Kinross Gold Corp. (K), the gold company with the cheapest shares among large producers, is working with BNP Paribas SA to arrange financing this year for a $1.6 billion expansion project in Mauritania.
The third-largest Canadian gold miner has taken more than $5.5 billion of writedowns on its Tasiast operation since its acquisition as part of an C$8.2 billion ($7.7 billion) purchase in 2010 of Red Back Mining Inc. Chief Executive Officer Paul Rollinson, who took over from Tye Burt two years ago, is trying to get funding to justify making Tasiast the company’s biggest mine.
“We think we’ll get pretty good terms,” Rollinson, 52, said last week in an interview at the company’s Toronto headquarters. “It just takes longer to structure when you’re working through government agencies and their systems and approval processes.”
The company expects to finalize the Tasiast financing toward the end of the year, Rollinson said. The lenders may include multilateral credit agencies, such as the World Bank’s International Finance Corp., and the funding may total about $700 million to $750 million, he said.
The company won’t make a final decision on the expansion until early 2015, he said. The project was delayed after Rollinson ordered fresh studies to reassess the design. “My theme there is, take the time to get it right,” he said. “Bigger isn’t always better.”
Underperforming Index
The company was the third-worst performer this year on the 30-company Philadelphia Stock Exchange Gold and Silver Index amid the perceived risks related to its operations in Russia, where Kinross gets about a quarter of its production. Russia’s relations with the rest of the world are deteriorating four months after its annexation of Ukraine’s Crimea region sparked Europe’s biggest geopolitical crisis since the end of the Cold War.
Rollinson is among CEOs at the world’s largest producers seeking to restore discipline after years of commodity-price increases. In addition to sending Tasiast back to the drawing board, Rollinson has suspended the dividend, halted a higher-cost mine and slashed annual spending plans by 69 percent since he took over.
The latest design for Tasiast is for a smaller project with an estimated cost of $1.6 billion, although Rollinson is hoping he can make further cuts to costs. The company will fund the rest of the expansion itself, he said.
‘Opportunity to Transform’
The company, which also operates mines in the U.S., Brazil, Chile and Ghana, has a lot riding on the expansion.
“It has the opportunity to transform Tasiast from what’s a smaller, higher-cost producer currently in the portfolio, to our largest producer at close to the lowest cost,” Rollinson said.
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