Kinross Gold Corp. Aug. 1 reported lower gold production and higher costs at its Fort Knox Mine due to lower ore grades and the minor pit wall slide that occurred at this Interior Alaska operation in March.

Fort Knox produced 71,463 ounces of gold during the second quarter of 2018, a roughly 22 percent decrease from the 91,237 oz recovered during the same period last year.

The per-ounce cost of Fort Knox gold sold during the quarter was US$969, a 53 increase over the US$635 production cost of sales during the same period last year.

The mill processed 3.11 million metric tons of ore averaging 0.44 grams per metric ton gold during the quarter, compared to 3.07 million metric tons averaging 0.86 g/t last year.

Additionally, 4.28 million metric tons of ore averaging 0.18 g/t gold was processed on the heap leach pad, compared to 5.83 million metric tons averaging 0.26 g/t during the second quarter of 2017.

For the first half of this year, Fort Knox produced 151,391 oz of gold at $739/oz sold, compared to 184,886 oz at US$626/oz during the first half of 2017.

Kinross said the pit wall slide at Fort Knox is limiting the areas of the pit that can be accessed, which is the reason for the lower grade ore being fed into the mill.

"We experienced a minor pit-wall failure in the first quarter ... It is poorly located and is restricting access to higher-grade material," said Kinross Gold COO Lauren Roberts.

This limited access is expected to impact the mine's gold production and costs for the balance of 2018.

Roberts said gold production at the Interior Alaska operation is expected to be around 282,000 oz this year, which is about 30,000 oz less than envisioned in a technical report published earlier this year.

"We do not expect any impact next year and expect to recover those ounces in 2020," the COO added.

While 2018 is shaping up to be a slow gold production year for Fort Knox, this operation about 25 miles north of Fairbanks has many more years of churning out the precious metal, thanks to Kinross' June decision to develop Gilmore, an expansion project immediately west of the open-pit currently being mined.

This initial phase of expansion into the Gilmore project area is expected to add roughly 1.5 million oz of gold production from Fort Knox by extending mining by six years to 2027 and gold recovery from heap leaching to 2030.

"We are pleased to proceed with the initial Fort Knox Gilmore project, a low-risk, low-cost brownfield expansion that is expected to extend mine life to 2030 at one of our top performing operations and contribute 1.5 million gold-equivalent ounces to strengthen our long-term U.S. production profile," said Kinross President and CEO J. Paul Rollinson.

Nearly all the gold mined from Gilmore will be recovered via heap leaching, a process that involves stacking the ore on a lined pad and using a mildly acidic leaching agent trickled over the ore to dissolve the gold into a solution that is pumped through a facility that recovers the gold.

The company said early works on the Barnes Creek Heap Leach Pad, a new facility being constructed to process much of the ore from Gilmore, has begun.

With permitting complete and development getting underway, Kinross expects initial production from this expansion area to begin in early 2020.

In the meantime, the company continues to explore the prospectivity and upside potential immediately surrounding the current Fort Knox pit and the larger property.

The orebody currently being mined has not yet been fully delineated to the west, south and east. Kinross said the first few holes drilled this year at the East Wall extension of the open-pit have returned encouraging results and drilling there is ongoing.

In addition, generative exploration work is underway around the Fort Knox property. This includes a review of the gold resource at Gil Sourdough, a deposit about seven miles northeast of the mill .

According to the most recent calculation, Gil hosts 29.5 million metric tons of indicated resource averaging 0.56 g/t (533,000) oz. of gold.

Kinross Gold Corp.

The first few holes drilled this year at the East Wall extension of the Fort Knox open-pit have returned encouraging results and drilling there is ongoing.

Kinross said it is evaluating potential synergies between Gil and ongoing operations at Fort Knox.

–SHANE LASLEY