Kinross Shareholders Should Purge Management

Kinross: Kinross to suspend Russian operations

Kinross Gold Corporation (TSX:K; NYSE:KGC) (“Kinross” and the “Company”) is deeply concerned about the loss of life and destruction in Ukraine and wishes to express its sympathy and support for the people who are suffering because of this tragic situation.

The Company today is announcing a donation of $1,000,000 to the Canadian Red Cross Ukraine Humanitarian Crisis Appeal to assist those people most in need. Kinross is hopeful for a peaceful and diplomatic solution in Ukraine.

The Company is suspending all activities at its Udinsk development project. The Company is also in the process of suspending operations at its Kupol mine, with the focus on the safety and well-being of its more than 2,000 employees and in recognition of its obligations to manage and mitigate the mine's environmental impact on an ongoing basis.

The Company intends to adhere to all sanctions and legal restrictions that have, or will be, announced by relevant governments.

Everyone who signed off on this decision should be fired from the company. Donating to the Red Cross is fine, but shutting the mine is not acceptable behavior. Companies should not be invovled in politics. If management wants to virtue signal, they should have resigned en masse and said they cannot in good conscience work for a company operating in Russia. Instead, they have trashed the value of their Russian assets. I doubt the courts would be amenable, but I'd love to see a shareholder lawsuit target all of the management and board with personal lawsuits to clawback any future losses.

With this management, the company is done in Russia. They will be lucky to sell the mine at a good price because they cannot go back to normal. This mine will probably be targeted for environmental or labor violations. It is an impaired asset under current Kinross management and every potential buyer knows it.

That said, I wouldn't sell today. "The market" doesn't think ahead like that. They will restart the mine as soon as there's a permanent ceasefire or peace agreement because at that point, they will be in clear violation of their legal obligations to shareholders. Plus I expect gold will rebound. Longer-term though, I wouldn't stick around. Plenty of other mining stocks with better upside.

Companies should stick to doing business and not play politics. I don't think the management is necessarily "woke" in their beliefs, but their behavior is "woke" in the sense of destroying corporate value in pursuit of political or ideological goals, or in this case the moral vanity of the management.

At this point, many companies are engaged in reckless ideological games. BigTech is cruising for complete destruction with their political interference in elections and violating fundamental rights such as freedom of speech. Disney has no trouble doing business with autocratic and repressive regimes, but they go all out against a bill protecting children from sexual abuse in Florida. Many major companies are beyond saving if the political winds suddenly change because they have thrown caution to the wind and expressly chosen one side over another. Managements will be crucified by their shareholders if unrecoverable losses start piling up. Lest it be forgotten, or if you didn't know:

Long-Term Capital Management did business with nearly everyone important on Wall Street. Indeed, much of LTCM's capital was composed of funds from the same financial professionals with whom it traded. As LTCM teetered, Wall Street feared that Long-Term's failure could cause a chain reaction in numerous markets, causing catastrophic losses throughout the financial system.

After LTCM failed to raise more money on its own, it became clear it was running out of options. On September 23, 1998, Goldman Sachs, AIG, and Berkshire Hathaway offered then to buy out the fund's partners for $250 million, to inject $3.75 billion and to operate LTCM within Goldman's own trading division. The offer was stunningly low to LTCM's partners because at the start of the year their firm had been worth $4.7 billion. Warren Buffett gave Meriwether less than one hour to accept the deal; the time lapsed before a deal could be worked out.[24]

Seeing no options left, the Federal Reserve Bank of New York organized a bailout of $3.625 billion by the major creditors to avoid a wider collapse in the financial markets.[25] The principal negotiator for LTCM was general counsel James G. Rickards.[26] The contributions from the various institutions were as follows:[27][28]

$300 million: Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P.Morgan, Morgan Stanley, Salomon Smith Barney, UBS

$125 million: Société Générale

$100 million: Paribas, Credit Agricole[29]

Bear Stearns and Lehman Brothers[29] declined to participate.