Fort Knox expansion jumps to fast track

Kinross Gold Corp., owner of the Fort Knox Gold Mine near Fairbanks, is accelerating work on an expansion project now under way at the mine to boost gold production at Fort Knox as much as six months sooner than originally planned.

Based on the revised schedule, production from the project is now expected to begin in mid-2009 instead of at the end of 2009, as reported in its fourth-quarter 2007 and year-end reports.

The accelerated schedule will result in the advancing about $35 million of capital spending from 2009 to 2008. However, total expected capital spending for 2008 and 2009 remains unchanged at $175 million, Kinross said May 6.

Overburden excavation at Fort Knox is progressing well, and orders for procurement and erection of the carbon-in-column plant building, carbon columns and tankage have been awarded.

The Fort Knox Project is expected to extend the life of the mine from 2013 until 2018. The project will double life-of-mine production to 2.9 million gold ounces, and will increase Fort Knox production to an average of 370,000 gold ounces per year during the five years that begin in 2010. It also will positively affect the average life-of-mine cost of sales per ounce, resulting in an expected average cost of sales per ounce of about $390, the company said.

Income dips despite higher gold prices

The Toronto-based company also posted slightly higher first-quarter profits and a 34 percent increase in revenue though production fell substantially when compared with results during the same three months in 2007.

Earnings for the period ended March 31 increased to $70.9 million, compared with $68.5 million a year ago, while per-share profits fell 25 percent to 12 cents a share from 16 cents a share in the first quarter of 2007, largely due to a 39 percent increase in the miner's average number of shares outstanding.

Earnings for the first quarter included a gain of $11.5 million, or 2 cents a share, related to the sale of the Kubaka mine.

First-quarter revenue climbed to $330.2 million from $245.7 million a year earlier. The average realized gold price was $929 per ounce sold, compared with an average realized gold price of $650 per ounce in the first quarter of 2007.

The miner produced 331,784 gold equivalent ounces in the first quarter of 2008, compared with 389,394 gold equivalent ounces in the first quarter of 2007.

Problems at Fort Knox, other mines blamed

Kinross President and CEO Tye Burt said the company's production dipped below expectations in the first quarter due to short-term operational issues at Fort Knox and two other mines, which deferred some production and negatively impacted costs.

Gold produced at Fort Knox in the first quarter fell nearly 21 percent to 65,394 ounces from 82,714 ounces produced a year ago. The decrease year-over-year is due primarily to mining lower grades and harder ore as a result of mine sequencing. Total sales for the quarter were 76,954 ounces, which included a late shipment of about 12,000 ounces at year-end that was recognized in first-quarter 2008 sales rather than fourth-quarter 2007 sales.

Revenue, however, jumped 50 percent for the quarter to $71.2 million due to a higher gold price and an increase in ounces sold. Cost of sales per ounce was $459 compared with $327 for the first quarter of 2007, primarily as a result of higher consumable costs at Fort Knox, particularly energy costs, and an increase in revenue-based royalties due to a higher gold price.

Alliance with Full Metal Minerals

Kinross also said it has entered into an alliance with Full Metal Minerals to conduct greenfields exploration in Alaska and the Yukon Territory in 2008 and 2009. In connection with the Hammond Reef transaction described above, Kinross and Brett

Resources will enter into an exploration alliance aimed at identifying properties of interest in British Columbia and the Yukon.