Kinross Gold Corporation (TSX:K)(NYSE:KGC) today announced the results of its pre-feasibility study for its Tasiast expansion project. Based on these results, the Company has decided to proceed with a feasibility study on an expanded Tasiast operation with a 38,000 tonne per day (tpd) mill.
 

The PFS was based on constructing a new 30,000 tonne tpd mill at Tasiast utilizing heavy fuel oil as an energy source. It assumed a $1,500 per ounce gold price for overall project economics and, consistent with the Company’s year-end mineral reserve estimates, a $1,200 per ounce gold price for pit design purposes. The PFS estimates are based on a pit design mineral resource estimate of approximately 10 million recovered gold ounces, which does not include additional known resources estimated using a gold price assumption above $1,200 per ounce. In addition, the PFS estimates do not include potential district exploration upside.
 

The study found that during the first five years of production, a 30,000 tpd mill would be expected to have average gold production of approximately 830,000 ounces per year, with average cash costs

(1) of approximately $500 per ounce, and average all-in sustaining costs

(2) of approximately $735 per ounce. The expected initial capital cost would be approximately $2.7 billion

(3). The PFS indicated an estimated IRR for the project of approximately 11% and an estimated NPV of approximately $1.1 billion.
 

In addition, the PFS incorporated trade-off studies which considered utilizing the existing 8,000 tpd mill capacity at Tasiast in addition to a new 30,000 tpd mill. These studies concluded that a single new 38,000 tpd mill would be expected to provide the optimum economics for an expanded project. Based on these results, the Company is proceeding to a full feasibility study on an expanded Tasiast operation with a 38,000 tpd mill. The FS work process will begin immediately, and is now scheduled for expected completion in the first quarter of 2014. Following completion of the FS, the Company will make a decision on whether to complete engineering and proceed with construction. The decision will depend on a range of factors, including gold price assumptions and projections, expected economic returns, and various technical and other considerations.
 

“Although there is considerable work to be done at the feasibility study level before we decide whether to proceed with construction, the results of the PFS are encouraging,” said CEO J. Paul Rollinson. “As we continue to evaluate the project, we remain firmly focused on preserving the strength of our balance sheet.”
 

The FS will assess construction of a standard carbon-in-leach circuit with a primary crusher and SAG mill, in addition to the existing dump leach facilities. The FS will assume an open-pit mining sequence based on developing a series of pushbacks that would allow the mine to encounter expected higher grade ore early in the mine life. A variable cut-off grade strategy is expected to be applied to bring gold production forward and stockpile lower-grade material for processing later in the mine life.
 

The FS will explore a number of opportunities to optimize the project and improve overall economics, including the potential for implementing lower-cost natural gas power. Kinross is currently part of a joint venture which is working to advance the commercialization of power generated by natural gas supply located offshore of Mauritania.

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           Summary of PFS estimates for 30,000 tpd mill at Tasiast

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Operational metric                       Estimate (weighted average)

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Mill throughput                          30,000 tonnes per day

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Life of mine(4) (end of production)      2033

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Ounces recovered - life of mine          10.0 million(5) -- based on pit

                                         design using assumed gold price of

                                         $1,200/ounce

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Estimated ore processed - life of mine   CIL: 196 million tonnes

                                         Dump leach: 46 million tonnes

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Average annual production (ounces) -     755,000-855,000 (830,000)

first five years

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Average annual production (ounces) -     400,000-500,000 (475,000)

life of mine

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Cash cost per ounce - first five years   $475-575/ounce ($500)

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Cash cost per ounce - life of mine       $675-775 ($700)

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All-in sustaining cost per ounce - first $710-810 ($735)

five years

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All-in sustaining cost per ounce - life  $890-990 ($910)

of mine

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Average grade - first five years         2.08 g/t

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Average grade - life of mine             1.41 g/t

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Average CIL recovery - life of mine      93%

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Strip ratio - first five years           4.5

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Strip ratio - life of mine               4.6

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Peak mining rate per year                120 million tonnes

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Initial capital expenditure (April 1,    $2.7 billion

2013 forward)

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IRR(6)                                   11%

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NPV(6)                                   $1.1 billion

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Key assumptions:

    Energy source                        Heavy fuel oil

    Gold price (pit design)              $1,200/ounce

    Gold price (economic evaluation)     $1,500/ounce

    Discount rate                        5%

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(1) Cash costs include operating costs and royalties.

(2) All-in sustaining cost includes operating costs, royalties, sustaining

    capital, and capitalized stripping, and does not include any allocation

    of regional or corporate overhead costs.

(3) Includes estimated capital expenditures from April 1, 2013 forward, and

    a contingency of $290 million.

(4) Defined as April 1, 2013 forward

(5) The $1,200 pit design in the PFS for purposes of economic evaluation

    does not include inferred mineral resources and certain measured and

    indicated mineral resources. The PFS does not result in any change to

    Kinross' existing mineral reserve and mineral resource estimates for the

    Tasiast project. Please refer to our most recent Annual Information Form

    for Tasiast annual mineral reserve and mineral resource estimates as at

    December 31, 2012.

(6) Does not include potential for improved economics related to potential

    district exploration upside, potential implementation of lower-cost

    natural gas generated power, or additional known mineral resource

    estimates using a gold price above $1,200.

About Kinross Gold Corporation
 

Kinross is a Canadian-based gold mining company with mines and projects in Brazil, Canada, Chile, Ecuador, Ghana, Mauritania, Russia and the United States, employing approximately 9,000 people worldwide. Kinross maintains listings on the Toronto Stock Exchange (symbol:K) and the New York Stock Exchange (symbol:KGC).