Market Overview

Kinross proceeding with value-enhancing Tasiast 24k project

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

TORONTO, Sept. 15, 2019 (GLOBE NEWSWIRE) -- Kinross Gold Corporation (TSX:K, NYSE:KGC) ("Kinross") today announced that it is proceeding with a project to incrementally increase throughput capacity at its Tasiast mine to 24,000 tonnes per day (t/d). Based on the results of the completed "Tasiast 24k" feasibility study, the project is expected to increase production, reduce costs, and generate significant cash flow and attractive returns at an initial capital cost estimate of $150 million.

Tasiast 24k project feasibility study highlights
(Based on a $1,200/oz. gold price and $55/bbl oil price)
Throughput capacity (t/d) 24,000  
Average annual production (Au oz.) (2022 – 2028) 563,000  
All-in sustaining cost (per oz.)1 (2022– 2028) $560  
Production cost of sales (per oz.)1 (2022 – 2028) $485  
Net present value (NPV)2 ($ billions) $1.7  
Initial capital expenditures ($ millions) (incremental) $150  
Internal rate of return (IRR)2, 3 (incremental) 60%  

CEO commentary
J. Paul Rollinson, President and CEO, made the following comments in relation to the Tasiast 24k project:

"We are excited to be moving ahead with the value-enhancing Tasiast 24k project. The project allows us to further unlock Tasiast's substantial value through a capital efficient, low-risk investment which maximizes the mine's potential through continuous improvement and leverages the knowledge we have gained from running the successful Tasiast Phase One expansion. The 24k project is expected to increase production and lower costs while generating attractive returns and significant free cash flow.

"We are well positioned to successfully execute the Tasiast 24k project. We have strong liquidity, the $300 million project financing is proceeding as planned, the expanded Tasiast operation continues to consistently outperform initial expectations, and permits for the project are in place. The Tasiast 24k project further strengthens our development pipeline, adding to our high-quality projects in the U.S., Chile and Russia."

Tasiast 24k project overview

The Tasiast 24k project takes a continuous improvement approach to increasing throughput, which is expected to ramp up to 21,000 t/d by the end of 2021, and then to 24,000 t/d by mid-2023. The project is expected to extend life of mine by four years to 2033.

Throughput increases are expected to be achieved through minor upgrades and de-bottlenecking initiatives in the plant. The project includes modifications to the existing grinding circuit, adding new leaching and thickening capacity, as well as incremental additions to onsite power generation and water supply.

Tasiast 24k project flyover video animation: https://youtu.be/6zOzvltZgP4

Tasiast 24k project*
Timeline Operational metric Estimate
2022 – 2028 Average annual production (Au oz.) 563,000  
Production cost of sales (per Au oz.)1 $485  
All-in sustaining costs (per Au oz.)1 $560  
Average CIL grade processed (g/t) 2.2  
Strip ratio 5.9  
Average processing cost (per tonne) $14.20  
Average mining cost (per tonne)** $2.40  
Total material mined (tonnes) 375,900,000  
2029 – 2033 Average annual production (Au oz.) 281,000  
Production cost of sales (per Au oz.)1 $860  
All-in sustaining costs (per Au oz.)1 $940  
Average CIL grade processed (g/t) 1.1  
Strip ratio 5.1  
Average processing cost (per tonne) $14.20  
Average mining cost (per tonne)** $2.65  
Total material mined (tonnes) 94,300,000  
2020 – 2033
(Life of mine)
Average annual production (Au oz.) 445,000  
Production cost of sales (per Au oz.)1 $585  
All-in sustaining costs (per Au oz.)1 $6654  
Average CIL grade processed (g/t) 1.8  
Average recovery rate 93%  
Strip ratio 6.1  
Average processing cost (per tonne) $14.60  
Average mining cost (per tonne)** $2.45  
Total material mined (tonnes) 628,800,000  
Total ounces recovered 6,200,000  

*Based on a $1,200 per ounce gold price assumption and $55/bbl oil price assumption, and current operation plus 24k project.
**Includes re-handle costs.

With the go-ahead decision for Tasiast 24k, the project team has been established and work packages and initial contracts are expected to be awarded shortly. The Company has permits in place for the 24k project and detailed engineering is now more than 50% complete.

The Company expects to file an updated Tasiast Technical Report at the end of October 2019 that incorporates the 24k project.

Lower capital costs and relative execution risk 

The initial project capital costs are expected to be approximately $150 million, which is significantly less than the capital estimate for the original 30,000 t/d Phase Two expansion plan. The 24k project has reduced execution risk, requires less additional infrastructure, and leverages greater utilization of the existing facilities.

The design and engineering of the project benefitted significantly from the knowledge acquired operating the Phase One expansion, which helped identify many of the opportunities included in the 24k plan. For example, the project leverages the upside flexibility of the SAG mill, instead of requiring the addition of a new ball mill, resulting in substantial capital savings.

The project also incorporates operational efficiencies in maintenance, mining, supply chain and processing, which have contributed to Tasiast's record operating performance over the past three quarters since the completion of the Phase One expansion.

Forecast Tasiast 24k project initial capital costs ($ millions)
Support infrastructure 47
Process plant 32
Indirect, owner's cost and taxes 47
Contingency 24
Total 150

The 24k plan includes non-sustaining capitalized stripping from 2020 – 2029, which is expected to average approximately $95 million per year.

Project financing

The Company is on schedule to complete the $300 million in project financing for Tasiast from the International Finance Corporation (IFC), Export Development Canada (EDC), and two commercial banks later this year. The Company has strong liquidity and is well positioned to fund the Tasiast 24k project.

Mauritania update and new labour agreement

Kinross has been actively engaged with the Government of Mauritania since the presidential inauguration in August 2019. On September 11, 2019, the Company's President and CEO, Paul Rollinson, held a productive meeting with the country's newly-elected President, His Excellency Mohamed Ould Cheikh El Ghazouani. Mr. Rollinson also held meetings with key members of the newly-appointed cabinet, including the Prime Minister and the Minister of Petroleum, Energy and Mines. During the meetings, both parties reaffirmed their shared commitment to working towards a positive future for Tasiast, which is a significant contributor to the Mauritanian economy.

The Company recently signed an agreement in principle on the main terms and conditions of a new three-year collective labour agreement with unionized employees at Tasiast, which is expected to be finalized in the coming weeks. The previous labour agreement was set to expire in November 2019.

Tasiast 24k project gold price sensitivity estimates

  Average gold price
  $1,100/oz. $1,200/oz. $1,300/oz. $1,400/oz. $1,500/oz. $1,600/oz.
IRR2, 3
(incremental)
 53%  60%  66%  72%  75%  75%
NPV2
($ billions) (current operation plus 24k project)
$1.3  $1.7  $2.1  $2.5  $2.8  $3.2 

Tasiast 24k project oil price sensitivity estimates

  Oil price
  $45/bbl $55/bbl $65/bbl
IRR2, 3
(incremental)
 61%  60%  59%
NPV2
($ billions) (current operation plus 24k project)
$1.8  $1.7  $1.6 

Mineral Reserves and Mineral Resource estimates5

As a result of the Tasiast 24k feasibility study, estimated proven and probable mineral reserves at December 31, 2018 at Tasiast are approximately 7.2 million Au oz., compared with the previously disclosed 7.4 million Au oz., with grades remaining unchanged at 1.9 g/t. The estimated measured and indicated mineral resources are 2.7 million Au oz. compared with the previously disclosed 2.9 million Au oz.

 

Tasiast Proven and Probable Mineral Reserves
(As of December 31, 2018)

 
  Tonnes
(kt)
Grade
(Au g/t)
Ounces
(Au koz)
Proven 26,258 2.0 1,653
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