Kinross Gold Corporation is pleased to announce an agreement with N-Mining Limited to acquire Chulbatkan, a high-quality, heap leach development project with significant upside potential and low relative execution risk, for total fixed consideration of $283 million, including approximately $113 million in cash and approximately $170 million in Kinross shares. In addition, N-Mining will have the right to economic participation equivalent to a 1.5% net smelter return (NSR) payment and contingent consideration linked to future reserve additions.
- High-quality development project with strong upside potential
Large, high-grade, near-surface resource with potential to support a low-cost, low-strip, high-return, open-pit, heap leach operation.
Estimated indicated resource of approximately 3.9 million ounces of gold and estimated inferred resource of 80,000 ounces of gold1.
Highly continuous mineralization remains open along strike and at depth with potential for additional high-grade structures within the resource. Multiple promising satellite targets within the under-explored ~120 sq. km license.
Exploration and mining license in place until the end of 2037. - Leverages operating expertise
Project’s favourable leach characteristics a clear strategic fit with Kinross’ world-class, cold climate heap leach expertise, with features similar to the Company’s Fort Knox mine in Alaska. - Builds on existing regional platform
Expected to strengthen Russia region’s long-term production and cash flow. Kinross has 24 years of operational success in-country, having operated four mines, including developing Kupol and Dvoinoye, two low-cost mines, on budget and on schedule. - Aligns with project pipeline and capital priorities
Expect to conduct a comprehensive exploration program, complete pre-feasibility and feasibility studies within the next three years, and targeting a two-year construction period. This initial timing complements existing Kupol and Dvoinoye operations and Company’s broader project plans. - Maintains strong liquidity position through a mix of cash and shares
Cash and share transaction, and timing of payments, maintains Kinross’ strong liquidity.
“Chulbatkan is an exciting high-quality development project with significant upside potential and low relative execution risk located in a country where we have had extensive experience and success, and maintain a strategic and competitive operating advantage,” said J. Paul Rollinson, President and Chief Executive Officer. “This acquisition is an excellent fit for Kinross as it enables us to leverage our expertise as a world-class cold climate heap leach operator. With a large estimated mineral resource, Chulbatkan has the potential to be a significant low-cost, low-strip, high-return operation that will strengthen our longer-term production and cash-flow profile. It is an excellent complement to our existing operations at Kupol and Dvoinoye, both of which remain prospective in their own right.”
Chulbatkan overview
Chulbatkan is a high-grade, open-pit, heap leach project that is expected to be a high-return operation with a low strip ratio, attractive costs, significant upside potential and low relative execution risk.
Kinross has completed substantial due diligence on Chulbatkan over the past 16 months, including analysis of eight confirmatory drill holes that showed positive results, and a metallurgical testing program consisting of eight trial leach columns confirming favorable leach characteristics and recoveries. Kinross has conducted several site visits and maintained a strict chain of custody to ensure sample validity during the due diligence process.
The Company has also completed an internal analysis to better understand the project, including building a preliminary block model and mine plan. Based on the analysis and substantial due diligence work, Kinross estimates approximately 3.9 million gold ounces in indicated mineral resources and 80,000 gold ounces in estimated inferred mineral resources for the project.
All figures rounded. Mineral resource estimates are based on an internal block model and assumed a constrained pit using a $1,400 per ounce gold price and cut-off grade of 0.35 g/t.
Preliminary approximate estimates for Chulbatkan include: a mine life of six years; total life of mine production of 1.8 million recovered ounces; a strip ratio of 1.5; all-in sustaining costs in the $550 per ounce range, and; initial project capital expenditures of $500 million. These estimates are based on Kinross’ internal analysis using a preliminary block model and a constrained pit using a $1,200 per ounce gold price2.
The Company expects to commence a comprehensive exploration drill program, and undertake work including core re-logging and updating the geologic model, with a view to updating the project’s resource base and converting estimated mineral resources to estimated mineral reserves. The Company is also planning to complete pre-feasibility and feasibility studies within approximately three years and is targeting a two-year construction period. This initial and preliminary timing is well aligned with the Company’s current project development pipeline, capital priorities and complements existing Kupol and Dvoinoye operations.
The project has exploration and mining licenses in place until the end of 2037, and has existing starter infrastructure, including a base camp, and trial scale pit, non-commissioned ADR plant and heap leach pad.
Chulbatkan’s mineral resource estimate is limited by the extent of drilling, with most holes ending in mineralization. The highly continuous mineralization extends from near surface to an average drilled depth of approximately 300 metres. The Company believes the deposit, which is open along strike and at depth, has the potential for additional high-grade structures within the existing resource and multiple promising satellite targets.
The footprint of the mineral resource estimate currently represents less than 1% of the approximately 120 sq. kilometre under-explored license area, which has multiple, untested high-quality targets. Several structural environments analogous to the Chulbatkan deposit and multiple downstream placer gold occurrences indicate additional hard rock source mineralization may be found within the license area. As well, numerous surface rock samples with grades greater than 1 g/t have been collected outside of the defined resource area.
In August 2018, as part of the due diligence process, drilling of approximately 2,150 metres in eight confirmatory drill holes were completed that showed positive results. Highlights include:
See page five for Explanatory Notes, and page six for the Appendix for Chulbatkan plan and section views and drill hole locations.
About Kinross Gold Corporation
Kinross is a Canadian-based senior gold mining company with mines and projects in the United States, Brazil, Russia, Mauritania, Chile and Ghana. Kinross’ focus is on delivering value based on the core principles of operational excellence, balance sheet strength, disciplined growth and responsible mining.