Kinross Gold Walks Away From Giant Ecuador Project Over 70% Windfall Profits Tax Demand

on June 11 2013 7:37 AM

Kinross Gold Corp. (NYSE:KGC) will book a $720 million charge in the second quarter to reflect its decision to abandon a huge project in Ecuador, where the Canadian mining company and the government couldn't agree on terms -- despite two years of talks.

The Fruta del Norte project, which Kinross bought five years ago for about $1 billion and is seen as the world's largest untapped gold resource, is being abandoned because the company isn't willing to pay a 70 percent windfall profits tax demanded by Quito, the Edmonton Journal reports.

Because the government won't permit Kinross to sell its ownership of the La Zarza concession, which contains the entire Fruta del Norte resource, it will revert to the government on Aug. 1.

About $700 million of the charge is expected to be noncash, reflecting the company's entire net carrying value of the Fruta del Norte project and about $20 million represents accrued severance and closure costs.

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