The feasibility study for Kinross’ Tasiast expansion project in Mauritania reveals the potential to lower costs and risk while increasing cash flow per share.However, Kinross has also deferred its final decision on construction until 2015 at the earliest.
The Canadian-based gold miner announced that the results of the study, based on an optimal mill size of 38 000 tonnes per day, show the new mill could produce an average of 848 000 gold ounces annually for its first five years, with cash costs of approximately $501 per ounce.
The feasibility study, which is based on a gold price of $1.350 per ounce, estimated a mineral reserves increase of nearly 50%, to 9.6 million ounces.
It also pegged initial capital expenditure at approximately $1.6 billion, compared with a pre-feasibility estimate of $2.7 billion.
Kinross CEO J. Paul Rollinson said in a statement on Monday that the expansion project had the potential to provide Kinross with meaningful growth and relatively low execution risk.
“An expanded Tasiast would not only be our largest producing mine, but is expected to be among our lowest cost operations, establishing it as a cornerstone of our future portfolio,” he said.
Most of the basic infrastructure is already in place at Tasiast, it has a well-documented mineral resource and permitting and concession rights for expansion are complete. These factors helped reduce estimated capital costs and lowered forecast operating expenditures. Taken together, these factors have significantly enhanced the project’s estimated internal rate of return (17% under the outlined mill size and gold price assumptions), said Rollinson.
“The mill expansion also gives us the opportunity to more than triple production at Tasiast without the risks associated with a greenfield project.”
He added, however, that the expansion is dependent on a number of factors, including the gold price, and that Kinross would defer a final construction decision until 2015 at the earliest.
In the interim, Kinross will explore opportunities to further lower costs and identify project financing options. “We will also continue to work closely with the government of Mauritania to ensure the appropriate policy foundation is in place to support a positive investment decision,” said Rollinson.
With the projected initial capital cost of $1.6 billion, including $182 million in contingency, and an expected 2018 start-up date, the project is forecast to pay back in late 2020.