Kinross adds equipment, ups spending

Work began this spring on a three year, $60 million capital project at the Fort Knox gold mine northeast of Fairbanks, Alaska, a project that will ultimately access 1 million ounces of deeply buried gold, ensuring production at Alaska's largest mine through 2010.

Called Phase 6, the mine expansion entails removing 55 million tons of non-gold bearing rock, or waste rock, in order to access an estimated 1 million ounces of gold already included in the mine's reserve used to estimate the remaining amount of production life. Toronto-based Kinross Gold, which owns the Fort Knox mine, decided earlier this year to proceed with the Phase 6 project. The work was briefly described in the company's 2003 year-end report, and was further detailed in Kinross' first quarter report, released May 10.

"Results from Fort Knox in-pit work confirmed sufficient continuity of the mineralization to justify a major pit wall layback on an assumed gold price of $325 per ounce," the report said. "This major layback is compromised of a three year, approximately $60 million capital expenditure program mostly in the form of stripping to liberate ore to prolong the economic life of the Fort Knox Mine."

When the waste rock is finally removed, at a rate of about 60,000 tons per day, the remaining strip ratio for mining gold-bearing rock is 1.8 to 1, according to Fort Knox General Manager John Wild. Miners will be able to access that gold, starting in 2007, allowing mining to continue through 2009. The final ore stockpiles will be processed in 2010, according to Wild.

New equipment requires more workers

This year, Kinross plans to spend $39 million on capital investments at Fort Knox. Of that, $19 million will go toward purchase or lease of new dirt-moving equipment.

"Twenty million is for the capital investment in Phase 5 and Phase 6," Wild said, in an interview with Mining News on June 1. "We're really pleased to have this budget approved."

Six new haul trucks are due to be delivered to Fort Knox in late July or early August, he said. According to the company's March 11 press release, the six Caterpillar 789 haul trucks each provide a 190-ton capacity. A new loader has been added to the mine fleet, and more loading equipment is being considered. The company purchased a new 27.5 cubic yard shovel in 2003, spending $3.7 million.

Adding new equipment and the increased mining work per day will require more workers, Wild said, adding to the 385 currently working at Fort Knox.

"We're adding new employees already," he said. "We'll be back up to the 424 range toward the end of the year."

The Phase 6 waste rock removal is predominately on the south side of the Fort Knox pit. Some of the stripping work wraps around the pit sides to the east and to the west, Wild said. Plans call for the pit's final size to be roughly 265 acres, measuring 5,200 feet by 2,600 feet, by more than 1,000 feet deep.

Tailings dam lift started

In addition, dirt-moving crews at Fort Knox have also been working to complete a 25-foot lift on the tailings dam impoundment, extending the amount of storage for non-mineralized rock, Wild said. The $5 million spent on the tailings dam lift this year will give Fort Knox another two years of tailings storage at the mine's 2003 milling rate of 14 million tons per year.

"The tailings dam is doing quite well. So far we are definitely on track for completion and on budget," he said.

The lift, which is being constructed using equipment and some personnel from the recently shuttered True North satellite mine, should be complete in about two months, weather permitting, Wild said.

Kinross announced its decision to suspend mining at True North, about 10 miles northwest of Fort Knox, in early March. Plans call for mining to resume at True North sometime in the fourth quarter of 2004, Wild said.

"If we have an opportunity to do it a little earlier, we'll do it," he said.

Lowered production, higher costs in first quarter

Adding ore from True North, combined with mining moving into an area with a higher grade of gold per ton of rock, will improve Fort Knox's production and cash costs, Wild said.

In the first three months of 2004, Fort Knox produced 75,980 ounces of gold, a decrease from the 91,214 ounces produced in the first quarter of 2003. Total cash costs were $290 per ounce, compared to the $260 per ounce posted in the first quarter of 2003.

"Production levels for the first quarter of 2004 were marginally ahead of plan and total cash costs were 6 percent below plan," the company said in the first quarter report. "During the first half of the year, mill feed grades are low due to the mining sequence at Fort Knox and the deferral of True North mining to the second half of 2004."

That will change in the second half of the year, as new equipment begins to help move more waste rock, miners move into a higher-grade area, the tailing dam project is completed and work resumes at True North.

"The grades are typically better, softer, and it blends better through the mill," Wild said. "The net effect is lower operating costs. You'll see our operating costs drop."

Kinross projections call for production to increase from 145,000 ounces expected in the first half of 2004 to 195,000 ounces in the second half. Total cash costs for the first half of the year are expected to average $280 per ounce, decreasing to approximately $176 per ounce in the second half.

The company expects total 2004 production to be 340,000 ounces, with an average cash cost at $220 per ounce of gold. The average grade of gold mined during the first three months of 2004 was 0.91 grams per tonne, compared to 1.11 grams per tonne in the first quarter of 2003. Kinross reported a recovery rate of 81 percent, compared to 83 percent in 2003. Depreciation, depletion and amortization costs dropped to $82 per ounce, compared to $105 in the first quarter of 2003.

Total production costs in the first three months of 2004 were $376 per ounce of gold produced at Fort Knox, compared to $369 per ounce in the first quarter of 2003.