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Business/Economy

Interior Alaska gold mine gets new life, $100M expansion

  • Author: Elwood Brehmer, Alaska Journal of Commerce
  • Updated: June 18
  • Published June 17

The Fort Knox gold mine as seen from the air. (Alaska Journal of Commerce)

It appears one of Alaska's largest mines is going to get a little bigger and stay open a little longer.

Kinross Gold Corp. announced June 12 that it has decided to move forward with a $100 million expansion to the Fort Knox gold mine about 25 miles northeast of Fairbanks.

Fort Knox is on land owned by the state Alaska Mental Health Trust Authority; the expansion, known as the Gilmore project, is on a recently acquired 709-acre parcel of state land just to the west of the existing mine pit that was previously held by the federal National Oceanic and Atmospheric Administration.

A feasibility the Toronto-based Kinross conducted on the prospect indicates the Gilmore project could yield 1.5 million ounces of gold and initially extend operations at Fort Knox to 2030. Milling at the mine is expected to stop in late 2020 without it, according to Kinross.

Now, mining is expected to continue into 2027 with ore processing running to 2030.

The mine opened in 1996.

The prospect also increased the proven and probable gold reserves at Fort Knox by 2.1 million ounces to 3.4 million ounces overall, Kinross notes further.

CEO J. Paul Robinson said the company will likely be able to fund the $100 million expansion with Fort Knox's existing cash flow, which will help Kinross maintain financial flexibility.

"With additional upside potential at Gilmore and beyond, Fort Knox is a significant asset in our portfolio located in an excellent mining jurisdiction," Robinson said in a Kinross release. "The Gilmore project and the addition of estimated mineral resources improves value and is expected to be a key contributor to the future growth of our company."

Kinross operates eight mines across North and South America, West Africa and Russia.

Gov. Bill Walker and Fairbanks-area legislators rejoiced at the news that Fort Knox, which currently employs about 630 people, will probably stay open longer. The mine is also the largest property tax payer in the Fairbanks North Star Borough, according to the governor's office.

"We are excited to see the Fort Knox mine plan, an extension onto newly state-owned land, potentially extending the life of the mine to 2030," Walker said in a formal statement. "This is a significant development for Alaska's economy, and was made possible by our administration, federal agencies and our congressional delegation cooperating to transfer these lands from federal ownership to State of Alaska ownership."

Kinross estimates the Gilmore project will generate a 17 percent internal rate of return with a net present value of $130 million and cash flow of $240 million, assuming an average gold price of $1,200 per ounce. At prices averaging $1,300 per ounce, those projections jump to a 26 percent return and a net present value of $239 million.

Spot prices for gold are currently about $1,280 per ounce.

The company has pegged the all-in operating cost of Gilmore at $950 per ounce. Combined with current operations, Fort Knox's overall production cost from 2018-2030 is expected to be $1,005 per ounce with annual production averaging 205,000 ounces of gold.

Early construction is expected to start in the third quarter of this year, with mining work starting next year and gold production from Gilmore being realized in early 2020.

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