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Kinross completes Great Bear Preliminary Economic Assessment

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Kinross completes Great Bear Preliminary Economic Assessment

 

 

 

 

 

Annual production over 500,000 ounces1
Impressive margins with low AISC2 of ~$800/oz
Drilling beyond PEA inventory shows high-grade mineralization at depth

 

Kinross Gold Corporation (TSX: K) (NYSE: KGC) is pleased to provide an update on the Great Bear project located in Red Lake, Ontario, Canada.

 

This news release contains forward-looking information about expected future events and financial and operating performance of the Company. We refer to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located on page 13 of this release. All dollar amounts are expressed in U.S. dollars, unless otherwise noted.

 

Kinross has completed a Preliminary Economic Assessment for the Great Bear project which supports the Company’s acquisition thesis of a top tier high-margin operation in a stable jurisdiction with strong infrastructure. Based on mineral resources drilled to date, the PEA outlines a high-grade combined open pit and underground mine with an initial planned mine life of approximately 12 years and production cost of sales3 of $594 per ounce. The Project is expected to produce over 500,000 ounces per year at an all-in sustaining cost (AISC)1 of approximately $800 per ounce during the first 8 years through a conventional, modest capital 10,000 tonne per day (tpd) mill.

 

Kinross has also released an updated mineral resource estimate increasing the inferred resource estimate by 568koz. to 3.884 Moz. which is in addition to the existing M&I resource estimate of 2.738 Moz4. The mineral resource estimate and PEA for the Great Bear project are available here.

 

CEO Commentary:

 

“This PEA marks an important milestone for Great Bear and reaffirms our view of it as a high-quality asset with robust economics and a clear path to become a world class operating mine,” said Paul Rollinson, Chief Executive Officer of Kinross Gold Corporation. “The Project represents a strong combination of high-margin production and modest capital requirements, with the opportunity for significant resource growth in the future.

 

“This PEA represents the first view of unlocking Great Bear’s full potential. Based on surface drilling to date, the PEA provides an initial snapshot in time of the Project. The ongoing drilling to depth has already shown multiple wide, high-grade intercepts beyond the current resource used in the PEA. This deep drilling from surface demonstrates the continuation of mineralization at depth and the upside potential for further resource and mine life additions in the future as we progress exploration from depth.

 

“These positive results are underpinned by a strong mining jurisdiction with a skilled labour pool and solid regional infrastructure. We have both the financial and technical resources to advance the development of this exciting new Project in our portfolio.”

 

________________________
1 Annual production over 500,000 ounces for the first 8 years.
2 AISC is a non-GAAP financial measure. The definition and purpose of this non-GAAP financial measure is included on page 11 of this news release. Non-GAAP financial measures and ratios have no standardized meaning under IFRS and therefore, may not be comparable to similar measures presented by other issuers. Please see average production cost of sales in the table entitled “PEA study financial highlights” for the related estimated GAAP financial measure.
3 “Production cost of sales per ounce” is defined as production cost of sales divided by total ounces sold. In the PEA, production costs of sales is referred to as production cash costs.
4 See the table below titled “Great Bear Summary of project mineral resources” for grade and quantity of mineral resource estimate.

 

Key PEA Highlights:

  • The Great Bear PEA demonstrates a top-tier high margin operation in a stable jurisdiction in Ontario, Canada. The Project is located within the prolific Red Lake Greenstone Belt 24 kilometres from Red Lake, a town with a long history of mining, significant infrastructure including a paved highway and provincial power lines, and access to experienced, skilled labour.
  • The results from the PEA affirm that Great Bear has the potential to be a cornerstone asset with a top tier production profile, low costs, and significant value.
  • The PEA mine plan demonstrates an excellent estimated internal rate of return (IRR) and after-tax net present value (NPV) at a range of gold prices.

 

PEA study physical highlights5
Annual production (koz. / first 8 years) 518
Annual production (koz. / life of mine average) 431
Life of mine production (Moz. Au) 5.3
Mill Processing rate (tpd) 10,000
Underground peak mining rate (tpd) 6,000
Life of mine tonnes processed (million tonnes) 44.6
Average grade processed (g/t Au) 3.87
Average recovery rate (% Au) 95.7

 

PEA study financial highlights
Average production cost of sales (per Au oz.)3,6 $594
Average all-in sustaining costs (per Au oz.)2,5 $812
Total initial construction capital cost (US$ millions) $1,181
Total capitalized mine development (US$ millions) $248
Total initial project capital (US$ millions) $1,429

 

Great Bear IRR and NPV estimates based on gold price7,8,9,10
  $1,900/oz. $2,500/oz.
IRR 24.3% 35.5%
NPV $1.9 billion $3.3 billion
Payback period (years) 2.7 1.7

 

________________________
5 The PEA is preliminary in nature and is based, in part, on Inferred Mineral Resources. Inferred Mineral Resources are considered too geologically speculative to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the economic forecasts on which the PEA is based will be realized.
6 Average production cost of sales and average AISC represent costs for projected production for the life of mine.
7 The economic analysis of the project was carried out using a discounted cash flow approach on a pre-tax and after-tax basis, based on a long-term gold price of $1,900/oz in USD and cost estimates prepared in CAD.
8 An exchange rate of 0.74 USD per 1.00 CAD was assumed to convert CAD market price projections and particular components of the capital cost estimates into USD.
9 The IRR on total investment that is presented in the economic analysis was calculated assuming 100% equity financing except open pit fleet, though Kinross may decide in the future to finance part of the project with debt financing.
10 The NPV was calculated from the after-tax cash flow generated by the project, based on a discount rate of 5% and a valuation date of January 1, 2026.

Mine Plan

 

The initial mine plan outlines concurrent open pit and underground mining over the first 8 years followed by combined underground mining and stockpile processing in years 8 to 12. The decision to mine the open pit and underground concurrently from the start provides significant production flexibility and time to continue exploration drilling from underground to further expand the resource and mine life.

 

The PEA demonstrates an initial life-of-mine (LOM) of approximately 12 years with total production of approximately 5.3 Moz. of gold. However this represents a point in time estimate of the mine plan and is only a window into the long-term potential of the asset given the limitations of drilling at depth from surface. Exploration drilling at depths up to 1,600 metres has already demonstrated continuation of high-grade mineralization with strong widths well below the current PEA inventory, highlighting the upside potential of this asset.

 

The high-grade open pit will be mined with a dual fleet strategy to provide selective mining of the high-grade material and lower cost mining of the waste, mining a peak of 26 million tonnes of material, and providing a peak of 9,000 tpd of mineralized material.

 

Figure 1: Open Pit mining plan

 

 

For the underground, the primary mining method is long hole open stoping with paste backfill and cemented rock fill. First stope production is expected to begin in 2029, subject to permitting, and to continue for 12 years with a peak production rate of 6,000 tpd, with potential to expand beyond this run rate as extensions to the underground resource are targeted. At peak, the underground will have a mining rate of 6,000 tpd between 2035 and 2038, producing an average of 327koz. per annum.

 

Figure 2: Underground mining plan

 

 The combination of the open pit and underground production in the years 1 to 8 will allow for processing of higher-grade material a

nd stockpiling of the remaining feed to supplement underground production in the latter years of the mine life. This strategy drives a milled grade of 4.6 g/t in years 1 to 8 and an average production of 518koz. per annum over these years.

 

Figure 3: Concurrent Open Pit and Underground Gold Production

 

 

Figure 4: Mill Throughput

 

 

Open pit mining operations
LOM material mined 187.9 Mt
LOM plant feed mined 24.3 Mt
Average grade 3.0 g/t Au
Strip ratio 6.7 (waste: plant feed)
Peak mining rate (all materials) 26.2 Mtpa
Mining unit cost (including capitalized mining) $3.59 ($/t mined)
Underground mining operations
LOM plant feed mined 20.3 Mt
Average grade 4.9 g/t Au
Steady State Mining Rate (plant feed) 6,000 tpd
Mining unit cost (excluding capitalized mining) $68.70 ($/t processed)

Mill, Processing and Tailings Design

 

For the PEA, a conventional milling circuit for free milling mineralization was selected, targeting an average processing rate of 10,000 tpd. This scale of plant configuration simplifies construction, drives high margins and production scale in the early years with selective processing of higher-grade material when mining both open pit and underground, and avoids oversizing the mill for a potential underground only scenario in the latter years of the mine life at Great Bear.

 

Kinross has completed a comprehensive metallurgical test work program including detailed chemical head analysis, mineralogy, gold deportment, comminution, and leaching and gravity recovery testing across a selection of composite samples. The results of the test work program indicated clean metallurgy with no deleterious elements and very strong recoveries, with average LOM recovery of 95.7% projected in the PEA. The clean metallurgy and conventional circuit are expected to further de-risk project construction and execution.

 

Based on the metallurgical test results, Great Bear’s processing plant has been designed as a conventional circuit with a proposed flowsheet including semi-autogenous grinding (SAG) and ball milling, pebble crushing, gravity concentration, leaching followed by carbon-in-pulp adsorption (CIP), elution, electrowinning, and smelting to produce gold doré.

 

 

Key Processing Data
Mill processing rate (tpd) 10,000
Total plant feed (Mt) 44.6
LOM avg. feed grade (g/t Au) 3.87
LOM contained gold (Moz) 5.5
LOM avg. recovery (% Au) 95.7
LOM recovered gold (Moz) 5.3

 

Kinross has invested substantial effort into early technical studies and design for tailings processing and management facilities at Great Bear leveraging the best available technologies to ensure the highest environmental standards.

 

As a result, the PEA design includes the addition of a desulphurization flotation circuit to remove sulphides and render the tailings non-acid generating, and a rigorous design criteria for all tailings storage facilities at the site.

 

As well, the LP Viggo Pit has been pulled forward to be mined during project construction in order to provide a robust in-pit tailings storage facility for the sulphide concentrate from the desulphurization flotation circuit, eliminating the need for a dam to impound the sulphide concentrate.

 

Capital Expenditure

 

The total initial construction capital is forecasted at $1.2 billion. Capitalized mine development prior to commercial production is expected to be approximately $250 million, comprised of $105 million related to open pit mining and $143 million related to underground capital development which will support higher production in the early years. The majority of the capitalized open pit mining is driven by the strategic decision to pull forward mining of the Viggo pit during construction to provide low-cost construction rock, early mill feed and a robust in-pit solution for the tailings concentrate.

 

Within the construction capital, the site development, water treatment and infrastructure area includes the truck shop, admin facilities, and camp. It also includes state of the art water treatment including ultra-filtration and a robust site-wide water management strategy to ensure the highest environmental standards.

 

Additionally, the capital estimate includes indirect and contingency costs, where indirect and owner costs are 40% of total direct costs and the contingency is 22%, providing further confidence in the PEA’s total estimate.

 

The Project’s capital requirements are expected to be manageable for Kinross and are forecasted within the Company’s planned annual capex profile in the range of $1 billion. Kinross is confident it can continue to prioritize its investment grade balance sheet and comfortably fund Great Bear, along with other planned capital spending.

 

Great Bear capital cost estimates
(US$ millions)
Direct Capital Costs
  Mine equipment $85
  Site development, water treatment and infrastructure $239
  UG Infrastructure $49
  Processing $217
  Power $47
  Tailings management facility $52
  Total Direct Costs $689
  Indirect $276
  Contingency $216
Total Initial Construction Capital Cost $1,181
  Capitalized open pit mining $105
  Capitalized underground development $143
Total Capitalized Mine Development $248
Total Initial Project Capital $1,429
Life of Mine Sustaining Capital $1,034
Total Growth Capital $9711

Next Steps and Permitting

 

Kinross is continuing to progress work in several areas across the Project, for both the advanced exploration program (AEX) and the Main Project. Both the AEX and Main Project remain subject to permitting, which continues to advance. The AEX permitting is a provincial process and Kinross is working closely with the authorities on finalizing the permits. The Main Project’s permitting is mainly a federal permitting review process driven by the Impact Assessment Agency of Canada (IAAC), with some provincial permitting components. Kinross was pleased to recently receive the Tailored Impact Statement Guidelines from IAAC, which will assist with completing the draft Impact Statement.

 

For the AEX, detailed engineering, execution planning, and procurement continues to progress well. The Company is targeting to commence surface works in 2024, subject to receiving provincial permits.

 

For the Main Project, Kinross expects to advance engineering definition and execution planning following the selection of design partners later this year. Work on permitting of the Main Project is ongoing and will require federal review under the Impact Assessment Act. An Impact Statement is currently in process and is expected to be submitted to the IAAC next year.

 

Kinross has actively engaged and consulted with Indigenous communities and organizations and has commenced negotiations of a Project Agreement with its First Nations partners, Lac Seul and Wabauskang, on whose traditional territories the Great Bear project is located.

 

________________________
11 The long-term power supply strategy for the Project is to obtain enough power supply from the Ontario power grid to avoid self-generation and the use of natural gas. To secure the necessary grid power supply, Kinross estimates it will need to make a capital contribution of approximately $97 million.

Resource update and exploration

 

The Mineral Resources12 at the property have been estimated for three zones: LP, Hinge, and Limb. As of April 2, 2024, approximately 568,000 ounces of inferred resources have been added from the LP zone to the total resource compared to year end 2023, bringing the total inferred resource to 3.9 Moz., in addition to 2.7 Moz. of M&I resources.

 

Mineral resources have been calculated at a gold price of $1,700 and the open pit reflects a $1,400 pit shell. The open pit cutoff grade is 0.55 g/t and the underground cut off grade of is 2.3 g/t for the main LP zone. The $1,400 pit shell has been chosen as this represents the optimal trade-off point at which underground extraction below the pit shows higher potential margins then deepening the open pit.

Great Bear Summary of project mineral resources13,14,15,16,17,18

(as at April 2, 2024)

Classification Tonnes Grade Gold Ounces
(000)   (g/t Au) (000)  
Measured 1,556   3.04 152  
Indicated 28,711   2.80 2,586  
TOTAL M&I 30,267   2.81 2,738  
Inferred 25,480   4.74 3,884  

 

Given the Company’s current understanding of the orogenic system, and the significant high-grade extensions realized at the main LP zone, Kinross expects the strong grades to continue as drilling extends deeper. To date, Kinross has completed more than 420 kilometres of drilling on the property and results have been very strong, supporting the Company’s view that high-grade mineralization extends at depth and indicating the potential for resource growth over time.

 

Kinross’ 2023 and 2024 exploration program resulted in the addition of significant ounces at improved grades compared with the initial project mineral resource declared at year end 2022, with the bulk of additions in the high-grade underground between 500 metres and 1 kilometre.

 

This recent drilling, highlighted by the deepest hole drilled on the property to date, which returned 3.8 metres at a grade of 9.5 g/t at nearly 1.6 kilometres vertical depth at the LP zone, demonstrates the impressive continuity of this system. Exploration drilling at Great Bear continues to see success beyond the PEA inventory. Drill holes BR-888 and BR-888C2 are the deepest drill holes on the property to date and have intersected high grade mineralization 1,600 metre vertically below surface.

 

Furthermore, exploration drilling at both the Discovery and Yauro zones have also intersected mineralization beyond the PEA inventory. Drill hole BR-770C3 intersected 22.7 metres at 6.51 g/t at Yauro and BR-896 intersected 5.4 metres at 7.82 g/t at Discovery. These drill holes demonstrate the successful expansion of mineralization through drilling, not just at depth, but along strike and linking zones.

 

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12 Mineral Resources are stated in accordance with CIM (2014) Definitions as incorporated by reference into NI 43-101. Mineral Resources are estimated for the LP zone and satellite Hinge and Limb zones and have an effective date of April 2, 2024.
13 Mineral resources estimated according to CIM (2014) Definitions.
14 Mineral resources estimated at a gold price of $1,700 per ounce.
15 Open pit mineral resources are reported within optimized pit shells at a cut-off grade of 0.55 g/t Au.
16 Underground mineral resources are reported within underground reporting shapes at cut-off grades of 2.3 g/t Au for the LP zone, 2.5 g/t Au for the Limb zone, and 2.4 g/t for the Hinge zone. An incremental cut-off grade of 1.7 g/t Au was used at the LP zone for areas that do not require additional development.
17 Mineral resources that are not mineral reserves do not have demonstrated economic viability.
18 Numbers may not add due to rounding.

Figure 5: Resource Growth – continuing to see high-grade intercepts outside of the PEA inventory

 

 

The PEA represents a point in time estimate and is only a window into the long-term potential of the asset given the indications of continued mineralization at depth. As a result, the Company is focused on progressing the AEX to begin drilling underground to continue unlocking the full potential of the asset.

 

In 2024, the Company will continue to focus drilling to link zones at depth at LP and further directional work at Hinge and Limb. Exploration will also focus resources on brownfield exploration work on the newly expanded ~120 square kilometre land package to look for additional open pit and underground opportunities.

 

Great Bear Technical Presentation details

 

In connection with this news release, Kinross will hold a conference call and audio webcast on Tuesday, September 10, 2024, at 9:00 a.m. EDT, followed by a question-and-answer session. To access the call, please dial:

 

About Kinross Gold Corporation

 

Kinross is a Canadian-based global senior gold mining company with operations and projects in the United States, Brazil, Mauritania, Chile and Canada. Our focus is on delivering value based on the core principles of responsible mining, operational excellence, disciplined growth, and balance sheet strength. Kinross maintains listings on the Toronto Stock Exchange and the New York Stock Exchange

 

Posted September 10, 2024

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