TORONTO (miningweekly.com) – Canadian miner Kinross Gold on Monday announced the results of a feasibility study that examined the viability of significantly expanding output at its Tasiast mine, in Mauritania, saying that the expected capital cost would be less than what a prefeasibility study (PFS) estimated last year.

The TSX- and NYSE-listed miner said that the initial capital cost to expand the mine would be $1.6-billion, compared with its PFS estimate of $2.7-billion.

A thorough review of project design, execution and scope produced about 230 cost-saving initiatives worth about $493-million.

Examples of the cost savings included pre-assembled plant modules, concrete precasting and greater reliance on in-house technical expertise for mine planning, engineering, geological modelling and overall project oversight.

The company also expected a decrease in Tasiast’s expected water demand owing to a planned reduction in dump-leach processing, more accurate mill modelling and greater-than-expected water availability from current sources, which had resulted in the company being able to defer the need to begin building a sea water pipeline from the coast to the mine until 2018.

RISING OUTPUT, LOWER COSTS

Kinross said that the feasibility study was based on replacing the existing 8 000 t/d mill at Tasiast with a new 38 000 t/d mill using heavy fuel oil for power generation at the site. The new mill would consist of a primary crusher, semi-autogenous grinding mill and a ball mill grinding circuit, with a conventional carbon-in-leach (CIL) circuit.

The existing dump-leach facilities would be phased out in 2019, but could be available for lower-grade ore in the future if it became economically viable, or if new ore was discovered in near-mine deposits. The new mill would have an average expected output of about 848 000 oz/y of gold for the first five years, with a forecast cumulative production of nine-million ounces to 2029.

Total cash costs were expected to average $501/oz for the first five years of production and $616/oz over the life-of-mine (LoM), with expected all-in costs of $792/oz for the first five years of production, which included construction of a sea water pipeline, and $878/oz over the LoM.

Overall CIL grades were expected to average 2.09 g/t for the first five years of production and 1.76 g/t over the LoM.

The mine pit design developed in the study increased the current compliant Tasiast mineral reserve estimate by 3.1-million ounces, or nearly 50%, to 9.6-million ounces of yellow metal.

Kinross said it expected the project to pay back in late 2020, should it start operations by 2018.

At an assumed gold price of $1 350/oz, the project has an estimated internal rate of return of 17% and an expected after-tax net present value of $1.2-billion.

According to the study, the project would take three years to complete based on a 2015 construction start date and is expected to generate $2.5-billion in free cash flow over the LoM.

Kinross noted that the expanded project was also expected to generate substantial, positive economic benefits for Mauritania and its people, including a significant increase in the country’s gross domestic product resulting from taxes, wages, earnings and locally supplied goods and services. Over the LoM, the expansion was expected to generate about $600-million in incremental direct payments to the Mauritania government in the form of taxes, royalties and duties.

Kinross said in July that it would defer to 2015 at the earliest a decision on the expansion of the Tasiast mine after it took a big noncash charge linked to the fall in gold price and suspended its semi-annual dividend.

Last year, Kinross booked a $3.2-billion charge related to the Chirano gold mine, in Ghana, and the Tasiast mine, both of which were acquired in the company's blockbuster $7.1-billion takeover of Red Back Mining in 2010. It previously wrote down $2.94-billion in goodwill related to the two mines.