Kinross Gold (TSX: K)(NYSE: KGC) announced Wednesday it has decided to proceed with the first stage of an expansion of its troubled Tasiast gold mine in Mauritania, which will dramatically increase production and slash costs at project.
The Canadian miner will spend about US$300 million to boost the mill’s capacity from the current 8,000 tonnes of ore per day to 12,000.
Kinross, the world’s fifth largest gold producer, acquired Tasiast in 2010 as part of a takeover.
The expansion, which is expected to reach full production in the first quarter of 2018, will slash production costs at the mine to $535 an ounce from around $1,000, the Toronto-based firm said.
Kinross will make a decision about whether to proceed with the second stage of expansion — which would boost output to 777,000 ounces — by the end of next year.
“Phase one doubles production and drops costs,” CEO J. Paul Rollinson said in a statement. “Phase two doubles production again and drops costs even further.” He added that after the second expansion, “this would become the best mine in our portfolio.”
Kinross, the world’s fifth largest gold producer, acquired Tasiast in 2010 as part of its takeover of Red Back Mining for $7.1 billion, a deal that soon proved disastrous. As gold prices fell and costs remained high, Kinross had to write down most of the asset's value.
In September, Kinross announced more than 225 layoffs and voluntary severances at the mine due to mounting costs and low gold prices. The biggest challenge for Tasiast is the high cost of operating in a remote desert location, where Kinross had to build a huge camp to accommodate up to 2,500 people.
The company expanded its portfolio last year through a deal to acquire two Nevada properties — the Bald Mountain mine and 50% of the Round Mountain mine — from fellow Canadian miner Barrick Gold Corp (TSX, NYSE:ABX).
The miner’s shares have gained 75% since the start of the year as the price of gold has rocketed.