Project expected to extend mine life to 2030 and
generate 17% IRR at a low capital costStrengthens Company’s
long-term U.S. production profile
Kinross Gold Corporation (TSX:K) (NYSE:KGC) (“Kinross”) is
pleased to announce that it is proceeding with the initial
Gilmore expansion project at its Fort Knox mine in Alaska.
The initial Gilmore project is expected to
extend mining at Fort Knox by six years to 2027, and leaching to
2030, at a low initial capital cost of approximately $100 million,
and increase life-of-mine production by approximately 1.5 million
Au eq. oz.
The project is expected to generate an internal
rate of return (IRR) of 17% and net present value (NPV) of $130
million based on a $1,200/oz. gold price, and an IRR of 26% and NPV
of $239 million based on a $1,300/oz. gold price.
Fort Knox Gilmore project feasibility study
highlights1 |
Operational metric |
Incremental Gilmore estimate2 |
Life of mine production (million Au oz.) |
|
1.51 |
|
Life of mine ore processed (million tonnes) |
|
183 |
|
Average grade processed (g/t) |
|
0.35 |
|
Strip ratio |
|
1.2 |
|
Average production cost of sales (per Au eq. oz.) |
$650 |
|
Average all-in sustaining costs3 (per Au eq. oz.) |
$950 |
|
Initial capital costs (million) (2018-2020) |
$100 |
|
Capitalized stripping (million) (2018-2020) |
$60 |
|
Internal rate of return4 (IRR) |
|
17 |
% |
Net present value5 (NPV) (million) |
$130 |
|
Cash flow (million) |
$240 |
|
CEO
commentary: J. Paul Rollinson, President and CEO,
made the following comments in relation to the Gilmore
expansion:
“We are pleased to proceed with the initial Fort
Knox Gilmore project, a low-risk, low-cost brownfield expansion
that is expected to extend mine life to 2030 at one of our top
performing operations and contribute 1.5 million gold equivalent
ounces to strengthen our long-term U.S. production profile.
“The Gilmore project offers an attractive IRR
and NPV and adds to our suite of quality development projects at
Tasiast, Round Mountain, Bald Mountain and Kupol to enhance our
globally diverse portfolio. The project’s low initial capital cost
is expected to be funded by Fort Knox’s cash flow, helping preserve
our strong balance sheet and financial flexibility.
“With additional upside potential at Gilmore and
beyond, Fort Knox is a significant asset in our portfolio located
in an excellent mining jurisdiction. The Gilmore project and the
addition of estimated mineral resources improves value and is
expected to be a key contributor to the future growth of our
Company.”
1 Based on a $1,200 per ounce gold price
assumption and $55/bbl oil price assumption. 2018-2030 unless noted
otherwise.2 Incremental to pre-Gilmore mine plan and estimated
mineral reserves previously disclosed by Kinross in its news
release dated February 14, 2018.3 Throughout this news release,
forecast site-level all-in sustaining cost excludes corporate
overhead costs. This is a non-GAAP measure and is not defined under
IFRS. Refer to “Reconciliation of non-GAAP financial measures”
section in the Company’s Q1 2018 MD&A.4 Throughout this news
release, calculated from July 1, 2018 forward and after tax.5
Throughout this news release, calculated based on a 5% discount
rate from July 1, 2018 and after tax.
Gilmore feasibility
study
The Gilmore feasibility study contemplates the
first two phases of a potential multi-phase layback of the existing
Fort Knox pit and construction of a new heap leach pad. The Company
expects to continue leveraging its extensive experience and
knowledge operating cold weather, sub-arctic heap leaching, having
successfully operated Fort Knox’s current heap leach during the
past 10 years.
The project plan requires minimal construction
of new infrastructure and new equipment purchases, and has been
optimized for lower initial capital costs. This includes continuing
mining using Fort Knox’s current fleet and leveraging assets from
the Company’s other North American operations as replacement
equipment is required. Kinross expects to finance the initial
capital costs of the project using Fort Knox’s cash flow.
Early construction work on the new heap leach
and dewatering is expected to begin in Q3 2018, with stripping
commencing in 2019. Initial production from Gilmore is expected in
early 2020, with approximately 5% of Gilmore ore expected to be
stacked on the existing pad. Approximately 95% of Gilmore ore is
expected to be stacked on the new heap leach pad, with stacking
commencing in late 2020. Currently, milling at Fort Knox is
expected to end in late 2020.
The project team has now been established and
contracting is underway. Engineering is largely complete and the
permitting process is proceeding as planned. Permits are now in
place to start work on the new heap leach pad.
Fort Knox estimates, including Gilmore
project1 |
Timeline |
Operational metric |
Combined estimate(current mine
plan + Gilmore) |
2018 –
2027(Mining) |
Average annual production (Au oz.) |
245,000 |
|
Average production cost of sales (per Au eq. oz.) |
$735 |
|
Average all-in sustaining costs3 (per Au eq. oz.) |
$1,015 |
|
Average grade processed (g/t) |
0.37 |
|
Strip ratio |
1.2 |
|
Average processing cost (per tonne) |
$1.74 |
|
Average mining cost (per tonne) |
$2.19* |
|
Average annual tonnes mined (tonnes) |
60 million |
2028 –
2030(Leaching) |
Average annual production (Au oz.) |
80,000 |
|
Average production cost of sales (per Au eq. oz.) |
$855 |
|
Average all-in sustaining costs3 (per Au eq. oz.) |
$900 |
|
Average grade processed (g/t) |
N/A |
Strip ratio |
N/A |
Average processing cost (per annum) |
$23.6 million |
2018 – 2030 (Life of
Project) |
Average annual production (Au oz.) |
205,000 |
|
Average production cost of sales (per Au eq. oz.) |
$745 |
|
Average all-in sustaining costs3 (per Au eq. oz.) |
$1,005 |
|
Average grade processed (g/t) |
0.37 |
|
Average recovery rate |
79% |
Strip ratio |
1.2 |
|
Average processing cost (per tonne) |
$2.00 |
|
Average mining cost (per tonne) |
$2.19* |
|
*includes capitalized stripping
As disclosed in the first quarter of 2018, the
Fort Knox pit experienced a minor pit wall slide. The wall slide is
not expected to materially affect Fort Knox’s average annual
production and cost estimates over the life of mine, the Gilmore
project’s IRR and NPV, or the Americas 2018 regional guidance. The
Company is continuing to analyze the slide’s impact and assess
mitigation plans, which may have some effect on Fort Knox’s 2018
and 2019 production and cost schedule.
Forecast Gilmore initial capital costs
(2018 – 2020) |
($ millions) |
Barnes Creek Heap Leach Pad |
51 |
Geotechnical Study and Dewatering |
19 |
Mining Fleet + Capitalized Maintenance |
12 |
Infrastructure, owner’s cost and other |
5 |
Contingency |
13 |
Total |
100 |
Capitalized stripping |
60 |
Gold price sensitivity estimates
|
Fort Knox Gilmore project
(incremental) Average gold price |
Financial Metric |
$1,100/oz. |
$1,200/oz. |
$1,300/oz. |
$1,400/oz. |
IRR4 |
7 |
% |
17 |
% |
26 |
% |
34 |
% |
NPV5 |
$21 million |
$130 million |
$239 million |
$348 million |
Oil price sensitivity
estimates
|
Fort Knox Gilmore project
(incremental) Oil price |
Financial Metric |
$45/bbl |
$55/bbl |
$60/bbl |
$65/bbl |
IRR4 |
19 |
% |
17 |
% |
16 |
% |
14 |
% |
NPV5 |
$157 million |
$130 million |
$116 million |
$103 million |
Updated Fort Knox Mineral Reserve and
Resource estimates6
As a result of the Fort Knox Gilmore feasibility
study, estimated proven and probable mineral reserves at Fort Knox
increased to approximately 3.4 million Au oz., as 2.1 million Au
oz. was converted from estimated measured and indicated mineral
resources. An additional 0.6 million Au oz. was added to estimated
measured and indicated resources due to engineering changes, which
included updating cost assumptions to be consistent with the
feasibility study, partly offsetting the conversion of gold ounces
to estimated mineral reserves.
Further drilling is expected to be conducted at
the 287-hectare (709 acre) Gilmore property in 2019, including
infill drilling to potentially add to the mine’s estimated mineral
reserves. The Company will continue to explore the prospectivity
and upside potential of the Fort Knox area, as the overall orebody
has not yet been delineated to the West, South and East.
Fort Knox Area Mineral Reserve and Resource
Estimates6(Closing Balance December 31, 2017) |
|
2017(Pre-Gilmore feasibility
study)(Au koz) |
Gilmore Conversion(Au koz) |
Engineering Changes(Au koz) |
2017(Post-Gilmore feasibility
study)(Au koz) |
Proven and Probable Reserves |
1,245 |
2,072 |
57 |
3,374 |
Measured and Indicated Resources |
3,229 |
(2,072) |
638 |
1,795 |
Inferred Resources |
689 |
- |
404 |
1,093 |
|
|
|
|
|
|
|
|
|
|
|
|
Fort Knox Area Proven
and Probable Mineral Reserves6(Closing Balance December
31, 2017) |
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Proven |
51,336 |
0.39 |
645 |
Probable |
230,870 |
0.37 |
2,729 |
Total |
282,236 |
0.37 |
3,374 |
Fort Knox Area Measured
and Indicated Mineral Resources6(Closing Balance December
31, 2017) |
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Measured |
6,606 |
0.36 |
77 |
Indicated |
140,339 |
0.38 |
1,718 |
Total |
146,945 |
0.38 |
1,795 |
Fort Knox Area Inferred
Mineral Resources6(Closing Balance December 31, 2017)
|
|
Tonnes(kt) |
Grade(Au g/t) |
Ounces(Au koz) |
Inferred |
105,605 |
0.32 |
1,093 |
6 These updated estimates are different from
those reported in the Company's news release dated February 14,
2018 and Annual Information Form dated March 29, 2018 and reflect
changes resulting from the feasibility study work completed in
2018. For further information (including assumptions, which remain
unchanged) see the Company’s Annual Information Form dated March
29, 2018, available at www.kinross.com and under the Company’s
profile on SEDAR (www.sedar.com). Mineral resources that are not
mineral reserves have not demonstrated economic viability.
Updated Fort Knox technical
report
Kinross today filed an updated technical report
for Fort Knox. The technical report incorporates updates with
respect to the current Fort Knox operation, including details of
the Gilmore project feasibility study and updated mineral resource
and mineral reserve estimates. The feasibility study has been
reviewed by third-party independent reviewers and was found to be
consistent with industry best practices. The technical report has
been prepared pursuant to Canadian Securities Administrator's
National Instrument 43-101, and may be found at www.kinross.com or
under the Company's profile at www.sedar.com. Click
here to access the updated Fort Knox technical report.
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
DiazDirector, Corporate Communicationsphone: 416-369-6469
louie.diaz@kinross.com
Investor Relations ContactTom
Elliott
Senior Vice-President, Investor Relations and Corporate
Development
phone:
416-365-3390
tom.elliott@kinross.com
Cautionary Statement on
forward-looking information
All statements, other than statements of
historical fact, contained or incorporated by reference in this
news release including, but not limited to, 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
provisions for ‘‘safe harbor’’ under the United States Private
Securities Litigation Reform Act of 1995 and are based on
expectations, estimates and projections as of the date of this news
release. Forward-looking statements contained in this news release
include those under the headings “CEO Commentary”, “Gilmore
feasibility study”, and “Updated Fort Knox Mineral Reserve and
Resource estimates” and include, without limitation, statements
with respect to: our estimates, expectations, forecasts and
guidance for production, production costs of sales, all-in
sustaining cost and capital expenditures, cost savings, project
economics (including net present value and internal rates of
return) and other information contained in the feasibility study;
as well as references to other possible events, the future price of
gold and silver, the estimation of mineral reserves and mineral
resources, the realization of mineral reserve and mineral resource
estimates, the timing and amount of estimated future production,
costs of production, capital expenditures, costs and timing of the
development of the project and mining and processing activities,
permitting timelines, currency fluctuations, requirements for
additional capital, government regulation of mining operations, and
environmental risks. The words ‘‘estimate’’, ‘‘expect’’,
“feasibility”, “plan”, “potential” “schedule”, “study” and “upside”
or variations of or similar such words and phrases or statements
that certain actions, events or results ‘‘may’’, ‘‘could’’, “will”
or ‘‘would’’ occur, and similar expressions identify
forward-looking statements. 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, models and assumptions of Kinross referenced, contained
or incorporated by reference in this news release, which may prove
to be incorrect, include, but are not limited to, the various
assumptions set forth herein and in our Annual Information Form
dated March 29, 2018 and our full-year 2017 and first quarter 2018
Management’s Discussion and Analysis as well as: (1) there being no
significant disruptions affecting the operations of the Company
whether due to extreme weather events and other or related natural
disasters, labour disruptions, supply disruptions, power
disruptions, damage to equipment or otherwise; (2) permitting,
development, operations and production from the Gilmore project
being consistent with the Company’s expectations; (3) political and
legal developments in any jurisdiction in the State of Alaska and
the United States of America being consistent with its current
expectations; (4) the exchange rate between the Canadian dollar and
the U.S. dollar being approximately consistent with current levels;
(5) certain price assumptions for gold and silver; (6) prices for
diesel, natural gas, fuel oil, electricity and other key supplies
being approximately consistent with current levels; (7) production
and cost of sales forecasts meeting expectations; (8) the impact on
costs and production of the recent pit wall failure at the Fort
Knox mine; (9) the accuracy of the current mineral reserve and
mineral resource estimates of the Company (including Fort Knox);
(10) labour and materials costs increasing on a basis consistent
with Kinross' current expectations; and (11) goodwill and/or asset
impairment potential, being consistent with the Company's current
expectations. Known and unknown factors could cause actual results
to differ materially from those projected in the forward-looking
statements. Such factors include, but are not limited to:
international economic sanctions (any other similar restrictions or
penalties) now or subsequently imposed, other actions taken, by,
against, in respect of or otherwise impacting any jurisdiction in
which the Company is domiciled or operates, or any government or
citizens of, persons or companies domiciled in, or the Company's
business, operations or other activities in, any such jurisdiction;
litigation commenced, or other claims or actions brought, against
the Company (and/or any of its directors, officers or employees);
fluctuations in the currency markets; fluctuations in the spot and
forward price of gold or certain other commodities (such as fuel
and electricity); changes in the discount rates applied to
calculate the present value of net future cash flows based on
country-specific real weighted average cost of capital; changes in
various market variables, such as interest rates, foreign exchange
rates, gold or silver prices and lease rates, or global fuel
prices, that could impact the mark-to-market value of outstanding
derivative instruments and ongoing payments/receipts under any
financial obligations; risks arising from holding derivative
instruments (such as credit risk, market liquidity risk and
mark-to-market risk); changes in national and local government
legislation, taxation (including but not limited to income tax,
advance income tax, stamp tax, withholding tax, capital tax,
tariffs, value-added or sales tax, capital outflow tax, capital
gains tax, windfall or windfall profits tax, royalty, excise tax,
customs/import or export taxes/duties, asset taxes, asset transfer
tax, property use or other real estate tax, together with any
related fine, penalty, surcharge, or interest imposed in connection
with such taxes), controls, policies and regulations; the security
of personnel and assets; political or economic developments in
countries in which Kinross does business or may carry on business;
operating or technical difficulties in connection with mining or
development activities; employee relations; litigation or other
claims against, or regulatory investigations and/or any enforcement
actions or sanctions in respect of the Company (and/or its
directors, officers, or employees) including, but not limited to,
securities class action litigation in Canada and/or the United
States, or any investigations, enforcement actions, cease and
desist orders and/or sanctions under any applicable
anti-corruption, international sanctions and/or anti-money
laundering laws and regulations in Canada, the United States or any
other applicable jurisdiction; the speculative nature of gold
exploration and development including, but not limited to, the
risks of obtaining and retaining necessary licenses and permits;
diminishing quantities or grades of reserves; adverse changes in
our credit rating; and contests over title to properties,
particularly title to undeveloped properties. 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 these cautionary statements 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 Factors" section of our Annual
Information Form dated March 29, 2018 and the "Risk Analysis"
section of our full year 2017 and first quarter 2018 Management’s
Discussion & Analysis. 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.
Other information
Where we say ‘‘we’’, ‘‘us’’, ‘‘our’’, the
‘‘Company’’, or ‘‘Kinross’’ in this news release, we mean Kinross
Gold Corporation and/or one or more or all of its subsidiaries, as
may be applicable. The technical information about Fort Knox
contained in this news release has been prepared under the
supervision of and verified by Mr. John Sims, an officer of the
Company who is a “qualified person” within the meaning of National
Instrument 43-101.
Source: Kinross Gold Corporation
A photo accompanying this announcement is available at
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