TSX-listed Kinross Gold has decided to proceed with the Gilmore expansion project at its Fort Knox mine, in Alaska.

The initial Gilmore project is expected to extend mining at Fort Knox by six years to 2027, and leaching to 2030, at an initial capital cost of about $100-million.

It is also expected to increase the life-of-mine production by about 1.5-million gold equivalent ounces.

The project is expected to generate an internal rate of return (IRR) of 17% and a net present value (NPV) of $130-million, based on a $1 200/oz gold price, and an IRR of 26% and NPV of $239-million, based on a $1 300/oz gold price.

“The Gilmore project offers an attractive IRR and NPV and adds to our suite of quality development projects at Tasiast, Round Mountain, Bald Mountain and Kupol to enhance our globally diverse portfolio,” Kinross president and CEO Paul Rollinson said on Tuesday.

The project’s low initial capital cost is expected to be funded by Fort Knox’s cash flow, helping preserve Kinross’ strong balance sheet and 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. 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,” noted Rollinson.

The Gilmore feasibility study contemplates the first two phases of a potential multiphase layback of the existing Fort Knox pit and the construction of a new heap leach pad.

The company expects to continue leveraging its extensive experience and knowledge operating cold weather, sub-arctic heap leaching, having successfully operated Fort Knox’s current heap leach during the past ten years.

The project plan requires minimal construction of new infrastructure and new equipment purchases, and has been optimised for lower initial capital costs. This includes continuing mining using Fort Knox’s current fleet and leveraging assets from the company’s other North American operations as replacement equipment is required.

Early construction work on the new heap leach and dewatering is expected to begin in the third quarter of this year, with stripping to start in 2019.

Initial production from Gilmore is expected in early 2020, with around 5% of Gilmore ore expected to be stacked on the existing pad.

About 95% of Gilmore ore is expected to be stacked on the new heap leach pad, with stacking starting in late 2020.

Currently, milling at Fort Knox is expected to end in late 2020.

The project team has now been established and contracting is under way. Engineering is largely complete and the permitting process is proceeding as planned. Permits are now in place to start work on the new heap leach pad.