Kinross Gold has agreed in principle to acquire the high-grade Dvoinoye deposit and the Vodorazdelnaya exploration property, both located about 90 km north of Kinross’ 75%-owned Kupol operation in the Chukotka region of the Russian Far East. The Dvoinoye deposit currently hosts a small open-pit mine that has been operated six months per year at a throughput of about 250 mt/d. Kinross plans to develop the operation as a larger underground mine and to transport the ore to the Kupol mill for processing.
Kupol, which is 25% owned by the government of Chukotka, is forecast to produce 495,000 to 525,000 oz of gold attributable to Kinross during 2010.
The Vodorazdelnaya property encompasses approximately 922 km2 and includes an exploration and mining license. Historic work on the property has identified targets for further exploration.
The transaction entails the indirect acquisition by Kinross of 100% of the participatory interests in Northern Gold LLC and Regionruda LLC, the owners of the Dvoinoye and Vodorazdelnaya exploration and mining licenses. The total purchase price is $368 million, comprising $165 million in cash and $203 million in newly issued Kinross shares. The transaction is expected to close by the third quarter of 2010, once all closing conditions have been satisfied or waived.
Northern Gold advised Kinross that it had completed a 30,000-m in-fill drilling campaign in 2009 and submitted an updated Russian C1 and C2 reserve estimate to the applicable authorities for approval. Kinross expects the estimate to define a potential mineral deposit of 3.5 million to 3.9 million mt at an average grade of 17 to 19 g/mt gold. Kinross plans to complete the additional work required to support a Canadian NI 43-101 compliant mineral resource estimate for the Dvoinoye deposit during 2010. Upon closing of the transaction, the company intends to commence permitting and feasibility work, including engineering and baseline studies.
The transaction remained subject to certain conditions, including satisfactory completion of due diligence by Kinross within 60 days and various third-party, regulatory, and governmental approvals in Russia, as well as TSX approval and the approval and execution of various agreements. A condition for the closing of the transaction is the successful registration of gold reserves of over 50 mt (approximately 1.6 million oz) and approval of foreign ownership of Dvoinoye as a strategic deposit by the Russian government.
