Kinross Gold Corp. agreed to acquire the Chulbatkan gold project in Russia from N-Mining Inc. for US$283 million in cash and shares.
The company will pay about US$113 million in cash and US$170 million in shares for the open-pit, heap leach development project. The transaction is expected to close by early 2020.
Toronto-listed Kinross will pay US$3.0 million on signing, US$138.5 million on closing and US$141.5 million on the first anniversary.
N-Mining will also receive a 1.5% net smelter return royalty on future production from the license area and contingent consideration of US$50 per ounce of future proven and probable reserves beyond the first 3.25 million ounces. Kinross will have the right to buyback one third of the royalty for US$10 million.
The company said July 31 its due diligence on Chulbatkan over the past 16 months confirmed favorable leach characteristics and recoveries, with a resource of 3.9 Moz in the indicated category and 80,000 gold ounces in the inferred category.
Based on preliminary estimates, the project is expected to have a mine life of six years, total life of mine production of 1.8 Moz, all-in sustaining costs of about US$550 per ounce and initial project capex of US$500 million. The estimates are based on a constrained pit using a gold price of US$1,200/oz, it noted.
Kinross expects to kick off exploration drilling to update the project's resource base and convert mineral resources to reserves.
The company is also planning pre-feasibility and feasibility studies within about three years and is targeting a two-year construction period.
The project has exploration and mining licenses in place until the end of 2037.
Kinross' net earnings attributable to common shareholders for the second quarter climbed to US$71.5 million from US$2.4 million a year ago. Attributable gold equivalent production in the quarter increased to 648,251 ounces from 602,049 ounces.