August 2007

Putting flesh on good bones

Kinross Gold focuses on production expansion

By H. Ednie

Construction underway at the Kupol project in Russia

Kinross Gold is building its future. With operations spanning the globe, the Canadian mining company is positioning to be a major producer of gold. Recently, CIM caught up with Tim Baker, executive vice president and COO, to discuss Kinross’s current activities.

CIM: Kinross has a number of gold operations and projects. What are some of today’s highlights?

Baker: We have lots of activity going on - we’re radically transforming Kinross. The Paracatu operation in Brazil promises a long mine life. With great people and such an expanded production rate, it will be a cornerstone for the company. We continue to evaluate options at each of our properties, such as at Fort Knox in Alaska, to extend mine life and to increase our flexibility. Existing operations like the Round Mountain mine in Nevada are producing lots of gold, while permitting at the nearby Gold Hill deposit is ongoing. The team there is really pulling together now. The development of our Kupol project in Russia is coming along very well and it promises to be one of the best and lowest cost gold mines in Kinross’ portfolio. The Cerro Casale is a huge project, which, if a decision is made to build, will take lots of energy and resources.

There’s a lot happening, and there will continue to be. We’ve continued to grow our gold reserve base at our core operations and we now have the fifth largest gold reserve base in the world.

CIM: The Paracatu mine is a large­scale open pit mine located less than three kilometres north of the city of Paracatu, in the northwest part of Minas Gerais State, 230 kilometres from Brasília, the capital of Brazil. Kinross acquired ownership interest in the Paracatu mine upon completion of the combination with TVX on January 31, 2003. On December 31, 2004, Kinross completed the purchase of the remaining 51 per cent of Paracatu from Rio Tinto. An estimated $470 million expansion project is ongoing, expected to start production mid-2008. What can you tell CIM members about it?

Baker: The Paracatu expansion project is now around 35 per cent complete, and on-track. We’re purchasing a new mining fleet to feed the new plant - we presently operate series 992 loaders, series 777 trucks, and we use dozers to haul the ore into loaders, as it is so soft that blasting is not required. We’re purchasing nine 793 Caterpillar trucks, a Bucyrus 495 shovel, a couple of 994 loaders, and a couple of drills, all of which are suited to the new plant.

A new mill is under construction that will employ standard technology, including a big 38-foot SAG mill, a couple of 40x24 foot ball mills, a flotation circuit, and an upgraded hydromet plant. Paracatu presently processes about 18 million tonnes per year of soft, low-grade ore - there’s virtually no waste. Initial total throughput with the new mill will increase to approximately 58.4 Mt for the first five years after commissioning of the new plant. We’ll keep the old mill running to treat the soft ore, and the new mill will treat hard ore found below the soft. We’ll run the two mills in parallel for the next 10 to 12 years, then evaluate what to do with the old plant once the soft ore is mined out.

Paracatu is already one of Brazil’s largest gold mines, and is expected to be one of the west­ern hemisphere’s largest gold mines and a growing contributor to Kinross’ production profile in 2008 and beyond.

CIM: The Buckhorn Mountain project is located in north-central Wash­­ington State, about 76 kilometres from Kinross’ Kettle River gold milling facility. Production is expected to begin later this year. What highlights can you share from Buckhorn?

Baker: Buckhorn is expected to contribute approximately 160,000 gold ounces per year at low costs, and is currently in the construction and permitting stages. Currently, portal development has commenced and the water treatment facilities should be completed by the end of July. The existing Kettle River mill is currently on care and maintenance, but will be restarted to process the Buckhorn ore.

CIM: Kinross acquired the Kupol project in Far Eastern Russia this past February through the acquisition of Bema Gold. Located in the Chukotka region, about 220 kilometres southeast of Bilibino, the project consists of a high-grade gold and silver vein which remains open along strike. Development of Kupol requires the construction of a 3,000 tonne per day mill and will employ both open pit and underground mining methods. Construction began in 2005 and production is expected to begin in late 2008, with an average annual output of 418,000 ounces of gold equivalent, operating as one of the lowest cost gold and silver mines in the world. Where does the Kupol project stand today?

Baker: Kupol construction is now around 60 per cent complete. All equipment has been delivered to site, and operating supplies for the first year of operation are presently being shipped to the port of Pevek in northeast Russia, to be hauled across the winter road next winter to the mine site, which is located within the Arctic Circle. In the open pit mine, stripping of waste is well advanced and we’ve started stockpiling ore now in preparation for mill startup. The underground mine is being developed, using Tamrock equipment. Some headings have been driven into the ore zone and some ore has been stockpiled.

We’ve installed refurbished SAG and ball mills, which originated from a mine in Tonopah, Nevada. Primary power generation comes from four Wartsila diesel generators, with back-up Caterpillar generators. It is a major logistical exercise shipping supplies in, with cyanide coming from China, lime from British Columbia, and mill balls from Canada.

During the operating years at Kinross’ now closed mine, Kubaka, a pool of well-experienced, proficient miners and operators had been developed and will be a valuable resource to the Kupol team. The Julietta mine has continued this tradition, and Kupol is now able to draw on these talent pools. This is of significant benefit as activities at Kupol increase in preparation for commissioning in 2008.

The remote location of the site and the difficulty shipping materials there make it imperative that we do a very good job, both in planning and implementation. We are confident that this has been achieved and the operation will be ready to role when construction is completed.

CIM: Kinross acquired its 49 per cent interest in the Cerro Casale deposit in the Atacama region of Chile in February through its acquisition of Bema Gold. The deposit, discovered in 1996, is a large gold and copper deposit with reserves of 23 million ounces of gold and six billion pounds of copper, and is arguably one of the largest undeveloped gold/copper deposits in the world. Development capital was estimated at $1.96 billion in the 2006 feasibility study. Does it look like the project will progress?

Baker: We’re drilling this year at Cerro Casale for metallurgical testing, and it continues to be a very interesting project, especially at today’s prices, though it continues to be a challenge due to the high capital costs.

Bema finalized a feasibility study last August - the fourth I think since Placer Dome completed the first feasibility in 1999 - and they all say the same thing, that there are high capital requirements. The results from the drilling this year will help us to better evaluate the possibility of going forward with mine development.

CIM: What are some of the other optimization projects across the Kinross operations?

Baker: A key focus for Kinross is on continuous improvement. There are a number of projects being targeted at each property with the aim of optimizing production, cutting costs, and increasing mine life. For instance, at Round Mountain we’re installing a spiral tails flotation circuit which will be running next month. This $4.6 million investment in two MinnovEX Flash Flotation Contact Cells and associated equipment will treat the spiral tailings to capture the gold that is too fine to be recovered by the spirals. We expect about a two per cent increase in recovery.

At Fort Knox, we’re evaluating a heap leach scenario. No decision has been reached yet, but we’re going through the permitting process. Heap leaching in Alaska will be challenging, but based on our experience at 4,500 metres in elevation at the Maricunga mine in Chile, we’re confident we can do it.

Fine tuning work is ongoing at Maricunga, with the aim to move more tonnage through the crusher. We are seeing improvements already this year with 45,000 tonnes per day being sustained over long periods.

CIM: Kinross acquired Bema Gold last February, bringing with it a number of operations and development projects. How does that acquisition fit into the Kinross strategy?

Baker: The acquisition of Bema Gold was a perfect choice - it brought us good projects and great people. Bema’s principal projects in Russia and Chile have been an excellent fit with Kinross’ experience in those countries. The Kupol ore body is a world-class ore body, and is expected to commence production in 2008. In Chile, we have consolidated our ownership in the Maricunga mine, previously operated by Kinross and jointly owned by Bema, which therefore required no physical integration. Finally, we added the possibility of future potential with the Cerro Casale project.

CIM: What are some of the major contributors to Kinross’ success? How will they be taken into account going forward?

Baker: Our greatest strength lies in the quality and experience of our people at the operations, at the country offices, and at the head office in Toronto. We rely heavily on the local teams to make local decisions, with the support of the corporate team, through integrating systems and providing leadership and strategic direction.

Kinross’ safety and environmental record is top notch, which is one reason I was happy to come on board. We continue to improve and push the envelope on performance. As well, we’re upgrading our human resources systems with a strong focus on performance management. We have a clear understanding of the need to attract and retain the best and are putting in place the systems to do just that.

Really, we’re simply putting flesh on good bones. With a production profile increasing from an expected 1.65 million ounces in 2007 to 2.1 to 2.2 million ounces in 2008, then we’ll jump to 2.6 to 2.7 million ounces in 2009. This is an exciting time, and we have the best team dedicated to achieving our goals.

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