As a result, Kinross, which already owns a minority stake in the 10,000-acre project, expects to add higher-grade mill feed to its nearby Fort Knox gold mine.
The Toronto-based producer intends to operate True North as a satellite deposit to Fort Knox.
Since 1995, Newmont has outlined a gold resource at True North of 1.3 million oz. contained in 18.2 million tons grading 0.072 oz. per ton.
Kinross expects to recover just over 1 million oz. at a similar grade but says more drilling is needed to upgrade the resource to the status of reserves.
Newmont President Ronald Cambre called the transaction a “win-win situation” for both parties. “Given the low gold-price environment, this provides the most efficient use of resources and existing processing capacity.”
Production at Fort Knox is expected to increase by 100,000 oz. annually with the addition of True North, since the grade there is three times the average reserve grade at Fort Knox. Cash costs for the additional ounces are pegged at US$130 per oz.
The capital cost of developing the satellite deposit is estimated at between US$15 million and US$20 million. Kinross plans to save money by using the mining fleet from the now-closed Delamar silver-gold mine in Idaho.
Fort Knox is expected to produce 370,000 oz. in 1999 at a cash cost of US$190 per oz.
In total, Kinross expects to produce 1 million oz. per year from mines in Canada, the U.S., Chile and Russia at an overall average cash cost of less that US$200 per oz.
Kinross Chairman Robert Buchan believes the True North transaction will solidify his company’s position as the fifth-largest gold producer in North America. With the addition of the Ryan Lode gold project, which Kinross acquired by merging with La Teko Resources, Buchan sees production at Fort Knox reaching 500,000 oz. annually. He says costs should fall in the range of US$180-185 per oz. by 2001.
Kinross completed the transaction with La Teko in February. In addition to the 35% interest in True North and the Ryan Lode, Kinross gained 75,000 acres of grassroots exploration holdings in Alaska.
The acquisition of True North does not come as a surprise. In April 1998, prior to its merger with La Teko, Kinross expressed interest in buying Newmont’s share of True North. It then acquired the right of first refusal on the property.
The True North property is in Alaska’s Fairbanks district.
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