Kinross PEA envisages top tier gold mine in Ontario
Kinross Gold Corp. (K-TSX, KGC-NYSE) has completed a preliminary economic assessment (PEA) for its Great Bear project in Red Lake, Ontario
Kinross said the PEA supports the company’s acquisition thesis of a top tier high-margin operation in a stable jurisdiction with strong infrastructure. Based on mineral resources drilled to date, it said the PEA outlines a high-grade combined open-pit and underground mine with an initial planned life of approximately 12 years and production cost of sales of US$594 per ounce. The project is expected to produce over 500,000 ounces annually at an all-in-sustaining cost (AISC) of approximately US$800 per ounce during the first eight years utilizing a conventional, modest capital of 10,000 tonnes per day mill.
The PEA envisages total initial project capital of US$1.4 billion. The total initial construction capital cost is estimated at US$1.18 billion.
Aside from the PEA, Kinross has also released an updated mineral resource estimate, increasing the inferred resource estimate by 568,000 ounces to 3.88 million ounces, which is in addition to the existing measured and indicated resource estimate of 2.73 million ounces.
Kinross shares advanced on the news, rising 2.46% or 28.5 cents to $11.84. The shares trade in a 52-week range of $13.07 and $5.91.
The announcement comes almost three years after Kinross agreed to acquire Great Bear Resources Ltd. and its 100%-owned Dixie Project which is located in the Red Lake Mining District of northwestern Ontario.
Kinross said it was going ahead with the deal in the belief that Dixie had potential to become a top tier deposit that could support a long-life mine complex and bolster Kinross’ long-term production outlook.
Under the terms of the transaction, Kinross has agreed to an upfront payment of approximately $1.8 billion, worth $29 per Great Bear common shares on a fully diluted basis.
“In addition to the prospect of developing a quality, high-grade open pit mine, we also believe that a significant portion of the asset’s value is its longer-term potential, which includes the view of a sizeable underground operation,” said Kinross President and CEO J. Paul Rollinson.
“The Dixie project is ideally located in the renowned Red Lake mining district in Northern Ontario near established infrastructure and in a province with a low-carbon energy grid,’’ he said.
The PEA demonstrates an initial life-of-mine of approximately 12 years with total production of approximately 5.3 million ounces of gold. However, the company said this represents a point in time estimate of the mine plan and is only a window into the long-term potential of the asset given the limitations of drilling at depth from surface.
Exploration drilling at depths of up to 1,600 metres has already demonstrated continuation of high-grade mineralization with strong widths well below the current PEA inventory, highlighting the upside potential of this asset, Kinross said.