Lobo-Marte boosts Kinross’ gold reserves

Kinross Gold (K-T, KGC-N) has announced its first reserve at the Lobo-Marte gold project in northern Chile. The project has a proven and probable reserve of 141 million tonnes grading 1.22 grams gold per tonne, for 5.6 million oz. gold.

Lobo-Marte — which Kinross acquired from Teck Resources (TCK.B-T, TCK-N) and Anglo American (AAUKY-O) for US$250 million in cash and shares, plus a royalty, in January 2009 — sits in the Maricunga mining district, roughly between Kinross’s Maricunga and La Coipa mines.

“It’s certainly one of our core growth projects and it’s in one of our core operating regions,” says Steve Mitchell, Kinross’s vice-president of communications.

And growth is what the company has been experiencing lately. In a recent press release, Kinross said its proven and probable reserves jumped from 45.6 million oz. at the end of 2008 to 51 million oz. at the end of 2009, despite having mined 2.7 million oz. gold last year.

Mitchell explains how the nearby mines and existing infrastructure will benefit the Lobo-Marte project because Kinross won’t need to build infrastructure from scratch. And the company can reduce costs by using its La Coipa mill to process Lobo-Marte ore.

The project’s prefeasibility study — completed at the end of 2009 — confirmed the viability of a 47,000-tonne-per-day, open-pit heap leach operation, with estimated recovery rates of 60-70%.

It’s a different approach than the one taken by the previous owners, who envisaged building a more expensive milling operation exploiting an indicated resource of 97.7 million tonnes grading 1.72 grams gold (about 5.4 million oz. gold) and inferred resources of 9.3 million tonnes of 1.56 grams gold (another 0.5 million oz. gold).

Kinross projects the start-up cost of the heap-leach operation to be US$575-650 million, with operating costs between US$11.50-12.50 per tonne. The study estimates an annual production of about 350,000-400,000 gold equivalent oz. for the first full five years of production.

But, how many years would the mine be viable for? This is only something that we will determine with a feasibility study, says Mitchell, which the company should have in hand by year-end.

Kinross expects to pour its first gold at Lobo-Marte between late 2013 and mid-2014.

At presstime in Toronto, Kinross was trading at $18.37 per share. The company has a 52-week trading range of $8.41-$23.91 per share and 696 million shares outstanding.