Aggressive growth strategy — Kinross to acquire Ridgeway

Having agreed to buy the Ridgeway mine near Columbia, S.C., Kinross Gold (TSE) is poised to generate 500,000 oz. gold and gold equivalent per year.

It will acquire the mine by buying Kennecott Ridgeway Mining Co., a subsidiary of Kennecott Minerals. The deal is expected to close by Nov. 15, with Kinross funding the US$47-million purchase from existing cash reserves. The open-pit mine and milling complex processes more than 15,000 tons per day, to yield 125,000 oz. gold and 70,000 oz. silver annually. Reserves stand at 31 million tons containing 856,000 oz. gold.

Kinross President Robert Buchan says he attempted to buy Galactic’s assets three years ago and, consequently, became quite familiar with the operation. “I’ve always had a fondness for the mine,” he says. “It has never operated under budget.”

The Ridgeway was brought into production in 1988 by 48% owner Galactic Resources and 52% owner and operator RTZ. Reserves at the time were 56.2 million tons averaging 0.032 oz. gold per ton, enough to support 10-12 years of production.

Mining was conducted at two pits, the Ridgeway North and South. Ore was passed through a semi-autogenous grinding mill and a secondary ball mill. Gold was then activated and put through a carbon-in-pulp plant, with the first gold pour occurring in December, 1988.

By 1990, Ridgeway became Galactic’s largest gold producer and a significant source of cash flow. During each of 1989 and 1990, the mine produced about 172,000 oz., yet production costs had risen to US$170 from US$140 per oz. Moreover, costs were expected to rise further, owing to the difficulty of “processing harder ores” and also because of the US$9.6-million cost of adding a second ball mill.

In 1991, Kennecott assumed RTZ’s 52% interest; in January, 1992, Galactic sold its 48% interest to Kennecott. Sighting lower-than-average grades, Galactic received US$16 million and transferred US$21.2 million in mine-related long-term debt to Kennecott for its interest in Ridgeway. With the acquisition, Kinross expects to increase its overall gold production by 50%. The company forecasts production of 445,000 oz. gold and gold equivalent for 1995, at an average cost of US$255 per oz. By the end of 1996, the company expects to produce more than 500,000 oz. gold and gold equivalent at an operating cost of US$230.

Kinross now owns six gold mines in Canada, the U.S. and Zimbabwe and is exploring Venezuela and the Commonwealth of Independent States for others. At presstime, Kinross announced an agreement with Consolidated Kassan Resources (VSE) to jointly acquire a privately held Tanzanian gold exploration company. Kinross has rights to acquire 51% and Kassan 49% of the company which controls mineral rights to about 1,000 square miles in 12 separate properties.

The land package is located within the prolific gold-producing Lake Victoria Goldfields region of northwest Tanzania, and comprises a series of Archean greenstone belts with similarities to the Abitibi belt in eastern Canada and the Yilgran Block of Western Australia.

A US$1-million program is under way on several of the properties, and will include over 35,000 metres of drilling to advance targets to the resource state and to define new targets.