughton said in a note that the change could have several advantages, from appeasing investors to providing continuity for project execution. As an experienced mining executive and former investment banker, Rollinson, he says, might better steer the company forward.
While being an insider may allow Rollinson to implement Kinross’ goals, however, this may also be a negative: he may be seen as linked to the company’s previous deals and poor performance, Haughton says.
Another disadvantage, he points out, is that Rollinson is not widely known to the investor base.
When looking at the company’s net present value by assets, Russia represents a quarter of Kinross’s value, Haughton says, adding that Burt was well known in Russia, and as a member of the Foreign Investment Advisory Council. “Maintaining a high level of engagement in Russia is expected to be important for the company,” he writes.
Haughton, and other analysts, think that bad news could follow Burt’s departure.
Barrick Gold (ABX-T, ABX-N) recently delivered a one-two punch by removing former CEO Aaron Regent, and reporting project delays and rising capex at its Pascua-Lama project, which straddles the Argentina and Chile border, as well as persisting problems at the Lumwana copper mine in Zambia.
Some market participants believe that both CEOs were let go for spearheading pricey acquisitions that brought challenging assets on board.
In Regent’s case, it would have been Barrick’s $7.3-billion acquisition of Equinox Minerals and the Lumwana mine in 2011, and for Burt, the $7.1-billion takeover of Red Back Mining and the Tasiast mine in 2010.
Earlier this year, as part of its review, the gold miner took a $2.49-billion writedown at Tasiast, leaving investors fuming and Burt’s leadership under scrutiny.
Tasiast has also been plagued by delays in expansion plans, largely due to higher project costs and labour disputes.
Kinross expects to post its second-quarter results on Aug. 8, which may include an outline of its plans at Tasiast, with more details expected early next year.
The miner closed Aug. 2 down 5.6% at $7.56 a share, within a 52-week trading range of $7.15 to $18.17.
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