Kinross Gold Corporation (TSX:K; NYSE: KGC) (“Kinross” or the
“Company”) is pleased to announce that it has entered into
agreements to acquire a 70% interest in the high-quality Peak Gold
project in Alaska from Royal Gold, Inc. (“Royal Gold”) and Contango
ORE, Inc. (OTCQB: CTGO) (“Contango”) for total cash consideration
of $93.7 million. Kinross will have broad authority to construct
and operate the Peak Gold project, with Contango retaining a 30%
non-operating minority interest.
The Peak Gold project is a relatively high-grade
deposit with a large estimated resource base that is expected to
commence production in 2024 as a low-cost, open-pit mine. The
project, which is located approximately 400 kilometres (250 miles)
southeast of the Company’s Fort Knox mine, is a low-risk “tuck-in”
to supplement Kinross’ existing Alaska operation. Kinross plans to
process Peak Gold ore at Fort Knox and utilize the existing mill
and infrastructure to benefit both the project and the mine.
Highlights of
the acquisition:
• Adds another
high-grade,
low-cost development
project to Kinross’
portfolio1
- Expect to commence production at
the open pit project in 2024, with total production of
approximately 1 million Au eq. oz. over 4.5 years at average mining
grades of approximately 6 g/t.
- Preliminary all-in sustaining
costs2 estimated to be in the range of $750 per Au eq. oz. and
initial project capital expenditures in the range of $110
million.
- Expect to strengthen Kinross’ medium-term production and cash
flow profile.
- Numerous exploration targets within
Peak Gold’s 675,000-acre (2,732 km2) land package to potentially
increase mine life.
• Low-risk project leverages Fort Knox mill,
infrastructure and successful operating experience in
Alaska
- Processing ore at Fort Knox avoids
mill construction and is expected to decrease execution risk, lower
capital expenditures, drive attractive returns, and reduce the
project’s environmental footprint and permitting requirements.
- Blending higher grade ore from the
Peak Gold project with Fort Knox ore is expected to extend mill
operation at Fort Knox, reduce overall costs and increase cash
flow.
- Leverages Fort Knox’s successful
27-year history in Alaska, one of the world’s top mining
jurisdictions.
• Project
to benefit local
communities, in
particular the Upper Tanana Athabascan Village of
Tetlin (“Village of Tetlin”)
- Project expected to contribute to
the state economy and provide additional employment opportunities
and benefits.
“The relatively high-grade, low-cost Peak Gold
project is an excellent addition to our portfolio, as it allows us
to leverage our existing mill and infrastructure at Fort Knox and
strengthens our medium-term production and cash flow profile. In
today’s gold price environment, Peak Gold is an attractive,
high-margin project that is expected to generate robust returns,”
said J. Paul Rollinson, Kinross Gold President and CEO. “The
project is also expected to add to our strong record of
socio-economic contributions to our host communities in Alaska, one
of the top mining jurisdictions in the world.”
Summary of the
transactions
Kinross has entered into agreements to acquire
70% of the Peak Gold project, which is 40% owned by Royal Alaska,
LLC (“Royal Alaska”), a subsidiary of Royal Gold, and 60% owned by
CORE Alaska, LLC (“CORE Alaska”), a subsidiary of Contango, for
total cash consideration of $93.7 million.
Kinross has agreed to purchase 40% of Peak Gold
by acquiring Royal Alaska from Royal Gold for total cash
consideration of $49.2 million. The Company has also agreed to
purchase 30% of Peak Gold from CORE Alaska for total consideration
of $44.5 million, which includes $32.4 million in cash and shares
of Contango purchased from Royal Gold. The cash received by
Contango includes a $1.2 million prepayment reimbursement for a new
royalty on Peak Gold silver revenues. All conditions precedent to
closing have been satisfied and the transactions are expected to
close on or before October 1, 2020.
Peak Gold project
overview
Located near Tok, Alaska, the Peak Gold project
is accessible by road and is near the Alaska Highway (see Appendix
A for map). The project is situated within the 675,000-acre (2,732
km2) mineral lease with the Village of Tetlin and is a high-grade
skarn deposit that extends to surface.
Based on Peak Gold’s 2018 preliminary economic
assessment, the project has estimated measured and indicated
mineral resources of approximately 1.2 million Au oz. with a grade
of 4.1 g/t, and an estimated inferred resource of 116,000 Au oz.
with a grade of 2.7 g/t (see Appendix B).
The Company has completed an internal analysis
of the project, including building a preliminary block model and
mine plan. Kinross’ preliminary mine plan includes crushing ore at
the open pit project and trucking the material to Fort Knox’s mill
for processing. By utilizing Fort Knox’s existing infrastructure,
the mine plan does not require the construction of a mill or
tailings facilities at the project site. Kinross expects to receive
a management fee and toll mill Contango’s 30% of ore mined3.
The Company expects to blend the project’s
higher grade ore with Fort Knox’s lower grade ore to reduce Fort
Knox’s average life of mine all-in sustaining costs2 by
approximately $70 per Au eq. oz. and extend the mill’s operating
life. Extending mill operation is expected to increase recoveries
at Fort Knox, as displaced ore that was projected to be placed on
the heap leach pads will instead be processed at the mill.
Kinross’ preliminary estimates1 for the Peak
Gold project (on a 100% basis), using a $1,200 ounce gold price,
include:
- A mine life of 4.5 years,
commencing in 2024;
- Total life of mine production of 1
million recovered Au eq. oz. at average mining grades of
approximately 6 g/t;
- All-in sustaining costs2 in the
range of $750 per Au eq. oz., and;
- Initial project capital
expenditures of $110 million.
The Company plans to commence an infill,
geotechnical and metallurgical drilling program to further develop
the existing resource base. Kinross is also planning to focus on
targets across the larger land package identified by previous
sampling, mapping and geophysics. Initial permitting activities are
expected to commence in parallel with the drilling program. Kinross
expects to complete permitting and a feasibility study by the end
of 2022. Project construction is expected to take approximately one
year, with production planned to commence in 2024.
Kinross has completed substantial due diligence
at the project, conducting site visits in 2019. The Company has
also held productive meetings with leaders of the Village of
Tetlin, who have indicated their support for the project
development plan. Kinross also plans to rename the project in
consultation with the Village of Tetlin and looks forward to a
productive and mutually beneficial partnership with the
community.
“We look forward to the safe and responsible
development of the project and the positive benefits it is expected
to generate for our community,” said Village of Tetlin Chief
Michael Sam. “We also look forward to further building a
relationship with Kinross, a company with a strong track record in
Alaska, and are pleased to see further investment plans for the
project.”
Strong record of responsible mining and
value generation in Alaska
Kinross’ Fort Knox mine, located near Fairbanks,
Alaska, has an excellent health and safety record and a long,
successful history of responsible mining and environmental
stewardship. In 2019, the National Mining Association recognized
Fort Knox’s safety performance with the Sentinels of Safety Award,
the most prestigious safety award in the United States.
Fort Knox has strong relationships with local
government and host communities and generates significant value for
the state economy. The mine contributed approximately $300 million
to Alaska’s economy in 2019 through procurement, taxes, wages,
community programs and donations, providing meaningful livelihoods
for employees, opportunities for local suppliers, and support to
approximately 90 Alaska non-profits. Fort Knox operations supported
1,150 jobs in the Fairbanks North Star Borough in 2019, including
650 direct jobs with the mine, and conducted business with 350
Alaskan vendors.
Fort Knox’s commitment to environmental
stewardship is exemplified by its 27-year partnership with the
Alaska Department of Fish and Game in managing a major environment
restoration project in the Fish Creek valley. The project
successfully restored 1.5 miles (2.4 kilometres) of the creek and
neighbouring wetlands, safeguarding a 175-acre (71-hectare)
freshwater reservoir that enhanced the fish habitat. Fort Knox also
completed reclamation of its nearby True North deposit in 2015 and
recently returned the land back to Alaska for future public
use.
Advisors
Paradigm Capital is acting as financial advisor
to Kinross, with Davis Graham & Stubbs LLP and Osler, Hoskin
& Harcourt LLP acting as legal advisors on the transaction.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining
company with mines and projects in the United States, Brazil,
Russia, Mauritania, Chile and Ghana. Kinross’ focus is on
delivering value based on the core principles of operational
excellence, balance sheet strength, disciplined growth and
responsible mining. Kinross maintains listings on the Toronto Stock
Exchange (symbol:K) and the New York Stock Exchange
(symbol:KGC).
Media Contact Louie DiazSenior Director,
Corporate Communicationsphone:
416-369-6469louie.diaz@kinross.com
Investor Relations ContactTom ElliottSenior
Vice-President, Investor Relationsphone:
416-365-3390tom.elliott@kinross.com
Appendix A:
Map of Peak Gold
project
https://www.globenewswire.com/NewsRoom/AttachmentNg/38b5c2fc-8181-4730-93d1-2b8b3eeda2ab
Appendix B: Peak Gold Mineral Resource
Estimates*
|
Tonnes(000) |
Au Grade(g/t) |
Au Contained(koz) |
Ag Grade(g/t) |
Ag Contained(koz) |
Measured |
473 |
6.4 |
97 |
17 |
254 |
Indicated |
8,728 |
4.0 |
1,111 |
14 |
3,945 |
Measured + Indicated |
9,201 |
4.1 |
1,208 |
14 |
4,199 |
Inferred |
1,344 |
2.7 |
116 |
16 |
694 |
*Estimates are on a 100% basis and based on Peak
Gold’s 2018 preliminary economic assessment (“PEA”). Peak Gold’s
mineral resource estimates assumed a $1,400 per ounce gold price
and $20.00 per ounce silver price. The PEA is preliminary in
nature, and includes inferred mineral resources that are considered
too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral
reserves, and there is no certainty that the PEA will be
realized.Cautionary statement on forward-looking
information
All statements, other than statements of
historical fact, contained in this news release, including any
information as to the future financial or operating performance of
Kinross, constitute “forward-looking information” or
“forward-looking statements” within the meaning of certain
securities laws, including the provisions of the Securities Act
(Ontario) and the “safe harbor” provisions under the United States
Private Securities Litigation Reform Act of 1995 and are based on
the expectations, estimates and projections of management as of the
date of this news release, unless otherwise stated. The words
“estimate”, “expects”, “forward”, “plan”, “potential”,
“opportunity”, “upside” or variations of or similar such words and
phrases or statements that certain actions, events or results may,
could, should or will be achieved, received or taken, or will occur
or result and similar such expressions identify forward-looking
statements. Forward-looking statements contained in this news
release include, but are not limited to, those under the heading
"Strategic rationale for acquisition" and “Peak Gold project
overview”. Forward-looking statements are, necessarily, based upon
a number of estimates and assumptions that, while considered
reasonable by Kinross as of the date of such statements, are
inherently subject to significant business, economic and
competitive uncertainties and contingencies. The estimates and
assumptions of Kinross contained in this news release, which may
prove to be incorrect, include, but are not limited to: (i) that
the parties will complete the acquisition in accordance with, and
on the timeline contemplated by, the terms and conditions of the
relevant agreements, on a basis consistent with our expectations;
(ii) the accuracy and reliability of the pre-acquisition mineral
resource estimates of the project and Kinross’ analysis thereof
being consistent with expectations (including but not limited to
tonnage and grade estimates) and the potential benefits to Kinross
from the project and any upside from the project; (iii) the
completion, timing and results, of the planned exploration program
and corresponding feasibility studies being consistent with
expectations; (iv) production and the results of future operations
being consistent with Kinross’ economic model, preliminary project
estimates, execution risk analysis, and preliminary mine plan; (v)
projected production, anticipated mine life, all-in sustaining
costs and capital expenditure estimates for the project; (vi) the
successful development of the Peak Gold project on the timelines
anticipated, or at all; (vii), share price volatility; and (viii)
fluctuations in the spot and forward price of gold, silver, or
certain other commodities (such as, diesel fuel, natural gas, and
electricity). In addition, there are risks and hazards associated
with the business of gold exploration, development and mining,
including environmental hazards, industrial accidents, unusual or
unexpected formations, pressures, cave-ins, flooding and gold
bullion losses (and the risk of inadequate insurance, or the
inability to obtain insurance, to cover these risks). Many of these
uncertainties and contingencies can directly or indirectly affect,
and could cause, Kinross' actual results to differ materially from
those expressed or implied in any forward-looking statements made
by, or on behalf of, Kinross, including but not limited to
resulting in an impairment charge on goodwill and/or assets. There
can be no assurance that forward-looking statements will prove to
be accurate, as actual results and future events could differ
materially from those anticipated in such statements.
Forward-looking statements are provided for the purpose of
providing information about management’s expectations and plans
relating to the future. All of the forward-looking statements made
in this news release are qualified by this cautionary statement and
those made in our other filings with the securities regulators of
Canada and the United States including, but not limited to, the
cautionary statements made in the “Risk Analysis” section of our
MD&A for the year ended December 31, 2019 and the Annual
Information Form dated March 30, 2020. These factors are not
intended to represent a complete list of the factors that could
affect Kinross. Kinross disclaims any intention or obligation to
update or revise any forward-looking statements or to explain any
material difference between subsequent actual events and such
forward-looking statements, except to the extent required by
applicable law.
Source: Kinross Gold Corporation
_________________1 Kinross’ preliminary estimates for
production, grade, all-in sustaining costs and capital expenditures
are calculated on a 100% basis and assumes a $1,200/oz. gold price.
The estimates and scope of the project may change following the
feasibility study.2 Preliminary all-in sustaining cost estimates
exclude corporate overhead costs. The metric is a non-GAAP measure
and is not defined under International Financial Reporting
Standards. Refer to the “Reconciliation of non-GAAP financial
measures” section in the Company’s Q2 2020 MD&A. 3 Toll
milling to cover fixed and variable costs plus a profit markup.
Kinross Gold (NYSE:KGC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Kinross Gold (NYSE:KGC)
Historical Stock Chart
From Apr 2023 to Apr 2024