Kinross Gold Corp. (NYSE: KGC) fired its CEO after the markets closed last night. The company replaced Tye Burt, its chief executive for the past seven years, with J. Paul Rollinson, who had been the company’s executive vice-president for corporate development. The change follows by less than two months the firing of Aaron Regent at Barrick Gold Corp. (NYSE: ABX).
The odd thing about the change at Kinross is how the board chose to describe it:
[T]he Board has determined that in view of current market and industry fundamentals, stakeholder interests will best be served by an executive management team focusing on the implementation and oversight of the comprehensive capital and project optimization process that was announced by the Company on January 16, 2012. The objective of this process is to improve capital efficiency and investment returns while optimizing the Company’s major projects … The Board has also determined that a change in CEO is required to guide Kinross through this capital and project optimization process. … [Rollinson] understands all facets of the mining industry, including exploration and mining, mining finance and mining transactions.
That’s all okay, but Rollinson’s résumé doesn’t seem any better suited for the job than did Burt’s. The problem for Kinross, as it is for Barrick and virtually every other gold miner, is that costs continue to rise even faster than the price of gold. Kinross, like Barrick, chose a leader long on finance experience and short on operations experience.
The boards of Kinross and Barrick apparently believe that capital allocation and discipline will improve stock prices more than developing either new projects that contain higher grade ores or that can more efficiently monetize the lower grade ores. Maybe the new approach will work out, but developing all those new properties at Kinross and Barrick will not get any cheaper, regardless of who’s in charge.
Shares of Kinross are up more than 2% in premarket trading this morning, at $7.63. The stock’s 52-week range is $7.11 to $18.25.
Paul Ausick
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