Canaccord has cut Kinross Gold Corporation (K.TO, KGC) to a Hold
rating from Buy and eased its price target to $7.70 from $8 on news
of its writedown, resulting from an update on operations in
Kinross last night announced that it will not proceed with
further development of the Fruta del Norte (
) 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
It said: "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."
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.
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