Kinross Gold’s Tye Burt joins a growing list of fallen CEOs for companies struggling to keep investors satisfied in the current market condition, where cost escalations are causing project delays and internal reviews of assets.
The Toronto-based producer says Burt will be replaced by Paul Rollinson, the company’s former executive vice-president of corporate development.
The news comes with little surprise given the recent wave of ousted CEOs, after depressing share prices.
Kinross closed August 1 at $8.01 a share in Toronto, which is 56% off from its 52-week high of $18.17 reached last September and 31% down for the year to date.
In a statement published after market close, Kinross’s board thanked Burt for his seven-year tenure but added a new CEO is needed to guide the company through its capital and project optimization process that it announced early this year.
As part of that strategy, Kinross said it was reviewing its major advanced gold projects to improve economics at Tasiast in Mauritania, Lobo-Marte in Chile and Fruta Del Norte in Ecuador. As result it cautioned investors of project delays and possibility of needing more capital to advance the three projects down the road.
Commenting on Rollinson’s appointment, BMO Capital Markets’ analyst David Haughton said in a note the change has several potential advantages, from appeasing investors to providing continuity for project execution. As an experienced mining executive and former investment banker, Rollinson, he says, could potentially better steer the company forward.
While being an insider may allow Rollinson to implement the company’s goals, it may also be a downside, Haughton says as he may be perceived to be closely linked to the company’s previous deals and poor performance.
Another disadvantage, he points out, is that Rollinson is not widely known to the investor base.
When looking at the company’s net present value by asset, Russia represents about a quarter of Kinross’s value, says Haughton, noting former CEO Burt was well known in Russia and as a member of the Foreign Investment Advisory Council.
“Maintaining a high level of engagement in Russia is expected to be important for the company,” he writes.
Haughton similar to other analysts suggest bad news may follow Burt’s departure.
Barrick Gold recently delivered this one-two punch, by following the removal of its former CEO Aaron Regent with news of project delays and capex increases at its Pascua-Lama project straddling the border of Argentina and Chile and persisting problems at the Lumwana copper mine in Zambia.
Though some market participants believe that both CEOs were let go for spearheading pricey acquisitions that brought on board challenging assets.
In Regent’s case it would have been Barrick’s $7.3-billion acquisition of Equinox Minerals and the Lumwana mine in 2011 and for Burt the $7.1-billion takeover of Red Back Mining and the Tasiast mine in 2010.
Earlier this year, as part of its review the [Kinross] took a $2.49-billion write-down at Tasiast, leaving investors fuming and Burt’s leadership under scrutiny.
Tasiast has also been plagued by delays in expansion plans largely due to higher project costs, and labour disputes.
Kinross expects to posts its second quarter results on August 8, which may include an outline of its plans at Tasiast, with more details expected early next year.
The miner closed August 2 down 5.6% at $7.56 a share.
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