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Kinross Gold To Proceed With Expansions At $1 Billion Price Tag

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(Kitco News) - Kinross Gold Corp. (TSX: K; NYSE: KGC) will proceed with a phase-two expansion at its Tasiast gold mine in Mauritania plus an expansion at Round Mountain in Nevada, the company announced Monday.

The second-phase expansion at Tasiast will push mill capacity up to 30,000 tonnes of ore per day to produce an average of approximately 812,000 gold ounces annually for the first five years, Kinross said. The average all-in sustaining cost was pegged at $655 an ounce.

The mine currently processes 8,000 tonnes of ore a day but this will increase to 12,000 when a phase-one project is completed, according to the company’s website. The first phase is expected to reach commercial production in the second quarter of 2018.

Meanwhile, a Round Mountain “Phase W” expansion is expected to extend mining by five years and increase life-of-mine production by 1.5 million ounces of gold, the company said. However, Kinross needs to complete the permitting process.

The combined cost of the two projects comes to a little more than $1 billion. Kinross said it expects to finance both projects with its existing liquidity and operating cash flow. As of June 30, the company had cash and cash equivalents of $1.06 billion and available credit of $1.4 million.

Kinross said construction on the phase-two Tasiast expansion is expected to begin in early 2018, with initial plant and infrastructure capital costs estimated at $590 million. Commercial production is expected to begin in the third quarter of 2020. When completed, the project is expected to generate free cash flow of $2.2 billion over the life of mine, Kinross said.

The capital costs are lower than originally forecast, said J. Paul Rollinson, president and chief executive officer. “Our decision to proceed with the Tasiast phase-two expansion underscores our determination to realize the potential of this world-class asset and generate significant value for our shareholders,” he added.

The expansion would replace the two current ball mills with a new larger ball mill, and add new leaching, thickening, and refinery capacity, and make additions to the mining fleet. A new power plant would be added as well. Cumulative gold production from 2020 to 2029 is projected to be 6.3 million ounces.

The company added that the Tasiast phase-one project is on time and on budget, with plant construction now two-thirds completed. The company acquired Tasiast in 2010 when it purchased Red Back Mining for $7.1 billion.

Meanwhile, the Round Mountain Phase W expansion is estimated at $230 million, plus incremental non-sustaining capitalized stripping of $215 million from 2018 to 2020. Life of mine sustaining capital is expected to be $135 million.

Stripping of Phase W ore is expected to begin in early 2018, assuming the permit process is completed, Kinross said. Construction and relocation of infrastructure is expected to be completed by the second quarter of 2019, and initial low-grade Phase W ore should be encountered in mid-2019. Phase W is expected to generate incremental cash flow of $265 million and extend mining by five years from 2020 to 2024, the company said.

“Lower operating costs, combined with an optimized mine plan, have contributed to a further de-risking of the project and improved returns,” Rollinson said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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