The acquisition will be completed by Kinross’ subsidiary Kinross Brasil Mineraçao from Brazilian steel manufacturer Gerdau.

Kinross expects to finance the acquisition by pursuing debt financing of about $200m, with the balance from existing liquidity, which totaled nearly $2.6 billion at the end of the last year.

The power plants include the Barra dos Coqueiros (BCQ) and Caçu hydro power plants located on the Claro River in the neighbouring state of Goias, about 660km west of Paracatu.

BCQ has a capacity of 90MW, while Caçu has a 65MW capacity. Both the plants have been in operation since 2010.

Kinross stated that it will use the electricity from the hydro plants to power its Paracatu mine, resulting in lower production costs over the mine’s life time.

The acquisition is expected to reduce kinross’s operating costs at the mine by eliminating about 70% of future power purchases. Additionally, Brazil’s legislation allows for reduced power tariffs to companies that generate their own power supply.

The remaining 30% of the power is expected to come from third party suppliers under fixed term power purchase agreements. The operating concessions for the two plants will expire in 2037, five years after the mine’s life is expected to end.

With reduced tariffs, the company expects to save at least $15 per ounce, which is included as a part of the total expected savings of about $80 per ounce of production cost of sales over the mine’s entire life time.

The power plants are also expected to have a relatively low operating and maintenance costs, which is claimed to be typical for such plants.

For smooth transition of ownership and management, Kinross expects to assume the existing operations and maintenance contract for the two plants.

Apart from these two plants, the company also self-generates power at its Tasiast, Kupol and Dvoinoye gold mines in Brazil.

The transaction is expected to be closed in about three to six months.

Image: Kinross to power its mine from two hydroelectric power plants in Brazil. Photo: Courtesy of Jeremiah Castro/FreeImages.com.