Kinross acquires power plants in Brazil for Paracatu Mine
Kinross Gold Corporation declared the acquisition of two hydroelectric power plants in Brazil from Gerdau SA subsidiary for $257 million. The two plants are expected to clinch a long-term supply of power for Kinross’s Paracatu mine thereby resulting in lower production costs over the Paracatu mine’s life.
Kinross expects to fund the acquisition by pursuing debt financing of approximately $200 million, which totalled approximately $2.6 billion at year-end 2017.
The acquisition is expected to allow Kinross to significantly lower operating costs at Paracatu by eliminating approximately 70% of future power purchases. In addition, Brazilian legislation provides reduced power tariffs to companies that generate their own power supply. Due to reduced tariffs, the Company expects savings of approximately $15per ounce, which is included as part of the total expected savings of approximately $80per ounce of production cost of sales over the life of mine. The plants are also expected to have relatively low operating and maintenance costs, as is typical with hydroelectric power plants. Kinross has agreed to obtain the Barra dos Coqueiros and Cacu hydro power plants located on the Claro River in the neighbouring state of Goias, approximately 660 kms west of Paracatu.
Both plants have been in operation since 2010 and have a total installed capacity of 155 MW (BCQ – 90 MW; Caçu – 65 MW), and are expected to supply approximately 70% of Paracatu’s future power needs. The remaining 30% of Paracatu’s power demand is expected to continue to be fulfilled by third party suppliers under fixed term power purchase agreements. The operating concessions for both plants expire in 2037, five years after Paracatu’s mine life is expected to end.