Kinross Gold will proceed with the Phase One expansion of its Tasiast mine in Mauritania, which is expected to increase mill throughput capacity from the current 8,000 metric tons per day (mt/d) to 12,000 mt/d, while significantly reducing Tasiast’s operating costs and increasing production. Preparations for Phase One construction to install incremental crushing and grinding capacity to the existing carbon-in-leach (CIL) circuit, which includes an oversized semiautogenous grinding (SAG) mill and gyratory crusher, will begin immediately. Phase One is expected to reach full production by the end of Q1 2018 with an estimated capital cost of $300 million.
The company also released details of a prefeasibility study on a combined potential Phase One and Phase Two expansion based on installing additional mill throughput of 18,000 mt/d for a total combined capacity of 30,000 mt/d. This potential expansion contemplates replacing the two current ball mills with a new larger ball mill, adding incremental power generation to the existing 20-megawatt heavy fuel oil power plant and additional leaching and thickening capacity, upgrading the water supply infrastructure, and expanding the mine fleet.
“This phased approach allows Kinross to transform Tasiast into a lower cost, cash flow positive operation in the near term while preserving the operation’s significant growth potential,” said Paul Rollinson, president and CEO, Kinross Gold. “Phase One will be self-financed by the company. The expansion is forecast to reduce Tasiast’s production cost of sales per ounce by an estimated 48% while increasing annual production by an estimated 87% compared with 2015. The Phase One expansion has robust stand-alone economics, including a positive 20% expected internal rate of return.”
“Phase Two underscores Kinross’ focus on financial discipline. The forecast total capital expenditure for the combined Phase One and Two has been significantly lowered compared to previous expansion studies. With lower capital required, the expected benefits remain compelling, with a 30,000-mt/d Tasiast expected to be the company’s largest and lowest cost operation with a long estimated mine life.
“The two-phased approach strikes the right balance between growth and preserving balance sheet strength and is well-suited to the current gold price environment,” Rollinson said. “Phase One achieves Kinross’ near term goals with a manageable investment while allowing the Company to reassess market conditions and further optimize the project before deciding to proceed with Phase Two.”
The new mill is forecast to produce an average of approximately 409,000 oz/y of gold during the first 10 years (2018-2027), with a forecast cumulative production of 5 million gold oz to 2033. Milling of residual stockpiled ore will extend the estimated mine life to 2033.
Production cost of sales is estimated to average $535/oz, with estimated all-in sustaining cost of $760/oz for 2018-2027. Mill grades are expected to average 3.1 g/mt over this period.
Preparations for Phase One construction will begin immediately. Engineering work is 35% complete and is expected to reach 80% by end of July. A significant amount of contractual commitments and site establishment work is expected to occur during Q2 2016, with full field construction expected to commence in Q3 2016. Phase One commissioning is expected to begin in Q4 2017, with full production expected by the end of Q1 2018.
Based on an assumed gold price of $1,200/oz and oil price of $45/bbl, the expansion has an estimated IRR of 20% and NPV of $635 million (after tax and unlevered, from April 1 forward) and is expected to generate $1.16 billion in free cash flow over the life of mine.
The combined Phase One and Phase Two expected capital expenditures of approximately $920 million is significantly lower compared with the 2014 feasibility study estimate of $1.6 billion for the new-build 38,000-mt/d plant. This forecast reduction was achieved through a combination of factors: scale effect of approximately 20% lower throughput capacity; more efficient leveraging of the existing mill and infrastructure; a leaner approach to engineering and construction management facilitated by the two-phased approach; and generally more favorable market conditions for procurement of equipment packages and construction contracts.
As the combined Phase One and Phase Two approach contemplates a lower throughput rate compared with the 2014 feasibility study, and a slightly higher forecast processing cost per ton, the pit design was reduced slightly and cut-off grade increased, thereby decreasing the estimated proven and probable mineral reserves from 9 million oz (as of December 31, 2015) to 8.2 million oz. Resulting estimated grades increased slightly from 1.8 g/mt to 1.9 g/mt. Tasiast’s estimated measured and indicated mineral resources also decreased slightly, from 3.4 million oz (as of December 31) to 3.2 million oz, with estimated grades increasing to 1.3 g/mt from 1.2 g/mt.
