Tasiast Expansion could Provide an Upside to Kinross’s Production



Tasiast expansion project

Mill expansion has the potential to transform Tasiast into Kinross Gold’s (KGC) largest mine, with costs among the lowest in its portfolio. Kinross Gold announced the results of its feasibility study for the Tasiast expansion project in February 2015. Following a comprehensive review, the company decided not to proceed with the 38,000 ton-per-day mill expansion.

Kinross Gold stated that the current gold price environment doesn’t provide much confidence regarding the project economics at this time. Also, the company wants to preserve its balance sheet strength in this market environment.

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Project’s stats

The project would take three years to complete. It would add production equivalent to 848,000 ounces over the first five years (2018–2022) and 563,000 ounces annually over the life of the mine (2018–2029).

The primary concern with Tasiast’s development is the $1.6 billion capital expenditure, out of which $700 million–$750 million is targeted in project finance. This would increase the financial leverage for the company. Kinross also has to maintain a trailing 12-month net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) below 3.5x.

Potential to create value

However, Kinross Gold’s management continues to believe that a Tasiast mill expansion has the potential to create significant value over the long term and that it has the potential to offer both large and low-cost production with relatively low execution risk. The company said it will continue to assess market conditions with a view to possibly expanding Tasiast, should circumstances change. Currently, the company is planning to do a phased expansion of the project.

Kinross’s peers Goldcorp (GG), Newmont Mining (NEM), Yamana Gold (AUY), and Barrick Gold (ABX) also have such expansion projects in the pipeline to extend their respective mine lives.

The VanEck Vectors Gold Miners ETF (GDX) offers exposure to senior and intermediate gold miners. The SPDR Gold Trust ETF (GLD) tracks spot gold prices. Barrick and Goldcorp account for 12.70% of GDX’s holdings.


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