After two and a half years of work at its troubled Tasiast project, Kinross Gold Corp. still has a lot to prove.
On Monday, Kinross released a long-awaited pre-feasibility study on the proposed expansion of Mauritania-based Tasiast. The company called the results “encouraging” and elected to move ahead with a full feasibility study. But analysts and investors were far from thrilled.
Put simply, the study results did not confirm that the project would generate a strong return on investment. Instead, they confirmed a lot of work still needs to be done.
The initial cost to get Tasiast up and running would be US$2.7-billion, according to the study. While the proposed mine would produce roughly 830,000 ounces of gold a year at low costs, the estimated net present value is only US$1.1-billion at a gold price of US$1,500 an ounce, while the internal rate of return (IRR) is a meagre 11%.
That is a low IRR for such a large and high-risk project, especially given that the assumed gold price is higher than the current one. At lower gold prices, analysts estimated that the numbers get significantly weaker.