Kinross eyes Russian mine

In keeping with its reputation as an aggressive player in the global arena, Kinross Gold (TSE) has secured rights to acquire a stake in the high-grade Aginskoye gold deposit in Kamchatka, Russia.

This latest deal follows Kinross’s recent acquisition of a 50% interest in the Goldbanks gold property, and an additional 24.9% interest in the Denton-Rawhide gold mine, both of which are in Nevada.

Kinross Vice-president Gordon McCreary says these acquisitions (including Aginskoye, once the deal closes) should have the effect of boosting annual production to 650,000 oz. gold and gold-equivalent by 1998.

McCreary says Kinross entered into an agreement with Asarco (NYSE) to acquire an interest in the Russian project. “At 25%, the project interest was too small for Asarco, but not for us.”

The agreement calls for Kinross to pay US$4 million for the interest and for operatorship of AOZT Kamgold, a Russian company that was successful in a competitive tender for the right to develop the Aginskoye deposit.

Other shareholders of Kamgold are Grynberg Resources, a private American company holding a 25% interest, and AOZT Kamgeo, with 50%. The latter is a Russian company whose shareholders include the exploration geologists who delineated the Aginskoye deposit.

“The project comes with a land package which has excellent exploration potential,” McCreary tells The Northern Miner. “While there is no history of gold mining in Kamchatka, there has been plenty of exploration. This knowledge of the region’s potential is what our Russian partners will bring to the table.”

The Aginskoye project comes complete with a bankable feasibility study, recently completed by Kilborn Engineering, which is based on diluted minable reserves (proven and probable) of 919,000 tonnes grading 29.6 grams gold per tonne. The project also hosts possible reserves of a further 688,000 tonnes grading 19.6 grams.

These reserves were delineated by 52 km of underground workings from seven adits, about 160,000 metres of drilling and extensive surface trenching.

The proposed 500-tonne-per-day operation would involve conventional underground mining of narrow, steeply dipping, epithermal veins and the processing of ore in a cyanidation mill. A gold recovery of 97% is expected in the form of dore. “The metallurgy is clean, which explains the good recoveries,” McCreary says.

The capital cost of the project is estimated at US$41 million, which is expected to be financed by a non-recourse project financing within Kamgold.

Initial production is expected to start in July, 1997. In the first full year of production, 1998, production is expected to exceed 200,000 oz. gold, with an average annual output of 170,000 oz. during the initial five years. The cash operating cost is projected at less than US$130 per oz.

The project is accessible by a rudimentary road from the ice-free port of Petropavlovsk-Kamchatsky, a city of about 300,000 people on the eastern side of the Kamchatka Peninsula.

“The region had been dependent on military spending in the past, and this project is one facet of an effort to diversify the economy,” McCreary explains.

Kinross expects to close the transaction with Asarco (which is still subject to Russian regulatory approvals) within 90 days.

In 1994, Kinross’ share of gold production from its domestic and foreign mines totalled 174,165 oz., a 157% increase over the 67,702 oz. produced in 1993. Silver production amounted to 5.15 million oz. for the year.