Kinross adds Tok-area gold deposit to portfolio for $93.7M
The operator of the Fort Knox gold mine north of Fairbanks paid $93.7 million for a majority stake in a gold deposit south of Tok, roughly 250 miles away.
Kinross Gold Corp. announced Sept. 30 that it has acquired a 70 percent interest in the Peak Gold project from Royal Gold and Contago ORE Inc.
Kinross intends to develop the Peak Gold deposit into a short-lived open pit mine and truck the ore north to the Fort Knox mill for processing. The trip would involve hauling the crushed ore up the Alaska and Richardson highways, through Fairbanks and up the Steese Highway to the mine site near Chatanika.
Scheduled to open in 2024, the Peak Gold mine is expected to produce roughly 1 million ounces of gold equivalent from grades of about 6 grams per ton over 4.5 years. Kinross estimates the $110 million project will have an all-in sustaining cost of approximately $750 per ounce.
Paul Rollinson, CEO of Toronto-based Kinross, said in a company statement that it is a high-margin project at current gold prices.
“The relatively high-grade, low-cost Peak Gold project is an excellent addition to our portfolio, as it allows us to leverage our existing mill and infrastructure at Fort Knox and strengthens our medium-term production and cash flow profile,” Rollinson said.
The project would add roughly 220,000 ounces of gold equivalent production to Fort Knox, more than double the mine’s production from 2019 of just more than 200,000 gold equivalent ounces, according to Kinross, which expects blending the ores will cut the mine’s all-in sustaining costs by about $70 per equivalent ounce.
In the deal, Kinross sent $49.2 million to Royal Gold for its 40 percent stake in the project and $44.5 million in cash and Contago ORE shares purchased from Royal Gold to a Contago subsidiary.
Contago, which previously held a 60 percent stake in the project, will retain a 30 percent interest in Peak Gold.
Royal Gold CEO Bill Heissenbuttel said the deal allows the company to focus on its core royalty and streaming business.
Kinross said it expects to conduct initial permitting and drilling for the open-pit mine concurrently and hopes to complete permitting and feasibility reviews by the end of 2022 before a year of construction.
The company will charge Contago a management fee and mill toll to process its 30 percent of the ore mined from the project.
Kinross plans to rename the project after consulting with leaders of the nearby Native Village of Tetlin, according to the statement.
Tetlin Chief Michael Sam said in a statement issued by Kinross that he is pleased to see the company investing in the project.
“We look forward to the safe and responsible development of the project and the positive benefits it is expected to generate for our community,” Sam said.
The 675,000-acre Peak Gold property also holds other exploration targets that could extend the life of the project, according to Kinross.
A 2018 preliminary economic assessment of the project estimated measured and indicated resources of about 1.2 million ounces of gold equivalent at a grade of 4.1 grams per ton and inferred resources of about 116,000 ounces of gold at an average grade of 2.7 grams per ton.
Elwood Brehmer can be reached at [email protected].