TORONTO (miningweekly.com) – Canadian gold miner Kinross Gold on Monday released results of a prefeasibility study (PFS) to expand its Tasiast gold mine, in Mauritania, by adding a 38 000 t/d mill at a cost of about $2.7-billion.

Kinross said the PFS was based on constructing a new 30 000 t/d mill at Tasiast using heavy fuel oil as an energy source. It assumed a $1 500/oz gold price for overall project economics and a $1 200/oz gold price for pit design purposes.

The PFS estimates were based on a pit design mineral resource estimate of about ten-million recovered gold ounces, which did not include additional known resources estimated using a gold price assumption above $1 200/oz. The PFS estimates also did not include potential district exploration upside.

The study found that during the first five years of production, a 30 000 t/d mill would be expected to have average gold production of about 830 000 oz/y, with average cash costs of about $500/oz, and average all-in sustaining costs of about $735/oz.

The PFS had indicated an estimated internal rate of return for the project of about 11% and an estimated net present value of about $1.1-billion.

Kinross said the PFS incorporated trade-off studies which considered using the existing 8 000 t/d mill capacity at Tasiast in addition to a new 30 000 t/d mill. These studies concluded that a single new 38 000 t/d mill would be expected to provide the optimum economics for an expanded project.

Based on these results, the company said it would immediately proceed to a full feasibility study. The feasibility study was scheduled to be complete by the first quarter of 2014. Following completion of the feasibility study, the company would make a decision on whether to complete engineering and proceed with construction.

The decision would depend on a range of factors, including gold price assumptions and projections, expected economic returns, and various technical and other considerations.

"Although there is considerable work to be done at the feasibility study level before we decide whether to proceed with construction, the results of the PFS are encouraging. As we continue to evaluate the project, we remain firmly focused on preserving the strength of our balance sheet," CEO J Paul Rollinson said.

The feasibility study would assess construction of a standard carbon-in-leach circuit with a primary crusher and semi-autogenous grinding mill, in addition to the existing dump-leach facilities. The feasibility study would assume an openpit mining sequence based on developing a series of pushbacks that would allow the mine to encounter expected higher-grade ore early in the mine life.

A variable cutoff grade strategy would be applied to bring gold production forward and stockpile lower-grade material for processing later in the mine life.

The feasibility study will explore a number of opportunities to optimise the project and improve overall economics, including the potential for implementing lower-cost natural gas power.

Kinross was currently part of a joint venture working to advance the commercialisation of power generated by natural gas supply located offshore of Mauritania.

Kinross took a $3.2-billion impairment charge mostly related to its Tasiast mine in the fourth quarter of 2012. Kinross in 2010 acquired the mine in a blockbuster $7.1-billion acquisition of Redback Mining, but in December 2011, also took a $2.9-billion impairment hit for Tasiast and the Chirano gold mine, in Ghana, which it acquired in the same transaction.

Kinross had forecast total capital expenditure for 2013 of about $1.6-billion, about $325-million less than in 2012, as miners around the world have slashed spending in an effort to control runaway development budgets.

Kinross shares trading on the TSX on Monday closed down 1.26% at C$5.49.