How the Tasiast Phase Two Expansion Could Add Value to Kinross Gold
Going ahead with Tasiast Phase Two
On September 18, 2017, Kinross Gold (KGC) announced that it would go ahead with the Tasiast Phase Two expansion as the feasibility study for the project concluded. This phase is expected to increase the mill capacity to 30,000 tons per day (or tpd).
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Other key highlights of Tasiast Phase Two are as follows:
- production of an average of 812,000 ounces of gold per year for the first five years
- average production cost of sales of $440 per ounce and all-in sustaining costs of $655 per ounce
- expected free cash flow generation of $2.2 billion over the life of the mine
- incremental internal rate of return for standalone Phase Two is 24% at the gold price (GLD) of $1,200 per ounce and an oil price of $55 per barrel
Improved project economics
While Tasiast Phase One would take the mill capacity from 8,000 tpd to 12,000 tpd, the feasibility study of Phase Two contemplates installing additional 18,000 tpd to take the total capacity to 30,000 tpd.
Tasiast Phase Two’s economics have improved significantly compared to the pre-feasibility study (or PFS) estimate due to:
- lower current estimate for the initial capital expenditure of $590 million, compared to $620 million, according to the PFS
- higher annual production in the first five years due to the bringing forward of ounces
- operational efficiency gains achieved at the mine
The Phase Two expansion would replace the two current ball mills and add new leaching, thickening capacity, and additions to the mining fleet. A new power plant would also be added to power the 30,000 tpd mill. The construction period for Phase Two is expected to start by early 2018, and commercial production is expected in 3Q20.
A strong pipeline goes a long way in allaying investors’ concerns regarding the future production growth. Agnico Eagle Mines (AEM), Goldcorp (GG), Eldorado Gold (EGO), and Newmont Mining (NEM) have strong growth project pipelines.