Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Kinross Gold (TSX: K; NYSE: KGC) has grown inferred resources at its Great Bear project in Ontario by 45% after reporting its first resource there exactly one year ago.
Great Bear now contains 3.3 million oz. gold in 22.7 million inferred tonnes (open pit and underground) grading 4.5 grams gold per tonne, the gold major reported in its 2023 results.
The previous inferred resource was 2.3 million oz. gold in 20 million tonnes grading 3.5 grams. Measured and indicated resources remained the same at 2.8 million oz. of metal in 33 million tonnes grading 2.7 grams gold.
The company plans to complete a preliminary economic assessment at the project late this year.
“Great Bear continues to exceed expectations and we were excited to add more than one million ounces of higher-grade underground resource,” Kinross CEO Paul Rollinson said in the release. “We continue to successfully target extensions of the resource at depth, reinforcing our view that Great Bear has the potential to be a large, long-life, high-grade mining complex.”
Analysts share the company’s optimism for the project’s growth prospects, with BMO Capital Markets seeing the potential for an even longer-lived mine than currently envisioned.
“While Kinross management continues to envision Great Bear as a about 10,000-tonnes-per-day project, the prospectivity of the site could add significantly to mine life and operational flexibility and could improve project economics through delineation of deposits with higher grades or lower development/operating costs,” mining analyst Jackie Przybylowski said in a note to clients.
The underground resource grade rose to 4.5 grams gold from 3.6 grams gold per tonne. Significant growth occurred in the LP zone, with additional gains at the adjacent Hinge and Limb zones. Promising high-grade intercepts suggest these zones may extend deeper, potentially augmenting future LP zone output.
Kinross is moving forward with an advanced exploration program on the property, with onsite infrastructure planning well advanced.
The company aims to start surface construction work in late 2024, dependent on permit approvals, and start work on an underground decline by mid-2025.
Kinross recently submitted an initial project description, starting the timer on the federal impact assessment process. The company expects to file a detailed project description soon, with the impact statement to follow in early 2025.
Toronto-based Kinross bought the property about 500 km northwest of Thunder Bay, and 25 km southeast of Red Lake in February 2022 via a takeover of Great Bear Resources for C$1.8 billion ($1.4bn) in cash and shares.
In the fourth quarter of last year, Kinross reported a year-over-year production decrease in gold production to 546,513 equivalent ounces, from 595,683 oz. gold-equivalent. However, it achieved a 10% increase in annual gold output to 2.2 million oz. of gold-equivalent, up from 2 million oz. in 2022.
Enhanced operations mainly drove this growth at La Coipa in Chile, and Tasiast in Mauritania, despite a production dip at Bald Mountain in Nevada.
The average realized gold price from continuing operations was $1,945 per oz. for 2023, compared with $1,793 per oz. for full-year 2022, boosting revenue to $4.2 billion for the year, a significant rise from $3.5 billion reported in 2022.
Cost of sales per gold-equivalent ounce rose to $976 per oz. in the fourth quarter from $848 in the year-earlier period.
The company’s earnings experienced a dramatic turnaround, with the higher output, gold price, effective cost management and improved efficiencies driving up net earnings from continuing operations to $416.3 million in 2023, starkly contrasting to the $31.9 million reported in 2022. Capital spending also rose, attributed to efficiency improvement investments in Tasiast and the Manh Choh project in Alaska.
In 2024, Kinross expects to produce about 2.1 million attributable gold-equivalent oz., matching its 2023 production level. The company expects to maintain its annual production at around 2 million attributable gold-equivalent oz. in 2025 and 2026.
The company expects its all-in sustaining cost to be $1,360 per gold-equivalent oz. for 2024, compared with the $1,316 per oz. in 2023.
Kinross shares traded 2.4% higher at C$6.92 apiece in early afternoon trading in Toronto. Kinross equity is up 25% over the 12-months, having touched C$4.71 and C$8.39. It has a market capitalization of C$8.5 billion ($6.3bn).
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Janet Gibson
Please send me a recent pic of John Ivany. Thanks.