Kinross Gold (KGC) has suspended its Maricunga mine in Chile. The company had anticipated that it would have to close the mine in 4Q16. The earlier-than-expected suspension comes after a judicial decision in Chile. According to this new ruling, Chile’s environmental regulatory authority’s (or SMA) revised sanctions are enforceable. The sanction substantially reduces water pumping at Maricunga. The company reported that this caused the mine to suspend mining and crushing activities and curtail processing at the end of July 2016. The company also maintained that the earlier-than-planned suspension of Maricunga would not materially impact the production and cost guidance for 2016.
Chile’s SMA had earlier shut down the water system to Kinross’s mine in March. This had resulted in the company suspending its mining operations in May. Later, the company started the operations but at a slower pace.
Exploring other options
The company further added that it continues to vigorously oppose the SMA’s actions and has various appeals pending with Chile’s Environmental Tribunal. The company will continue to explore further permitting efforts and consider possible options for restarting the mine.
According to Kinross, as of December 31, 2015, the Maricunga mine had estimated proven and probable mineral reserves of 1.0 million ounces and mineral resources of 4.3 million ounces. While mineral reserve estimates were prepared using a $1,200 per ounce gold price, the mineral resources were estimated using a $1,400 per ounce gold price.
Kinross is not the only company to have been impacted by the change in laws related to environmental and other factors. Barrick Gold’s (ABX) project Pascua-Lama on the Chile-Argentina border remains suspended due to an injunction by the Chilean government on environmental grounds. Kinross’s peers (RING) such as Goldcorp (GG), Yamana Gold (AUY), and Agnico-Eagle Mines (AEM) have lower geopolitical risk than Kinross.