Kinross and Bema to restart Refugio

Kinross Gold (K-T) and Bema Gold (BGO-T) plan to restart mining operations at the Refugio heap leach mine located near Copiapo, Chile.

The equal partners (Kinross is operator) had placed Refugio on care and maintenance in May 2001 due to low gold prices. Since that time the mine has produced declining amounts of gold from residual leaching of the existing heaps.

During the past year, a 56,000-metre drill program expanded reserves enough to justify a 25% expansion of the daily throughput. The partners state that initially, the Verde pits are scheduled to produce 40,000 tonnes of ore per day. This material will be crushed and placed on the leach pads. The new Pancho pit is expected to be mined at a rate of 35,000 tonnes per day and should extend the mine life to about 10 years at an assumed gold price US$350 per ounce. Life-of-mine annual gold production is expected to range from 230,000 to 260,000 ounces on a 100% basis at total cash costs averaging about US$225 per ounce.

“During its previous operating history, the Refugio mine consistently failed to meet expectations due primarily to poor design and construction compounded by declining gold prices,” commented Bob Buchan, President and CEO of Kinross. “We are particularly pleased in this improved gold price environment, to be able to recommence operations at Refugio with a substantial capital program to address the previous deficiencies, thereby allowing the operation to reach its true potential.”

Kinross and Bema state that production should recommence late in the fourth quarter of 2004. Initial capital costs are estimated at US$71 million. This will go towards repairing and replacing critical components of the existing infrastructure. In addition, the partners will purchase a new mining fleet. This will be financed through a capital lease of about US$30 million. Major capital items include plant modifications and upgrades, the purchase of a new mining fleet and a modest pre-stripping program. A 110-kilometre power line connected to the Chilean grid will replace the previous diesel generated power. Kinross is currently evaluating various financing opportunities for its 50% of capital contributions.

At the base case gold price of US$350 per ounce, proven and probable reserves weigh in at 124 million tonnes averaging 0.86 gram gold per tonne, or 3.4 million contained ounces gold. The base case project economics indicate a pre-tax internal rate of return of almost 22% and a payback of approximately 3.8 years. The sensitivity analysis of the project economics yields an IRR of approximately 34% and a payback of 2.6 years at the current gold price of US$400 per ounce.