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Kinross Gold takes $1b write-down on 2007 Bema Gold acquisition

Kinross Gold CEO Tye Burt says his company and joint venture partner Barrick will make a decision on the economics of the Cerro Casale project in the third quarter after a feasibility study is completed.

Author: Dorothy Kosich
Posted: Thursday , 19 Feb 2009

RENO, NV -

A $1 billion write-down of Kinross Gold's acquisition of Bema Gold in 2007 translated into a net loss of $968.8 million or negative $1.47 per share for the fourth-quarter 2008, and resulted in a net loss of $807.2 million (negative $1.28/sh) for the full-year 2008.

For fourth quarter and full-year 2008 Kinross took goodwill impairment charges of $668.4 million for Kupol, $220.2 million for Maricunga and $105.5 million for Quebrada, all properties acquired through Bema.

Ironically, Kinross reported a record $1.6 billion in metals sales in 2008.

During a conference call Wednesday to discuss financial results, Kinross President and CEO Tye Burt told analysts Kinross and joint venture partner Barrick expect to make a decision during the third quarter of this year on the economics of the Cerro Casale project, one of the world's largest undeveloped gold and copper deposits.

Kinross decreased its proven and probable reserves by 970,000 ounces of gold to 45.6 million ounces of gold at year-end 2008 primarily due to an updated pre-feasibility study that resulted in an 833,000-ounce decrease in Cerro Casale mineral reserves. The Cerro Casale pre-feasibility study is expected to be made public shortly. A final feasibility study on Cerro Casale is expected to be completed during the third quarter of this year, Burt told analysts.

Despite the decrease at Cerro Casale, Kinross' total measured and indicated mineral resources at year-end 2008 increased by 24% to 13.7 million ounces of gold. The net gains are primarily due to reserve and resource increases at Fort Knox and Paracatu.

Silver reserves year-end 2008 increased by 28.8 million ounces to 105.8 million ounces. Meanwhile, copper reserves were reduced by 243 million pounds to 2.6 billion pounds as a result of adjustments made in the pre-feasibility study at Cerro Casale.

Cerro Casale partners Barrick and Kinross have agreed in principle to revise their ownership structure to an even 50/50 split.

Kinross reaffirmed its 2009 guidance that it expects to produce 2.4 million to 2.5 million gold equivalent ounces, an increase of 32% over 2008 production. On a by-product accounting basis Kinross expects to produce 2.2 million to 2.3 million ounces of gold and 12 million to 12.5 million ounces of silver this year.

Capital expenditures are expected to be $475 million this year for Kinross versus the original forecast of $460 million due to 2008 capital expenditure carry-overs.

Exploration and business development expenses for 2009 are forecast to be $75 million, of which $65 million will be allocated for exploration and corporate development and $10 million for technical services and environment, health and safety. Last year exploration and business development expense for 2008 was $59 million.

Total 2009 budgeted expense exploration is $61 million with 60% to be invested in the north and South American Cordillera regions with the balance to be spent for Eastern Russia, Brazil and corporate exploration activities. Greenfields, near-mine and advanced-stage project expenditures will account for 60% of expenses exploration with major programs at Fruta del Norte in Ecuador, Lobo-Marte, La Coipa and Fort Knox.