Kinross Gold allegedly trying to recover Ecuador mine losses
Canada’s Kinross Gold Corp. (TSX:K) (NYSE:KGC), the company that took a $720 million write-down when it halted its $1.3bn Fruta del Norte gold-silver project in Ecuador last year, is in negotiations to get back part of the investment, Bloomberg is reporting.
The miner said in June last year it was abandoning all efforts to develop the project because of the high taxes demanded by the Ecuadorean government, which refused to renegotiate a plan for a 70% windfall tax on revenue, allow Kinross to sale Fruta or extend the company’s licence beyond an August 1 deadline.
For Kinross, the project was a calculated risk that simply didn’t pay off. For Ecuador, it was a major blow to its ambitious plans of attracting mining companies to develop the industry.
Since 2012, the country has signed only one investment contract for a large-scale mining project with the Chinese-owned Ecuacorriente S.A. for the open-pit Mirador copper project, scheduled to start production at the end of 2015.
A member of the country’s mining chamber told BNamericas earlier this month (subs required) the project sale was still ongoing, and that the potential buyer “would have to be approved by the government.”
But people familiar with the matter told Bloomberg that President Rafael Correa’s administration may agree to renew the company’s rights to the concession, removing legal hurdles to the prospective sale. Another option, says the report, is for Kinross to just sell data gathered from its prospecting operations.
Fruta del Norte, found in 2006, is one of the world’s biggest gold discoveries, containing about 6.7 million ounces of proven and probable gold reserves and 9 million ounces of proven and probable silver reserves, according to Kinross’ website.