Kinross, which had not filed financial statements since February, takes a US$416.7-million charge against earnings for the impairment of assets, of which US$400.1 million was in goodwill (the premium paid for assets in the takeover). The charges turn a US$19.7-million profit for the year into a US$406-million loss.
The company had suspended filing of its financial statements in February 2005 amid discussions with Canadian and U.S. securities regulators about its proposed merger with
Kinross contracted Standard & Poors Corporate Value Consultants (now Duff & Phelps) to review the way the TVX and Echo Bay acquisitions had been accounted for in the company’s books at the time of the merger in January 2003. The valuation of the TVX and Echo Bay assets, the way that valuation was distributed to different asset classes, and the net amount of goodwill in the acquisition price were all in question.
The Ontario Securities Commission placed a cease-trade order in April preventing management from trading in the company’s shares during the outside review. Kinross also sought and received permission to delay its annual meeting beyond the June 30 deadline in the company’s bylaws.
Kinross chief executive Tye Burt told a conference call that the company was satisfied that it had answered the concerns of the security regulators with the accounting review.
S&P’s revaluation of the mineral assets reduced the original value of the goodwill premium, to US$742.5 million from US$918 million. The revaluation moved US$45.4 million that had been allocated to property, plant and equipment assets into the carrying value of mineral properties, and added US$259 million to the carrying value of the properties. The increase in mineral interests mainly reflected increases in the value placed on reserves and resources thanks to the higher gold price.
The US$400.1-million impairment charge brought the goodwill on Kinross’s balance sheet to US$342.4 million, and total assets down to US$1.8 billion from US$2.1 billion before the restatement. The impairment charge also included a charge against the value of the Paracatu gold project in Brazil, where Kinross bought out the 51% held by joint-venture partner
Kinross also released unaudited financial results for 2004, when it made a net loss of US$55.9 million, or US16 per share, on revenues of US$666.8 million. The restated 2003 loss, US$406 million or US$1.32 per share, came on revenues of US$571.9 million.
On the balance sheet, Kinross took a further US$12.4-million impairment charge against goodwill in 2004, bringing the goodwill figure to US$330.9 million, and charged US$46.1 million against property, plant and equipment, mostly on operations in the process of being shut down. At the end of 2004, the company had a book value of US$1.3 billion, down from US$1.4 billion in the restated 2003 balance sheet, and US$47.9 million in cash.
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