North of 60 Mining News - The mining newspaper for Alaska and Canada's North

Fort Knox workers poured the 3 millionth ounce of gold extracted from the Interior mine May 10 as gold prices soared to a 25-year-high, above $725 an ounce.

Production at Fort Knox started in 1997, when the mine produced 366,223 troy ounces of gold. At startup, the mine's operating life was projected for 10 years, but discoveries of additional deposits have stretched that timeline.

Fairbanks Mining Inc., a wholly owned subsidiary of Toronto-based Kinross Corp. operates Fort Knox. Mine officials now say production will continue through 2010 and ore processing through 2012. Ongoing exploration of mining claims could further extend the mine's operating life, they add.

After a disappointing review in 2005, Kinross reduced by $141.7 million the value of mineral deposits controlled by Fort Knox. But mine officials say the write-down will not affect day-to-day mine operations nor result in worker layoffs.

Higher first-quarter earnings

Meanwhile, Kinross reported higher revenues and sharply higher profits in the first three months of 2006. Revenues climbed 10 percent to $198.3 million on sales of 371,818 ounces of gold. Net earnings, driven by high gold prices, skyrocketed to nearly $9 million, compared with a loss of $900,000 during the same period a year ago.

Fort Knox produced 79,677 ounces during the first quarter, up 8 percent from 73,953 ounces during the same period in 2005. However, gold sales from the Alaska mine decreased to 67,608 ounces compared with 70,998 ounces sold a year ago.

Higher costs at Fort Knox

The average cost of gold sold at Fort Knox jumped this year to $318 per ounce, compared with $246 per ounce in 2005. Cost of sales, on a per ounce basis, increased 23 percent due to increases in fuel, power and other operating costs.

Overall, Kinross reported an average cost of gold sold of $327 per ounce, up from $272 per ounce a year ago. The company's average realized gold price also rose to $532 per ounce, up 24 percent from $429 per ounce during the first quarter of 2005.

"Kinross is making substantial progress toward realizing our potential," Tye Burt, Kinross' president and CEO, said in a statement May 4. "Our revenue has risen more than our costs this quarter, leading to a higher cash margin."

Kinross said increased production at the Fort Knox mine reflected more tonnes processed and higher grades, partially offset by lower recoveries. Production in the first quarter of 2005 was impacted by slope stability issues.