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Kinross green light for Fort Knox Gilmore expansion

Multi-national miner Kinross Gold (NYSE: KGC) is proceeding with the initial Gilmore expansion project at its Fort Knox mine, in Alaska, which is nearing the end of its current planned life.
Kinross green light for Fort Knox Gilmore expansion Kinross green light for Fort Knox Gilmore expansion Kinross green light for Fort Knox Gilmore expansion Kinross green light for Fort Knox Gilmore expansion Kinross green light for Fort Knox Gilmore expansion

Henry Lazenby in Vancouver

The US$100 million expansion is expected to add another six years of mining to the operation's mine plan, followed by a further three years of leaching up to mine closure slated for 2030. Currently, without the Gilmore expansion, milling at Fort Knox is expected to end in late 2020.

The expansion will lift Fort Knox life-of-mine output by about 1.5 million gold-equivalent ounces and generate an additional $240 million in cash flow.

Kinross has completed a feasibility study on Gilmore, 42km north-east of Fairbanks, calculating an after-tax internal rate of return (IRR) of 17% and a net present value (NPV) of $130 million, based on an assumed gold price of $1,200/oz. At a slightly higher assumed gold price of $1,300/oz, the IRR rises to 26% and the NPV more than doubles to $239 million, the company says.

"The Gilmore project offers an attractive IRR and NPV and adds to our suite of quality development projects at Tasiast, Round Mountain, Bald Mountain and Kupol to enhance our globally diverse portfolio," president and CEO Paul Rollinson said.

He sees the Gilmore project's low initial capital cost funded by Fort Knox's existing cash flow, helping preserve the company strong balance sheet and financial flexibility.

The Gilmore feasibility study outlines the first two phases of a potential multi-phase layback of the existing Fort Knox open pit and building a new heap leach pad. This will draw extensively on Kinross' experience and knowledge operating in extreme cold weather, and successfully running a sub-arctic heap leaching facility, having successfully operated Fort Knox's current heap leach during the past 10 years.

"With additional upside potential at Gilmore and beyond, Fort Knox is a significant asset in our portfolio located in an excellent mining jurisdiction. The Gilmore project and the addition of estimated mineral resources improves value and is expected to be a key contributor to the future growth of our company," Rollinson said.

Early construction work on the new heap leach and dewatering is expected to start in the third quarter, with stripping to begin in 2019. Initial production from Gilmore is expected by early 2020, and about 5% of Gilmore ore is expected to be stacked on the existing leach pad. About 95% of Gilmore ore will be stacked on the new heap leach pad - for which permits construction permits are already in place - starting in late 2020.

The Gilmore feasibility study report updated the Fort Knox reserves and resources, adding about 2.1 million ounces of gold converted from measured and indicated categories, and helping to lift proven and probable reserves 171% to 3.37 million ounces of the yellow metal. Kinross managed to add a further 600,000oz to the compliant measured and indicated resource categories owing to engineering changes.

Kinross is one of the largest gold miners globally, with a market capitalisation of $4.57 billion. It gained mineral rights to the next-door Gilmore land package in December 2017, which resulted in a net 1.8 million ounce addition to the measured and indicated resource estimates at Fort Knox.

The company expects to undertake more drilling at Gilmore in 2019, including infill drilling to potentially add to mineral reserves. The company will also continue to explore the Fort Knox area, as the orebody has not yet been fully delineated to the west, south and east, it says.

Kinross also advises that a minor first-quarter pit wall slide at Fort Knox has not affected the operation materially, but is flagging possible changes to Fort Knox's 2018 and 2019 production and cost guidance.