Kinross to proceed with Alaska gold mine expansion

Kinross Gold Corp. [K-TSX; KGC-NYSE] said Tuesday June 12 it will proceed with the initial Gilmore expansion project at its Fort Knox Mine in Alaska.

The initial Gilmore Project is expected to extend mining at Fort Knox by six years, until 2027, and leaching to 2030, at a low initial capital cost of approximately $100 million. Gilmore expansion will also increase life-of mine production by approximately 1.5 million gold equivalent ounces.

The project is expected to generate an internal rate of return of (IRR) of 17% and net present value (NPV) of $130 million, based on a US$1,200/oz gold price, and an IRR of 26% and net present value of $239 million based on a gold price of US$1,300/oz.

Gold was trading Tuesday at US$1,296.60/oz.

Kinross advanced on the news, rising 0.53% or $0.025 to $4.77 on volume of 1.5 million. The 52-week range is $5.96 and $4.44.

Fort Knox is an open pit gold mine located near the city of Fairbanks. It ranks as one of Kinross Gold’s largest producing mines. Gold equivalent production last year was 381,115 ounces.

Kinross started drilling in the Gilmore area back in 2014, after deciding that the Fort Knox orebody continued to the west. It is thought that the Gilmore area contains roughly 2.1 million ounces of gold in the measured and indicated category, plus another 300,000 ounces of inferred material.

The Gilmore feasibility study contemplates the first two phases of a potential multi-phase layback of the existing Fort Knox pit and construction of a new heap leach pad. The company said it expects to continue leveraging its extensive experience and knowledge operating cold weather, sub-arctic heap leaching, having successfully operated Fort Knox’s current heap leach during the past 10 years.

The project plan requires minimal construction of new infrastructure and new equipment purchases, and has been optimized for lower initial capital costs. This includes continuing mining using Fort Knox’s current fleet and leveraging assets from the company’s other North American operations as replacement equipment is required.

Kinross said it expects to fund the initial capital costs of the project using cash flow from Fort Knox.

Early construction work on the new heap leach and dewatering is expected to begin in the third quarter of 2018, with stripping commencing in 2019. Initial production from Gilmore is expected in early 2020, with approximately 5% of Gilmore ore expected to be stacked on the existing pad.

The balance of 95% is expected to be stacked on the new heap leach pad with stacking commencing in late 2020. Currently, milling at Fort Knox is expected to end in late 2020.

Kinross Gold and financier Robert Cudney’s Northfield Capital are currently backing Nighthawk Gold Corp. [NHK-TSX], a company that is taking a fresh look at the former Colomac gold mine, located north of Yellowknife, Northwest Territories.

Nighthawk is one of a group of junior companies which have acquired large property positions in the NWT and Nunavut in the hope that they can create sufficient value through exploration to attract the interest of major mining companies.

The work that these companies are doing is once again putting the spotlight on a vast region both north and south of the Arctic Circle that came into focus following the discovery of the Ekati and Diavik diamond deposits and mine building during the early 1990s.