Massive Expansion Program Triples Mine’s Production

Kinross’ recent expansion of its Paracatu mine in Brazil invites superlatives. It is tripling production at Paracatu and has transformed the operation into the biggest gold producer in Brazil. It is also one of the largest gold mines in the world in terms of tonnes processed on a daily basis. Furthermore, it also has one of the longest lives of any operating gold mine, extending to about 2040.

Paracatu, located in the state of Minas Gerais, has been in operation since 1987. Kinross acquired a 49% stake in Paracatu as part of its acquisition of TVX and Echo Bay in 2003, and acquired the remaining 51% from Rio Tinto in 2004 to become 100% owner and operator. Once Kinross acquired full ownership, the company mounted an intensive exploration program to increase gold reserves and justify a substantial capital investment in new mining and processing equipment to treat the harder ores that were being mined.

The exploration program proved highly successful, resulting in a significant increase in reserves. As of year-end 2008, Paracatu had about 18 million ounces of gold reserves, and an additional 4 million ounces of resources. It clearly made sense to invest in a new more modern processing plant, and the expansion project was approved in 2006.

Construction of the new mine and processing facility took two-and-a-half years and about ten million man-hours to complete. The new plant produced its first gold in October, 2008. In the first quarter of 2009, Paracatu produced 72,745 gold equivalent ounces with average gold grades at 0.42 grams per tonne. Production is expected to be at design capacity by the end of second quarter of 2009.

At capacity, the expansion is expected to triple Paracatu’s production to about 550,000 gold ounces per year.

Paracatu hosts a very low grade ore body, with proven and probable reserve grades averaging only 0.40 grams per tonne. In order to reach such high production levels, Kinross’ new plant needs to process very large quantities of ore. The expansion boosts Paracatu’s capacity from 18 million to 60 million tonnes per year.

To support the expansion, Paracatu purchased a fleet of nine 240-tonne mine trucks, a 90-tonne excavator, and Brazil’s largest mineral crusher. The 38-foot diameter SAG mill is one of the largest in the world. Its motor runs on 20 megawatts -enough to power a small town. The expansion plant also includes two 24-foot diameter ball mills, new flotation cells and a new hydrometallurgical plant. Kinross is also looking at adding a third ball mill to improve recovery and throughput at Paracatu.

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Quick Facts

LOCATION: Minas Gerais State, Brazil

EMPLOYEES: Approx. 700

LANGUAGE: Portuguese

NEAREST MAJOR CITY: Paracatu, 2 k m south; population 80,000

OWNERSHIP: 100% Kinross

MINING: Open pit

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Paracatu Expansion By The Numbers

• Approximately 10,000,000 man-hours required to complete the expansion

• 1 0,200 tonnes of steel used in construction

• 56,000 cubic yards of concrete used in construction (by comparison, the Empire State Building in New York City required 62,000 cubic yards)

The nearby town of Paracatu has always had close economic ties to the mine, with about 30% of the local economy directly tied to the operation. The expansion is providing a major boost in terms of new jobs, business opportunities, and other direct benefits.

In addition to some 2,000 jobs created during construction, the expanded operations have created 200 new permanent operating jobs at Paracatu — 20% more than the original operation.

Some 3,300 new jobs have been created across the Kinross supply chain, including companies and workers outside Paracatu.

Purchases from the 550-odd local businesses that provide supplies and services to the mine are expected to triple to about $36 million Brazilian reais annually, while tax revenues to the municipality will double.

Kinross has always been a strong supporter of community development and sustainability in Paracatu through programs like The Generation Project, which assists the start-up of local small businesses, and the Partnership Seminar — an initiative that brings company and community leaders together to prioritize and fund projects that help the local population. Over the years, Kinross has funded more than 30 projects in areas such as health, sports, business development, culture and social assistance.

Recently, Kinross invested $1.7 million dollars in the revitalization of Paracatu’s Rico Creek. Improvements include cleaning up the impact of years of unauthorized small-scale mining activities, stabilizing the banks of the creek and planting vegetation. Two public recreational parks will also be built.

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Project Timeline

January 2003 Kinross acquires 49% of Paracatu through combination with TVX

December 2004 Kinross acquires remaining 51% of Paracatu from Rio Tinto

September 2006 Expansion project approved

August 2007 Construction 41% complete, SAG mill arrives on site

January 2008 Construction 80% complete

August 2008 Major construction completed, commissioning begins

October 2008 First gold pour

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