Kinross Gold’s second-quarter 2011 report on its financial results stated it expects to see upward pressure on capital and operating costs at its Tasiast expansion project in Mauritania, where it is pursuing a project to expand mill capacity from 8,000 to 68,000 mt/d. At the same time, the company reported its aggressive exploration program continues to add significant gold ounces to the Tasiast mineral resource inventory.

Based on a preliminary analysis, Kinross expects higher capital expenditures of $500 million to $1 billion above the original aggregate estimate of approximately $2.7 billion in the expansion project scoping study. However, the company believes there is significant potential to optimize the project and enhance overall economics in a number of key areas. To allow full analysis of these emerging opportunities and potentially to incorporate them into an optimized Tasiast project configuration, the company is extending work on the project feasibility study to the end of the first quarter of 2012. The extension is not expected to impact the project’s overall development schedule, with construction expected to begin in mid-2012 and production start-up targeted for early 2014.

Drilling at Tasiast during the first half of 2011 upgraded 6.4 million oz of inferred gold resource to measured and indicated and added approximately 2.9 million oz of gold to the total mineral resource inventory, which now stands at 7.6 million oz proven and probable, 9.1 million oz measured and indicated, and 4.6 million oz inferred. Drilling results continue to increase geological confidence in the mineral resource estimate, add to its overall size, and indicate the potential for additional areas of mineralization beyond those incorporated in the initial project mine plan.

Basic and detailed engineering have begun on the 60,000-mt/d Tasiast process plant and associated process infrastructure facilities, which are expected to bring total capacity up to 68,000 mt/d. The proposed expansion plant is a conventional gold cyanidation plant, consisting of primary crushing, grinding, gravity separation, carbon-in-leach cyanidation and cyanide destruction. The expected capital cost of the plant is about $500 million.

In addition to mills and crushers that have already been acquired, purchase of equipment for the Tasiast project is ongoing. As of the end of July, Kinross had placed orders for equipment including one 40-ft SAG mill; two 27-ft ball mills; a 16-MW power plant; 38 Caterpillar 793 haul trucks (which are expected to bring the site complement up to 50 haul trucks by 2013, the fleet required for the first phase of mining and stripping in the expansion project); five hydraulic shovels; and eight track and three wheel dozers.

Capital commitments to the end of July for mining, processing and power generation equipment totaled $515 million, with commitments expected to be approximately $1 billion by year-end 2011. Total actual spending by year-end is expected to be approximately $400 million, including expected advance payments to suppliers of approximately $190 million.

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