Kinross Gold Sees Bonanza in Mauritania's Mine Tasiast After Acquiring Red Back Mining

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Researched by Industrial Info Resources (Sugar Land, Texas)--Following the acquisition of Red Back Mining (TSX:RBI) (Vancouver, British Columbia) for $7.1 billion in shares and warrants, Canada's Kinross Gold Corporation (NYSE:KGC) (Toronto, Ontario) has gained one of the world's outstanding gold mine development projects in the Tasiast resource, in Mauritania in northwestern Africa. Estimates of the mine's gold reserves are under constant upward revision, and earlier this month, Red Back announced an increase of 42% in measured and indicated resources to 9.25 million ounces.

With a scoping study to be completed by December 2010 and a feasibility study planned for completion in July 2011, Kinross is expecting to increase milling capacity from 10,000 tons per day to 60,000 tons per day by 2013. Kinross' current preliminary estimate is that the deposit contains a minimum potential mineral resource of 350 million tons to 450 million tons, with a grade of 1.5 to 1.8 grams per ton for the life of the mine. These figures are based on the extensive geological and technical due diligence undertaken by the company's internal and external experts over the six months leading up to the announcement of the acquisition.

The preliminary conceptual estimates are based on data gathered from exploration of only eight kilometers of Tasiast's 70-kilometer greenstone belt. Kinross will employ development synergies by combining fast-tracked engineering and design, project development, procurement, permitting and tendering for a contractor. Investment in the mine's expansion could reach up to $1.5 billion.

The newly enlarged company will be one of the world's top five gold mining companies and will produce between 2.6 million and 2.7 million gold-equivalent ounces in 2010. The company is looking to enlarge this output to between 4.5 million and 4.9 million ounces by 2015. The combined company will include Red Back's Chirano gold mine in Ghana. Kinross now has 10 operating mines in North America, South America, Russia and Africa. Development studies are ongoing at the Lobo-Marte project in Chile and the Fruta del Norte mine in Ecuador. A feasibility study on capacity expansion at Maricunga in Chile has been completed.

Earlier this year, Kinross acquired a high-grade gold deposit 90 kilometers from its existing Kupol mine in eastern Russia. The company has taken over the White Gold project in the Yukon by acquiring Underworld Resources.

With the full potential of the production benefits flowing from the deal to be realized over a five-year period, steady nerves will be needed in pursuing targets. Even with the gold price currently nudging toward $1,300 per ounce, the purchase tag is considered to be fairly high by some industry analysts, as the price per ounce and cash costs together totaling something near the current record gold price. By initially mining high-grade ore, proving the size of the unmeasured resource and gaining from the synergies of major production expansion, Kinross could well outrun any ups and downs in the gold price.

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