Kinross gives Tsokol thumbs-down (February 07, 2005)

Kinross Gold (K-T) has cancelled a plan to develop the Tsokol deposit, near its Kubaka mine in far eastern Russia, placing Kubaka’s future in doubt.

Tsokol, which has an inferred resource of 587,000 tonnes grading 10.5 grams gold per tonne, had been expected to be developed following depletion of the Kubaka open pit in 2002. Development would have been phased-in after depletion of three small underground resources at Kubaka and after the Birkachan open pit was completed.

Ore stockpiles from the Kubaka pit, the underground resources at Kubaka, and the Birkachan pit are expected to keep the Kubaka mill fed for about a year. An underground resource at Birkachan — 1.5 million tonnes grading 12.1 grams gold per tonne, all in the inferred category — is still under consideration for development.

In a disclosure announcement, Kinross said Tsokol did not meet its rate-of-return criteria and that an “unpredictable tax climate” had militated against developing the deposit. Press reports suggest the local government in Magadan has become increasingly hostile to Kinross, but the company denies government relations were a factor in its decision.