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Kinross to Acquire 70 Percent Interest in the High-Quality Peak Gold Project in Alaska

Sep 30, 2020 | Mining, Monitor

Kinross Gold Corporation has entered into agreements to acquire a 70 percent interest in the high-quality Peak Gold project in Alaska from Royal Gold and Contango ORE, Inc. for total cash consideration of $93.7 million. Kinross will have broad authority to construct and operate the Peak Gold project, with Contango retaining a 30 percent non-operating minority interest.

The Peak Gold project is a relatively high-grade deposit with a large estimated resource base that is expected to commence production in 2024 as a low-cost, open-pit mine. The project, which is located approximately 250 miles southeast of Kinross’ Fort Knox mine, is a low-risk “tuck-in” to supplement Kinross’ existing Alaska operation. Kinross plans to process Peak Gold ore at Fort Knox and utilize the existing mill and infrastructure to benefit both the project and the mine.

 

Highlights of the acquisition:

  • Adds a nother high-grade, low- cost development project to Kinross’ portfolio
    • Expect to commence production at the open pit project in 2024, with total production of approximately 1 million Au eq. oz. over 4.5 years at average mining grades of approximately 6 g/t.
    • Preliminary all-in sustaining costs estimated to be in the range of $750 per Au eq. oz. and initial project capital expenditures in the range of $110 million.
    • Expect to strengthen Kinross’ medium-term production and cash flow profile.
    • Numerous exploration targets within Peak Gold’s 675,000-acre (2,732 km2) land package to potentially increase mine life.

 

  • Low-risk project leverages Fort Knox mill, infrastructure and successful operating experience in Alaska
    • Processing ore at Fort Knox avoids mill construction and is expected to decrease execution risk, lower capital expenditures, drive attractive returns, and reduce the project’s environmental footprint and permitting requirements.
    • Blending higher grade ore from the Peak Gold project with Fort Knox ore is expected to extend mill operation at Fort Knox, reduce overall costs and increase cash flow.
    • Leverages Fort Knox’s successful 27-year history in Alaska, one of the world’s top mining jurisdictions.

 

  • Project to benefit local communities, in particular the Upper Tanana Athabascan Village of Tetlin
    • Project expected to contribute to the state economy and provide additional employment opportunities and benefits.

“The relatively high-grade, low-cost Peak Gold project is an excellent addition to our portfolio, as it allows us to leverage our existing mill and infrastructure at Fort Knox and strengthens our medium-term production and cash flow profile. In today’s gold price environment, Peak Gold is an attractive, high-margin project that is expected to generate robust returns,” said J. Paul Rollinson, Kinross Gold President and CEO. “The project is also expected to add to our strong record of socio-economic contributions to our host communities in Alaska, one of the top mining jurisdictions in the world.”

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Alaska Business October 2020 Cover

October 2020

Peak Gold Project Overview

Located near Tok, Alaska, the Peak Gold project is accessible by road and is near the Alaska Highway. The project is situated within the 675,000-acre mineral lease with the Village of Tetlin and is a high-grade skarn deposit that extends to surface.

Based on Peak Gold’s 2018 preliminary economic assessment, the project has estimated measured and indicated mineral resources of approximately 1.2 million Au oz. with a grade of 4.1 g/t, and an estimated inferred resource of 116,000 Au oz. with a grade of 2.7 g/t.

Kinross has completed an internal analysis of the project, including building a preliminary block model and mine plan. Kinross’ preliminary mine plan includes crushing ore at the open pit project and trucking the material to Fort Knox’s mill for processing. By utilizing Fort Knox’s existing infrastructure, the mine plan does not require the construction of a mill or tailings facilities at the project site. Kinross expects to receive a management fee and toll mill Contango’s 30 percent of ore mined.

Kinross expects to blend the project’s higher grade ore with Fort Knox’s lower grade ore to reduce Fort Knox’s average life of mine all-in sustaining costs by approximately $70 per Au eq. oz. and extend the mill’s operating life. Extending mill operation is expected to increase recoveries at Fort Knox, as displaced ore that was projected to be placed on the heap leach pads will instead be processed at the mill.

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Kinross’ preliminary estimates for the Peak Gold project (on a 100 percent basis), using a $1,200 ounce gold price, include:

  • A mine life of 4.5 years, commencing in 2024;
  • Total life of mine production of 1 million recovered Au eq. oz. at average mining grades of approximately 6 g/t;
  • All-in sustaining costs2 in the range of $750 per Au eq. oz., and;
  • Initial project capital expenditures of $110 million.

 

Kinross plans to commence an infill, geotechnical, and metallurgical drilling program to further develop the existing resource base. Kinross is also planning to focus on targets across the larger land package identified by previous sampling, mapping, and geophysics. Initial permitting activities are expected to commence in parallel with the drilling program. Kinross expects to complete permitting and a feasibility study by the end of 2022. Project construction is expected to take approximately one year, with production planned to commence in 2024.

Kinross has completed substantial due diligence at the project, conducting site visits in 2019. The company has also held productive meetings with leaders of the Village of Tetlin, who have indicated their support for the project development plan. Kinross also plans to rename the project in consultation with the Village of Tetlin and looks forward to a productive and mutually beneficial partnership with the community.

“We look forward to the safe and responsible development of the project and the positive benefits it is expected to generate for our community,” said Village of Tetlin Chief Michael Sam. “We also look forward to further building a relationship with Kinross, a company with a strong track record in Alaska, and are pleased to see further investment plans for the project.”

Kinross’ Fort Knox mine, located near Fairbanks, has an excellent health and safety record and a long, successful history of responsible mining and environmental stewardship. In 2019, the National Mining Association recognized Fort Knox’s safety performance with the Sentinels of Safety Award, the most prestigious safety award in the United States.

Fort Knox has strong relationships with local government and host communities and generates significant value for the state economy. The mine contributed approximately $300 million to Alaska’s economy in 2019 through procurement, taxes, wages, community programs, and donations, providing meaningful livelihoods for employees, opportunities for local suppliers, and support to approximately 90 Alaska non-profits. Fort Knox operations supported 1,150 jobs in the Fairbanks North Star Borough in 2019, including 650 direct jobs with the mine, and conducted business with 350 Alaskan vendors.

Fort Knox’s commitment to environmental stewardship is exemplified by its 27-year partnership with the Alaska Department of Fish and Game in managing a major environment restoration project in the Fish Creek valley. The project successfully restored 1.5 miles the creek and neighbouring wetlands, safeguarding a 175-acre freshwater reservoir that enhanced the fish habitat. Fort Knox also completed reclamation of its nearby True North deposit in 2015 and recently returned the land back to Alaska for future public use.

Alaska Business Magazine October 2020 Cover

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