Kinross Seeks Improved Terms for Fruta del Norte Gold
Kinross also advised the government it will be exploring options to lower future capital commitments to the project, includ-ing project financing, potential strategic partnerships, and lower-cost processing alternatives. Permitting and development work will continue at Fruta del Norte during 2012, including construction of the site access road, upgrading of the existing camp, advancing work on the exploration decline, and exploration drilling.
Kinross and the government of Ecuador reached a non-binding agreement in prin-ciple in early December 2011 regarding key fiscal and legal parameters for the exploitation of Fruta del Norte. The agree-ment included an obligation to maintain the government’s share of project econom-ic benefits at 52%, including a royalty, cor-porate income tax, the state portion of a profit-sharing contribution, and a windfall profits tax. Included would be an advance royalty payment of $65 million to be cred-ited against future royalty obligations. The windfall profits tax would be 70% on income above an agreed base gold price.
A participant in Kinross’ year-end con-ference call asked if Kinross was seeking to whittle down the 52% tax burden of the December agreement. Kinross President and CEO Tye Burt responded that while the negotiations were confidential, the compa-ny was hoping to find some ways to miti-gate the impact of the windfall profits tax and of the other taxes and royalties.
At year-end 2011, the Fruta del Norte project had proven and probable reserves totaling 25.44 million mt, grading 8.21 g/mt gold and 11 g/mt silver and contain-ing 6.7 million oz of gold and 9 million oz of silver.