Kinross Gold Corporation (TSX:K)(NYSE:KGC) announced today that the
Company will not proceed with further development of the Fruta del
Norte (FDN) project in Ecuador. The Company also informed the
Government of Ecuador of this decision, and requested its
cooperation in ensuring an orderly transition that respects the
interests of both parties.
After more than two years of negotiations on exploitation and
investment protection agreements for the project, the Government of
Ecuador and Kinross have been unable to agree on certain key
economic and legal terms which balance the interests of all
stakeholders. Therefore, despite pending legislative amendments to
the mining and tax law regime in Ecuador, Kinross has concluded
that it is not in the interests of the Company and its shareholders
to invest further in developing FDN.
"We have said that we will exert strict capital discipline
across our Company, that we will allocate our capital only to
projects which meet our investment criteria, and that we will only
enter into agreements that are in the best interests of the Company
and its shareholders," said CEO J. Paul Rollinson. "After a great
deal of effort to arrive at a mutually agreeable outcome, it is
unfortunate that the parties were unable to reach an agreement on
FDN which would have met those criteria. That said, we respect the
Government of Ecuador's sovereign authority and its right to
determine how its resources are developed," he added.
Although Ecuadorian law permits an extension of the economic
evaluation phase of the project for up to 18 months, or the
suspension of the commencement of the exploitation phase, either of
which would have enabled negotiations to continue beyond the
current August 1, 2013 deadline, the government has indicated that
it will not agree to such an extension or suspension. Any possible
sale of the project is currently subject to the prior approval of
the government, and the government has also indicated it will not
support efforts by Kinross to solicit a potential new partner, or a
buyer. As previously disclosed, when the current economic
evaluation phase of the project expires on August 1, 2013, the La
Zarza concession, which contains the entire FDN mineral resource,
will revert to the government.(1)
The Company intends to focus on assisting its employees and its
local stakeholders during a transition period as it reduces its
level of activities in Ecuador in the coming months. "I want to
acknowledge our outstanding team in Ecuador for their dedicated
efforts in establishing FDN as a model for responsible mining," Mr.
Rollinson said. "I also want to thank our local stakeholders and
the communities of Zamora-Chinchipe, including members of the Shuar
Federation, who have partnered with us on a wide range of training,
business development and community investment initiatives over the
past several years as we worked together to advance this project,"
he added.
Kinross' decision to cease the development of FDN will result in
a charge of approximately $720 million in the second quarter.
Approximately $700 million of the charge is expected to be
non-cash, reflecting the Company's entire net carrying value of the
FDN project(2), and approximately $20 million represents accrued
severance and closure costs.
About Kinross Gold Corporation
Kinross is a Canadian-based gold mining company with mines and
projects in Brazil, Canada, Chile, Ecuador, Ghana, Mauritania,
Russia and the United States, employing approximately 9,000 people
worldwide. Kinross maintains listings on the Toronto Stock Exchange
(symbol:K) and the New York Stock Exchange (symbol:KGC).
(1) See Kinross' First Quarter Report for the quarter ended
March 31, 2013, page 16; and Kinross' Annual Information Form for
the year ended December 31, 2012, page 62, "Risk Factors".
(2) See Kinross' First Quarter Report for the quarter ended
March 31, 2013, page 16.
Cautionary statement on forward looking information
All statements, other than statements of historical fact,
contained or incorporated by reference in this news release
constitute "forward-looking information" or "forward-looking
statements" within the meaning of certain securities laws,
including the provisions of the Securities Act (Ontario) and the
provisions for "safe harbour" under the United States Private
Securities Litigation Reform Act of 1995 and are based on
expectations, estimates and projections as of the date of this news
release. Forward-looking statements are statements with respect to
possible events and circumstances including, without limitation,
statements with respect to the investment of capital; development
of projects; government action, regulation and relations;
environmental risks and liabilities including but not limited to
reclamation expenses; and title disputes and other legal claims and
actions. The words "indicate", "intend", "potential", or
"transition" or variations of or similar such words and phrases or
statements, denote that certain actions, events or results "may",
"could", "would" or "should" occur or be achieved, and similar
expressions, identify forward-looking statements. Forward-looking
statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Kinross as of the
date of such statements, are inherently subject to significant
business, economic, political and competitive uncertainties and
contingencies. The estimates and assumptions of Kinross referenced,
contained or incorporated by reference in this news release, which
may prove to be incorrect, include, but are not limited to, the
various assumptions set forth herein and in our most recently filed
Annual Information Form and our full-year 2012 Management's
Discussion and Analysis as well as:
(1) the cessation by the Company of further investment in and
development of the Fruta del Norte deposit and La Zarza mining
concession ("FDN") being consistent with Kinross' current
expectations including, without limitation, as related to the
reasonable cooperation of the Government of Ecuador in ensuring an
orderly transition with respect to FDN that respects the interests
of both parties; continuing recognition of the Company's other
remaining mining concessions and other assets, rights, titles and
interests in Ecuador; the implementation of Ecuador's mining and
investment laws (and prospective amendment to these laws) and
related regulations and policies; and compliance with, and the
implementation and enforcement of, the Canada-Ecuador Agreement for
the Promotion and Reciprocal Protection of Investments; (2) the
exchange rate between the Canadian dollar and the U.S. dollar being
approximately consistent with current levels; (3) certain price
assumptions for gold and silver; (4) prices for diesel, natural
gas, fuel oil, electricity and other key supplies being
approximately consistent with current levels; (5) production and
cost of sales forecasts for the Company, and entities in which it
now or hereafter directly or indirectly holds an investment,
meeting expectations; (6) the accuracy of the current mineral
reserve and mineral resource estimates of the Company (including
but not limited to ore tonnage and ore grade estimates) and any
entity in which it now or hereafter directly or indirectly holds an
investment; (7) labour and materials costs increasing on a basis
consistent with Kinross' current expectations; (8) goodwill and/or
asset impairment potential; and (9) access to capital markets being
consistent with the Company's current expectations.
Known and unknown factors could cause actual results to differ
materially from those projected in the forward-looking statements.
Such factors include, but are not limited to: political or economic
developments in Ecuador; changes in national, state and local
government legislation, taxation (which for purposes hereof shall
include but not be limited to income tax, advance income tax, stamp
tax, withholding tax, capital tax, tariffs, value-added or sales
tax, capital outflow tax, capital gains tax, excise tax,
customs/import or export taxes/duties, asset taxes, asset transfer
tax, property use or other real estate tax, royalty or any other
tax or similar levy, together with any related fine, penalty,
surcharge, or interest imposed in connection with such taxes),
controls, policies and regulations in Ecuador; the safety and
security of Company personnel and assets in Ecuador; employee
relations; environmental and reclamation liabilities; business
opportunities that may be presented to or pursued by us; our
ability to successfully cease further investment in and development
of FDN and, in cooperation with the Government of Ecuador,
successfully complete an orderly transition with respect to FDN
that is respectful the interests of both parties and does not
impose on the Company (and/or any of its directors, officers or
employees) any unreasonable obligations or liabilities, relating to
employees, taxation (as defined above) or the environment
(including, without limitation, with respect to the Company's prior
or continuing activities in Ecuador, or artisanal or illegal mining
activities) or otherwise; litigation commenced, or other claims or
actions brought, against the Company (and/or any of its directors,
officers or employees) in respect of the subject matter of this
news release, any fact, matter or circumstance arising therefrom
and/or in respect of Ecuador, FDN or any other of the Company's
other properties, mining concessions and assets in Ecuador, or any
of the Company's prior or continuing activities on or in respect
thereof or otherwise in Ecuador, including but not limited to any
class action or other litigation commenced against the Company in
Canada, Ecuador and/or the United States, under applicable
securities legislation or any other laws, and/or any other
litigation, claims, proceedings or actions brought against the
Company (or any of its directors, officers or employees) relating
to employee rights, taxation (as defined above), the environment
(including, without limitation, with respect to the Company's prior
or continuing activities in Ecuador, or artisanal or illegal mining
activities), or any rights, title or interest in any properties,
mining concessions or other assets (including but not limited to
FDN and the Company's remaining mining concessions, property rights
and related assets in Ecuador) and any of the Company's prior or
continuing activities on or in respect thereof.
Many of these uncertainties and contingencies can directly or
indirectly affect, and could cause, Kinross' actual results to
differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, Kinross. There
can be no assurance that forward-looking statements will prove to
be accurate, as actual results and future events could differ
materially from those anticipated in such statements.
Forward-looking statements are provided for the purpose of
providing information about management's expectations and plans
relating to the future. All of the forward-looking statements made
in this news release are qualified by these cautionary statements
and those made in our other filings with the securities regulators
of Canada and the United States including but not limited to the
cautionary statements made in the "Risk Factors" section of our
most recently filed Annual Information Form and the "Risk Analysis"
section of our full-year 2012 and Q1 2013 Management's Discussion
and Analysis. These factors are not intended to represent a
complete list of the factors that could affect the Company. Kinross
disclaims any intention or obligation to update or revise any
forward-looking statements or to explain any material difference
between subsequent actual events and such forward-looking
statements, except to the extent required by applicable law.
Other information
Where we say "we", "us", "our", the "Company", or "Kinross" in
this news release, we mean Kinross Gold Corporation and/or one or
more or all of its subsidiaries, as may be applicable.
Contacts: Media Contact Kinross Gold Corporation Louie Diaz
Manager, External Communications 416-369-6469louie.diaz@kinross.com
Investor Relations Contact Kinross Gold Corporation Tom Elliott
Vice-President, Investor Relations
416-365-3390tom.elliott@kinross.com
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