By Ian Ross
In what Kinross Gold Corp. chief executive officer Bob Buchan described as the “most important event to happen in the Timmins camp in 20 years,” the gold producer is joining forces with rival Placer Dome Ltd. in a regional partnership designed to reduce costs and improve the longevity of gold-mining in the Porcupine district.
The companies announced a joint-venture deal in Timmins on April 11 after signing a letter of understanding to combine their gold mining operations in the Porcupine district.
What Placer brings to the table is its open- pit Dome mine and a modern processing mill worth about $100 million (US), capable of processing 13,000 tonnes of ore a day.
Kinross is contributing the Hoyle Pond, Nighthawk and Pamour’s 60 pit mines, the latter considered the future “mainstay” of the joint project after the main Dome pit is exhausted in four or five years, says Buchan.
Kinross’s Bell Creek mill, which processes only 1,500 tonnes a day, will be shut down and will affect 28 jobs. Buchan says those jobs will be integrated into their 800-person workforce.
Buchan says the partnership just made sense for both parties, and initial discussions began about a year ago before gaining momentum in November.
With “the specifics of the Dome mill having a very high-quality long-term asset with a limited feed source, and us having a lot of feed and no high-quality mill, (the merger) was logical,” Buchan says.
Placer will own a slight majority interest - 51 per cent - in the venture.
“Having access to that (mill) substantially reduces our operating costs, between $25 and $30 (US) an ounce, and increases the number of ounces that can be brought from resources into reserves,” says Buchan.
“It gives the whole camp a great deal of longevity,” he says “...gold mining is going to be around town for 20 years or more.”
Because of Placer’s low-cost mill, Buchan says the cost savings should allow them to further develop high-grade sources at mining operations such as McIntyre and Nighthawk Lake.
The venture allows Kinross to move 1.3 million ounces of gold from indicated resources at the Pamour mine to proven and probable reserves.
Kinross’s reserves in the Porcupine district total 1.1 million ounces of gold at $300(US)-per-ounce price of gold, while Placer’s reserves stood at 1.3 million ounces at $275(US)-per-ounce gold price.
“There are some significant synergies to be captured in the Porcupine camp,” said Placer Dome president and CEO Jay Taylor in a press release.
“The Dome mine’s 13,000-tonnes-per-day mill, combined with Kinross’s large, high prospective land package, will maximize the returns to the shareholders of both partners.
“Our mill needs feed beyond 2007, and Kinross needs the infrastructure to develop and protect their resources.”
Buchan says the joint venture strengthens their land position for a 100-kilometre radius in securing all but about five per cent of the available property in the largest and richest gold camp in North America, which has historically produced 65 million ounces of gold.
“You can put a drill down anywhere and almost blindly find something,” Buchan says.
Due diligence still remains before the deal is finalized, but the new joint-venture company, The Porcupine Area Joint-Venture, is expected to be operational by July 1.
In the long-term, the relationship should sustain and create more mining and mining-related jobs, Buchan says.
“Once this starts to gain legs, it will start to have all sorts of capital expenditure, exploration and new mines brought into production to develop these new feed sources.
“It could have six different feed sources to this mill and a blending process that goes on for decades.
“I anticipate all jobs in the place will be protected and further anticipate in the coming years there will be more jobs added.”