Kinross Gold investing US$820M to tread water on production

TORONTO Kinross Gold Corp. is spending more than US$800 million to essentially tread water as — like many miners — it faces a future in which new gold assets are increasingly tough to find and costly to develop.

The Canadian miner said Monday it will move ahead with expansions at mines in Mauritania and Nevada as part of efforts to maintain its production and lower costs.

“I don’t look at it as standing still,” chief executive Paul Rollinson said Monday in an interview. “Top line production will be similar, but the cash flow that’s coming out of this asset will be dramatically different.”

Construction for the Phase Two expansion of the Tasiast mine in Mauritania will begin early next year, Toronto-based Kinross said in a statement. The company also intends to re-invest in its Round Mountain mine in Nevada to extend its life by five years. Together, the two investments should stabilize Kinross’s global production at about 2.5 million ounces a year, Rollinson said.

Around the world, gold miners have been scrambling to secure new production as existing mines approach the end of their lives. But securing profitable new production is a struggle. Some in the industry believe output may not increase for years.

The Phase Two Tasiast expansion will bring the African mine’s average annual production to 634,000 ounces for the 10-year life of the project, with commercial production expected to begin in 2020, Kinross said. Average all-insustaining costs in that period will be US$720 an ounce with lower costs and higher output in the first five years.

Initial plant and infrastructure capital costs for Phase Two will be about US$590 million, less than the US$620 million estimate in last year’s pre-feasibility study. An expansion of Round Mountain will need initial capital expenditures of US$230 million. The so-called Phase W expansion will add five years to the Nevada mine’s life, or 1.5 million ounces, at lower costs, the company said.

Kinross doubled-down on Round Mountain in 2015, buying the half of the mine it didn’t already own from Torontobased Barrick Gold Corp. as part of a bigger deal that allowed it to buy 100 per cent of Barrick’s Bald Mountain mine.