Kinross Gold subsidiary, Kinross Brasil Mineraçao, has agreed to acquire two hydroelectric power plants in Brazil from a subsidiary of Gerdau SA for $257 million. This would provide a long-term supply of power for the company’s Paracatu mine, resulting in lower production costs over the life of mine, the company said.

The two power plants, Barra dos Coqueiros (BCQ) and Caçu, are located on the Claro River in the neighboring state of Goias, approximately 660 kilometers (km) west of Paracatu. Kinross said additional infrastructure is not required for BCQ and Caçu to provide power to Paracatu due to Brazil’s well-developed infrastructure and existing market mechanisms for the transmission and utilization of power.

The acquisition is expected to allow Kinross to significantly lower operating costs at Paracatu by eliminating approximately 70% of future power purchases. In addition, Brazilian legislation provides reduced power tariffs to companies that generate their own power supply. Due to reduced tariffs, the company expects savings of approximately $15/oz, which is included as part of the total expected savings of approximately $80/oz of production cost of sales over the life of mine. The plants are also expected to have relatively low operating and maintenance costs, typical with hydroelectric power plants, Kinross said.

Both plants have been in operation since 2010 and have a total installed capacity of 155 megawatts (MW): BCQ, 90 MW; Caçu, 65 MW. The remaining 30% of Paracatu’s power demand is expected to continue to be fulfilled by third-party suppliers under fixed-term power purchase agreements. The operating concessions for both plants expire in 2037, five years after Paracatu’s mine life is expected to end.