Kinross Gold Corp. (KGC, Financial) updated its shareholders on Sept. 18 about projects it is undertaking.
In Mauritania, Kinross will proceed with the Tasiast mine’s phase two expansion project, which willl make it one of the largest producing assets in world. Annual gold production is forecasted to average an annual volume of approximately 812,000 ounces from 2020 to 2024.
The mine will also be remodeled into a low-cost gold producing asset, where operations are expected to run at an all-in sustaining cost (AISC)Â of $655 per ounce of gold sold and a cost of sales of $440 per ounce of gold produced.
From Tasiast, Kinross Gold projects generating $2.2 billion in cash flow over the life of the mine.
Concerning Tasiast’s investment profitability, Kinross has budgeted an initial $590 million to be invested as capital expenditures. The internal rate of return (IRR) is 24%.Â
In regard to the Phase W expansion project at Round Mountain in Nevada, the Canadian miner expects IRR of 13%.
The company expects the project to extend mining activity by five years and increase gold production by 1.5 million ounces.Â
President and CEO J. Paul Rollinson commented on the Tasiast project:
"Our decision to proceed with the Tasiast Phase Two expansion underscores our determination to realize the potential of this world-class asset and generate significant value for our shareholders. Our continued focus on financial discipline and technical excellence has resulted in lower capital requirements than originally forecast, which would materially improve project IRR and NPV.”
In regard to Round Mountain, Rollinson said:
"We have applied the same financial and technical rigour to the Phase W expansion at Round Mountain. Lower operating costs, combined with an optimized mine plan, have contributed to a further de-risking of the project and improved returns. Phase W is expected to add five years of mining at one of our best performing operations. We are delivering on our strategy while opening a new chapter as we invest in our long-term future growth. In short, this is great news for our shareholders."
With $1.12 billion in cash on hand and securities, a line of credit and $300 million to $350 million in free cash flow, the company has ample financial resources to fund its projects.
Kinross Gold closed at $4.53 per share on Monday, down 29 cents or 6.02%. Following this news about the expansion projects, however, the stock will likely see some upside over the next several days.
The Canadian miner also increased its gold reserves by 138.5% to 3.1 million ounces following the Phase W feasibility study at Round Mountain. This might be another catalyst to Kinross' market value.
As a result of enhanced reserves at Round Mountain, Kinross Gold has 32.8 million gold ounces in proven and probable reserves for an EVO (enterprise value per ounce of proven and probable gold reserve) metric of $195.73.
Kinross Gold currently has a market capitalization of $5.43 billion, a price-book (P/B) ratio of 1.31, a price-sales (P/S) ratio of 1.56 and a price-earnings (P/E) ratio of 107.86. The forward P/E ratio is 37.75 and the EV/Ebitda ratio is 5.46.
Disclosure: I have no positions in Kinross Gold Corp.
