TORONTO (miningweekly.com) – Canada's Kinross Gold expects to make a decision by the end of the year on installing extra grinding capacity at its Paracatu operation, in Brazil, where it has run into difficulties ramping up an expansion project.

The company is working on a scoping study, and could look at buying either a new or used ball mill for the site, both of which are available, COO Tim Baker said on a conference call on Wednesday.

CEO Tye Burt said that it would likely cost in the vicinity of $75-million and take from around 12 months to 18 months to find, buy, install and start up a third ball mill at Paracatu.

“For now, we're going to finish the scoping study by the end of the year, to determine what's the best ball mill and what the best approach is.

“But future grinding capacity would then be up by that ball mill, and we think that that would get us – in an order of magnitude -  back to our current plan.”

Last week, Kinross announced that it had cut its production forecast and raised cost expectations for this year, mainly because of difficulties in getting both throughput and recoveries at Paracatu up to design levels simultaneously.

“Our philosophy is to improve recoveries to acceptable levels, and then start pushing the tonnage up,” Baker said on Tuesday.

Throughput has been brought up to around 70% of design capacity, and the company achieved recoveries of 74% during October, compared with a design target of 80% gold recovery.

Based on the current situation, Kinross has said that it will likely produce at about 35 000 oz/m at Paracatu for the remainder of this year and into 2010.

However, the company is also getting encouraging early results from tests on new reagents to improve flotation recoveries, and it is also blending ore to mix higher grade material with lower grade, softer material, to optimise throughput.

These initiatives, plus the proposed extra grinding capacity, would hopefully boost gold production beyond the 35 000 oz/m.

“And we must be clear that the ounces are not lost. A tough quarter does not make ore break a 30-year mine life,” Burt added.

Kinross has had a number of capital projects under way over the last two years – besides the expansion at Paracatu, it has added a heap-leach facility at Fort Knox, in Alaska, which will extend the operation's life to 2018, and finished building two new mines last year – Kupol, in Russia, and Buckhorn, in the US.

The first gold ounces were produced from the heap leach at Fort Knox on Monday, Burt reported.

After revising its numbers to reflect the difficulties at Paracatu, Kinross has forecast production this year of about 2,2-million ounces of gold-equivalent ounces, compared with an initial January estimate of as much as 2,5-million ounces.

Burt said that he expects production in 2010 will be “broadly” similar to 2009's figures, although a firm forecast will only be published in January.

COSTS

While other gold-miners have managed to lower operating costs in the third quarter, Kinross reported higher costs for the period.

Cash costs rose to $464/oz, compared with $406/oz in the same quarter of 2008, mainly because of Paracatu, but also because it was weighed down by higher costs at the new Kupol mine.

But Burt emphasised that these were specific issues encountered at the company's growth projects, and it was not an overriding problem.

“The flip side of growth projects is that they are growth projects and you can't always predict in a straight line how they are going to perform,” he said.

For the full year, Kinross has forecast costs of between $435/oz and $450/oz.

ECUADOR

Kinross is still waiting for the go-ahead from the government of Ecuador, to begin drilling at the company's Fruta del Norte project, but Burt indicated that the approval should be received soon.

A delegation of Ecuadorian officials visited Canada recently and said that the final regulations would be published in early November, and that the approval to restart drilling should follow soon afterwards.

The company is “standing by” and has four drill rigs waiting at the site, he said.

“This is one of the best orebodies in a generation, so we are anxious to get drilling and proceed to those ounces and move our plans forward there.”

The company already has the necessary water and drilling permits and is just waiting for the final ministerial go-ahead.

“Bottom line, this is a country that is gingerly exploring its new mining framework,” Burt commented.

He has said on previous occasions that Kinross expects to complete a prefeasibility study on the Fruta del Norte project six months after the go-ahead is received.

Kinross, which published third-quarter results late on Monday, also announced it will accelerate studies on a potential expansion at its Maricunga mine, in Chile, and now expects to complete the full feasibility study by midyear of 2010.

Shares in the company declined 2,02% in Toronto on Tuesday, to C$19,36 apiece.