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Projects Kinross Gold Is Betting on for Production Upside

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Bald Mountain and Round Mountain

Kinross Gold’s (KGC) management sounded confident during the company’s 4Q16 earnings call about realizing Bald Mountain’s full potential. Management said the company has already added 1.0 million ounces to Bald Mountain’s gold reserves, which is ahead of the scheduled completion at the end of 1Q17.

The addition has increased Bald Mountain’s current mine life estimate. It has also increased management’s confidence regarding its upside potential. Kinross is on track to double Bald Mountain’s production in 2017 and reduce its unit costs.

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Round Mountain is also progressing according to plan. Phase W is on schedule with the continuing feasibility study throughout 4Q16. Other activities such as mine planning, geologic modeling, engineering, and permitting are also underway. The company is expecting to complete the feasibility study for the extension of the mine by 3Q17.

Tasiast expansion

The expansion of the Tasiast mine is one of Kinross Gold’s most important projects. Not only will it significantly increase the company’s production profile, but it will also contribute to lowering its cost structure. Management maintained during the earnings call that the Phase One expansion of its Tasiast mine is progressing well. It expects to reach full production by 2Q18.

Production growth

The Phase One expansion at the Tasiast mine is expected to increase mill throughput capacity from 8,000 tons to 12,000 tons per day. It will also significantly reduce operating costs and increase production. The company mentioned during its earnings call that Phase One is advancing on time and on budget. It also expects to reduce its AISC (all-in sustaining costs) to ~$760 per ounce.

You might recall that Kinross decided to do the Tasiast expansion in two phases in order to lower the risk. The feasibility study of Phase Two is currently underway and is expected to be completed by the end of the third quarter of 2017. This phase, which is expected to increase throughput to 30,000 tons per day, will require a further investment of $620.0 million. The company is expected to make the decision on Phase Two by the end of 2017. A favorable decision on this project could go a long way toward rerating Kinross stock’s multiple and narrowing its valuation gap compared to its peers.

Kinross Gold’s peers (RING) Barrick Gold (ABX), Goldcorp (GG), Agnico Eagle Mines (AEM), and Newmont Mining (NEM) have better project pipelines than Kinross Gold.

In the next part of this series, we’ll look at expectations for Kinross Gold’s production in 2017.

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