Kinross Gold expects 2012 to be a good year. Gold production should increase with the planned acceleration of Fort Knox heap leach capacity, expected full-year operation of the third ball mill at Paracatu, and increased production at Tasiast.

These expected gains are anticipated to be partially offset by a planned decline in grades, particularly at Kupol and Kettle River-Buckhorn. The company anticipates capital expenditures in 2012 of approximately $1.3 billion related to growth projects, primarily for Tasiast. It will also spend $220 million on exploration.

In 2011, Kinross produced approximately 2.6 million gold equivalent ounces. The company’s average 2011 production costs were approximately $600/gold equivalent ounce. In 2012, the company expects to produce approximately 2.6-2.8 million gold equivalent ounces from its current operations. Production costs are expected to be in the range of $670/oz-$715/oz for 2012. Higher consumable and labor costs, and an expected decline in grades at certain existing mines will increase costs.

The company’s three major growth projects at Tasiast, Fruta del Norte (FDN) and Lobo-Marte will require significant capital expenditures over the next several years. In light of cost escalation, and a better understanding of the Tasiast orebody and potential for alternative mining and processing rates and sequences, Kinross has elected to conduct a comprehensive optimization process with the aim of improving capital efficiency, project sequencing and investment returns. As a result, previously-disclosed scoping and pre-feasibility level assumptions and forecasts could be revised, including those related to project sequencing and start-up dates. The company expects the timetables for the Lobo-Marte, FDN and Tasiast feasibility studies will be extended.

As far as original Tasiast scoping study, various ore processing options have emerged following a recent infill drilling program, which provided a better understanding of the geology and distribution of the gold mineralization. The drilling program identified a higher-grade core and significant amounts of lower-grade halo material which may be better suited to a heap leach. Some of the near-surface lower-grade material may be more profitably developed with less capital intensive heap leaching in combination with carbon-in-leach (CIL) milling. Engineering analysis indicates that heap leaching may offer significant benefits if developed early in the Tasiast expansion sequence.

Based on these preliminary assessments, the company believes that approximately six to nine months of additional analysis and planning are required in order to determine the optimum processing mix for the Tasiast deposit, and the timing for developing those processing alternatives.

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