Kinross Gold Chief Sees No Need for Asset Sales in Tough Market
Kinross (K) Gold Corp., Canada’s third-largest producer by revenue, says now isn’t a good time to sell assets and the company will work on improving its least-profitable mines before it considers offloading them.
The “obvious candidates” that may not fit the Toronto-based miner’s requirements would be its highest-cost mines, Chief Executive Officer J. Paul Rollinson said yesterday in an interview after the company’s annual shareholder meeting.
“We’re going to look at them and we’re going to try to reconfigure them and we’re going to try do more with them before we would determine it’s not a fit,” he said. “We don’t have to sell to support the balance sheet.”
Mining companies led by BHP Billiton Ltd. (BHP) are holding the biggest ever sale of assets this year as producers seek to shore up earnings and cut costs, with about $48 billion of mines and assets on the block around the world. Barrick Gold Corp. (ABX), Kinross’s largest rival, is working with Bank of America Corp. and UBS AG on a possible sale of three gold mines in Australia, two people with knowledge of the matter said last month, and is also seeking buyers for its oil and gas unit.
It’s a difficult market to sell into, Rollinson said, because smaller companies that might be interested face depressed share prices and a lack of funding, especially after gold slumped into a bear market last month.
“The ability to source cash from likely buyers of things that are non-core is easier said than done, I think, in this environment,” he said. “And you really have to think hard about whether you want to take back a pile of paper in a smaller company.”
Kinross, which has operations in Mauritania, Ghana, the U.S., Chile, Brazil and Russia, isn’t looking for acquisitions either, even though depressed valuations in the industry might create “interesting” opportunities. The company is focused on improving its existing mines and projects, as Rollinson presses his managers to reduce spending and curb operating costs, even at the expense of output levels, in a bid to boost profits.
Those efforts are beginning to pay off, as Kinross this week reported earnings that beat analysts’ estimates for the third consecutive quarter and said costs decreased year-on-year for the first time in almost four years.
The company’s biggest deal was its 2010 acquisition of Red Back Mining Inc. for C$8 billion ($7.97 billion) to add two African mines, which it has since written down by a combined $6.5 billion. CEO Tye Burt was fired and replaced by Rollinson Aug. 1 of last year.
For now, corporate activity is “secondary” for the company, Rollinson said yesterday.
“There will probably be a time at some point in the future when we will think about those things again but it’s not in the immediate forefront of our minds.”
Barrick Gold and Goldcorp Inc. (G) are the largest Canadian gold producers by sales.
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