Kinross Gold‘s shares fell 20% a day after the company said it’s reviewing its three growth projects to improve “capital allocation, project sequencing and investment returns.”
The deposits under examination include: Fruta del Norte in Ecuador, Lobo-Marte in Chile, and Tasiast in Mauritania.
The Toronto-based miner says all three will require significant capital over the next couple of years, so it’s currently looking at ways to optimize the projects.
Along with expected delays that will come from the review, Kinross expects to lower the value of the Tasiast gold project.
The company got its hands on the deposit after acquiring Red Back Mining in 2010. On Sept. 30, 2011, it reported the project was worth US$7.1 billion, of which US$4.6 billion was goodwill.
But given current market conditions and industry-wide hikes in capital and operating costs, Kinross says it will record a material accounting charge, related to goodwill for Tasiast.
As part of the review, the company will explore different ways to process ore at Tasiast to reduce operating costs and risks.
Armed with a better understanding of the project’s orebody, it suggests it may be more cost-efficient to mine the lower-grade material at Tasiast through heap-leaching in combination with carbon-in-leach milling.
Kinross says it should take six to nine months of additional planning to determine the best processing mix for the project.
At Fruta del Norte, the company is working with the Ecuadorian government to improve the project’s economics. It recently signed a non-binding agreement with the government regarding the exploitation of the deposit in the Zamora Chinchipe province.
On Jan. 16 along with announcing its project optimization plan to better spend its money, the company reported the preliminary operating results for the full-year 2011 and outlook for 2012.
Kinross expects to have produced 2.6 million gold equivalent oz., at a cost of US$600 per oz. in 2011. Both figures fall within its previously-stated guidance.
For this year, the company is targeting production between 2.6 million and 2.8 million gold equivalent oz. Production cost is anticipated to fall within US$615 to US$715 per gold equivalent oz. The higher cost estimate is partially due to rising consumable and labour costs.
On Jan. 17, Kinross lost $2.81 to close at $10.39 on 27.5 million shares traded. Its shares plunged 38% in 2011 to close the year at $11.63. Since then, it has slid another 10% to a new yearly low of $10.35 a share.
I wonder why IPT shares are so low as Impact Silver appears to be doing quite well. Company management seem to be padding their own pockets quite well. Any comment on this company or should I sell mine. Dan