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MINING NEWS: Fort Knox performs well for Kinross Primary gold producer reports nine-month loss, higher reserves; considers capital improvements at Interior Alaska mine Rose Ragsdale For Mining News
Kinross Gold Corp., owner of the Fort Knox gold mine near Fairbanks, reported a 27 percent jump in proven and probable reserves at year-end 2005 to 24.7 million ounces of gold. The year-over-year increase from 19.4 million ounces in 2004 marks the fifth consecutive year of reserves growth.
Digging its way out of an accounting tangle that began nearly two years ago, Kinross posted the reserves figures in February along with financial results for the first nine months of 2005.
The third-largest primary gold producer in North America reported a net loss in the first three quarters of 2005, including a non-cash foreign currency impact on future tax liabilities.
Toronto-based Kinross, which had been unable to file financial reports since the third quarter of 2004 due to queries from U.S. regulators, posted a net loss of $61.7 million, or 18 cents a share, for the period that ended Sept. 30.
The results included a non-cash foreign currency impact on future tax liabilities totaling $22.9 million and a write-down of $36.8 million on the Aquarius property in Ontario, which Kinross sold to St. Andrew Goldfields in December.
For 2004, the gold producer posted restated net earnings of $24.9 million, or 7 cents per share, for the same period.
Questions from the U.S. Securities and Exchange Commission into the company’s accounting treatment of its 2003 purchase of two North American gold mining companies delayed results.
Since Kinross reported preliminary 2003 and 2004 results late last year, it has had to restate the results several times due to accounting changes.
Kinross said revenues for the first nine months of 2005 rose 10 percent to $535.5 million from $487.6 million a year earlier as gold prices rose and sales grew.
The company sold 1.2 million ounces of gold during the nine months that ended in September at a realized price of $430 per ounce for a total of $516 million. The average spot gold price was $432 per ounce.
Cost of sales increased in 2005, due to the inclusion of 100 percent of the Paracatu mine — up from 49 percent in 2004 — and higher costs across the company’s operating mines with the exception of Fort Knox, Kinross said.
The higher operating costs resulted mainly from stronger Brazilian, Chilean and Canadian currencies against the U.S. dollar and higher prices for energy, fuel and other supplies, the company said. Gold output rises in 2005 The share of gold equivalent ounces sold for the first nine months of 2005 was similar to the corresponding period of 2004. Kinross reported increased gold production at 100 percent-owned Fort Knox and five other mines in which it holds at least partial ownership interest. But this was offset by lower production resulting from the shutdown of two mines and decreased output at three other mines.
“Kinross’ reserve base and average mine life have grown steadily over the past five years and are reaching new highs,” said Kinross President and CEO Tye Burt. “Our 2005 exploration program has been successful in growing our reserve base at year-end 2005 to 24.7 million ounces, compared with the 19.4 million ounces reported at year end 2004, including replacing depletion from the gold produced in 2005.”
Kinross said it plans to produce 1.44 million ounces in 2006 at total cash costs of about $285 to $295 per ounce.
Kinross achieved its target in 2005 for full-year production of 1.6 million ounces of gold equivalent and expects total cash costs of about $275 to $280 per ounce, the company said.
Capital expenditures for 2005 totaled $165 million. Capital projects on tap at Fort Knox Looking ahead, the company estimated capital spending in 2006 at about $285 million, with $115 million for sustaining capital and $170 million for capital expansions, primarily at Fort Knox and three other mines.
Among significant capital projects this year, Fairbanks Gold Mining Inc., the Kinross unit that operates Fort Knox, is pursuing the possibility of building a heap leach facility and constructing a power line to serve the mine’s pit dewatering program.
Faced with rising commodity prices, the company is taking a hard look at alternative processing methods to improve mine efficiencies, according to community affairs director Lorna Shaw.
“We are currently evaluating a 160-million ton capacity valley fill heap leach located at the far north end of the tails impoundment in the Walter Creek drainage,” Shaw said. “The lower cost would allow us to process currently planned ounces at a greatly reduced rate.”
Fairbanks Gold is continuing to evaluate the heap leach project to determine its economic feasibility. “We won’t actually begin the heap leach permitting process until the project is deemed economic,” Shaw said.
Ground clearing could begin this year, and if Fairbanks Gold moves forward, the project could begin in 2007, she added.
Power grid extension planned Fairbanks Gold also proposes to build a power line around the perimeter of the pit at Fort Knox to extend the existing power distribution grid to improve the mine’s dewatering program.
As mining progresses, workers are descending deeper into the pit, and keeping the ground dry is becoming increasingly important, Shaw said.
“The 2005 dewatering rate was about 467 gallons per minute, and we anticipate an increase to 750 gallons per minute in 2006,” she said. As a part of the zero-discharge facility’s design, the water is held in containment until it is recycled in the processing of ore. Fort Knox has 23 dewatering wells that are currently serviced by eight diesel-powered generators.
“This improvement will not only increase reliability, but we expect to reduce annual operating and maintenance spending by approximately $300,000,” Shaw said.
Construction is planned to begin this spring, she added.
Kinross said Ryan Lode is no longer being included in Fort Knox’s reserves or resources because the company has elected not to make further option payments on that property. Meanwhile, the nearby True North and Gil deposits have been reclassified to resources due to changes in cost assumptions at Fort Knox, the company said.
Kinross is the seventh largest gold producer in the world. With nine mines in Canada, the United States, Brazil, Chile and Asia, Kinross employs more than 4,000 people worldwide.
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