Kinross Gold has started construction at its Dvoinoye underground gold mine project, located about 100 km north of its Kupol gold operations in the Chukotka region of far-east Russia. The Dvoinoye mine is expected to produce 1,000 mt/d of ore to be shipped to the Kupol mill, which will be expanded to process approximately 4,500 mt/d. Gold equivalent production from Dvoinoye ore for the first three full years of operation is expected to average between 215,000 and 250,000 oz/y, providing total expected production from Kupol of 650,000 to 700,000 oz/y.

Dvoinoye is scheduled to deliver its first ore to the Kupol mill in the second half of 2013. Life-of-mine production is expected to total approximately 1.1 million oz of gold and 1.14 million oz of silver. The Dvoinoye reserve will be mined using underground mechanized equipment, similar to the operation at Kupol. Life-of-mine ore production will total about 2.1 million mt of ore at grades of about 17 g/mt gold and 21 g/mt silver. Recoveries are expected to average 94% for gold and 80% for silver.

The project has an estimated mine life of seven years.

Capital expenditures to develop the Dvoinoye project are estimated at $370 million, including $175 million for infrastructure construction and upgrades to the Kupol mill.

The Dvoinoye feasibility study envisions mining costs of about $80/mt, processing costs of about $50/mt, and trucking costs of about $35/mt. Total life-of-mine production cost of sales per gold equivalent ounce is expected to be in the range of $575 to $600, based on an oil price of $90/bbl, gold royalties of 6%, silver royalties of 6.5%, and a corporate income tax rate of 20%.

Going forward, Kinross will report Dvoinoye and Kupol results as a combined operation.

As of the end of the first quarter of 2012, surface infrastructure construction at Dvoinoye was about 16% complete, and underground development was about 23% complete. Earthworks and roads for site facilities, including the permanent camp, were largely complete. Construction of the all-season road between Dvoinoye and Kupol was progressing well, with 32 km of the total 84 km completed. Surface construction activities will peak this summer.

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