Kinross Gold Executive Insights: Tasiast, Dvoinoye

On Wednesday, Kinross Gold Corporation (NYSE:KGC) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look. Here’s what the C-suite revealed.


Barry Cooper – CIBC: Just wondering, a bit of clarification that you can have on Tasiast with respect to the, (indiscernible) recoveries that you are getting, you indicate that this is a felsites unit and I thought there was a fair bit of resources in the felsic volcanics there. So can you just clarify is this ore recovery related to the fact that it’s altered near the surface or is there something specific about the felsic unit that has gone in different mineralogy that could impair future leaching components?

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Brant E. Hinze – EVP and COO: This is Brant. To answer that, I would first state that I was just at Tasiast and reviewing the circumstances there, and I would say that you are correct. This is a phenomenon that we’re experiencing on the surface and it’s a higher clay content than the felsites near surface highly oxidized, and as we breakthrough this and put more competent rock on the pad, we are seeing improved percolation rates. If you want some additional detail, Glen is here and is happy to get into a little bit more detail on the felsite itself.

Glen Masterman – SVP, Exploration: Barry, I would add to Brant’s comment and also that the felsite unit, which is an enveloping unit surrounding the Greenschist Zone is oxidized very strongly near surface and creates a lot of clay content in the rock and that has been the issue we’ve experienced when we put that ore type on to the dump leach. As we mine through it, the rock, as Brant indicated, becomes more confident, less clay, and we expect it to behave as predicted (indiscernible). In terms of the resource, the felsite is really a – hosts really just a small component of that resource. We expect to mine down through that into the top of the Greenschist, and that is when we expect to break through into the Greenschist door.

Brant E. Hinze – EVP and COO: Just a little follow-up on that if I may, Barry, as well too. As Glen indicated and as we indicated, this is a surface phenomenon, and for the remainder of the year, we’re putting a substantial amount of material on the leach pad, and as we transition into the more confident rock and experience better percolation rates, we certainly expect to see the recoveries come back on that. So, as an indication, we’re going from 9 million tonnes to the leach pad in 2011 to over 17 million tonnes to the leach pad in 2012.

Barry Cooper – CIBC: Right, okay. Then, maybe the other thing I was wondering, you’ve submitted the EIA for the Phase 2 at Tasiast and in that you’ve outlined, as you described the range of possible project components there, can you enlighten us as to what some of those are that are in the EIA?

Tye W. Burt – President and CEO: Barry, it’s Tye. I would suggest that we did look at a number of scenarios in the EIA, but we did also focus on our 60,000 tonne a day base case. Other cases considered would reflect those in the technical report that we filed earlier this year. I think the other three included a 40,000 tonne per day CIL mill, a 60,000 tonne, 100% heap leach approach and then some hybrid variance on those. So, nature of Phase 2 EIA covered effectively those scenarios at this stage.

Barry Cooper – CIBC: Right. So, there is nothing in there that would lead us to down path, I would say okay, kind of looks like you’re leaning this way or that at this point in time, that’s still yet to determined?

Tye W. Burt – President and CEO: That is still yet to be determined. And as Brant said earlier, we’ll give a directional indication on that at the end of Q2 for further study and full pre-feas and feas later in the year, early in ’13.

Barry Cooper – CIBC: And finally on the Dvoinoye, have you in fact hit or there in the underground and if so what does it look like, are there any differences relative to what you thought from drilling and what not and indeed is Permafrost there potentially going to cause similar issues to what you had at Kupol, now that we’re entering in to the summer time?

Brant E. Hinze – EVP and COO: Yes, (Barry) this is Brant. I’ve had the pleasure just recently visiting both Kupol and Dvoinoye, it was fortunate opportunity and the weather cooperated. The – and I did get underground at Dvoinoye. We are running into some (stringers of ore), but we’re in development at the Dvoinoye underground. Having viewed the underground circumstances that’s out there I would say that the ground conditions are exceptionally good there. So, I certainly wouldn’t expect any significant weather related issues certainly no more than what we’ve experienced in the past at Kupol. And if you remember, we have taken different number of different ground support methods in the consideration and Kupol as we learn a little bit more about those weather variances.

Barry Cooper – CIBC: So just to clarify, have you been in the ore yet or not?

Brant E. Hinze – EVP and COO: No, we’re not into the ore.

Barry Cooper – CIBC: And when would you expect to start doing some development in the ore?

Brant E. Hinze – EVP and COO: I don’t have an answer for that on the direct timing, but I can certainly get back with you on that Barry.

Tye W. Burt – President and CEO: Yeah we are on target for startup of ore shipping there which implies we’ll be right down in the ore by middle of next year Barry. So we’ll get back with more specifics.


Jorge Beristain – Deutsche Bank: My questions on Dvoinoye, you mentioned in the press release that there’s about $206 million of committed capital thus far out of the $370 million spent, but how much of the $206 million has actually been spent as of 1Q?

Paul H. Barry – EVP and CFO: Jorge, I can give you a direct answer on that and at the end of Q1 we spent at the rate on full project at about $170 million to $175 million.

Jorge Beristain – Deutsche Bank: So then there is roughly $200 million physically left to spend from this point forward?

Paul H. Barry – EVP and CFO: Correct.

Jorge Beristain – Deutsche Bank: And could I also get an update on the rough numbers for Tasiast as well out of the $3.5 billion rough CapEx, how much has been spent through 1Q?

Paul H. Barry – EVP and CFO: We are budgeting $765 million of CapEx this year, Jorge, at Tasiast, and we’re roughly a quarter of the way through that at this point, so a little under $200 million and we can get a precise number in a few minutes.

Jorge Beristain – Deutsche Bank: Right, there would not be any monies spent in 2011 that would also accrue against the $3.5 billion total?

Tye W. Burt – President and CEO: Sure, about approximately $280 million last year, I am sorry I should have added that in. So approximately by the end of this year about a $1 billion total of the total CapEx, as you know, primarily on infrastructure, mobile equipment, and supporting camp and truck maintenance and equipment maintenance facilities.

Paul H. Barry – EVP and CFO: It’s $260 million of ours.

Tye W. Burt – President and CEO: $260 million.

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