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The Tasiast gold mine in Mauritania.

Kinross Gold Corp. is laying the foundation to expand its troubled Tasiast gold mine in the Mauritanian desert.

Initial costs to increase production at the mine are now projected at $1.6-billion, according to a study released by Kinross on Monday. That is 40 per cent lower than the company's previous capital expenditure estimate of $2.7-billion.

"We clearly see the option to create a world-class asset at an existing site that can become a cornerstone of our future production," Kinross chief executive officer J. Paul Rollinson said in an interview.

Some analysts had expected the report to show favourable results after Kinross spent billions of dollars to buy the mine during the commodity boom.

The company has since written down its acquisition and has told investors it will not make a decision on expanding Tasiast until 2015 at the earliest.

Mr. Rollinson said the positive study would not speed up the decision. He said Kinross would spend the year fine-tuning an execution plan and looking for ways to finance the expansion.

"We are going to make sure we are completely happy with all items before we cross the line and make that decision," he said.

If Kinross proceeds, Tasiast will produce about 848,000 ounces of gold annually, more than triple what the mine produced last year.

The report showed that Kinross's investment in Tasiast would generate an internal rate of return of about 17 per cent assuming the gold price was $1,350 (U.S.) an ounce.

Under a preliminary study, the internal rate of return was 11 per cent.

The company said an expanded Tasiast would be its largest mine with some of the lowest production costs of around $792 per ounce.

Low-cost mines are key for gold miners dealing with a sharp drop in gold prices. Gold is trading around $1,300 an ounce after topping $1,900 in 2011.

The expansion would ramp up Tasiast' mill so that it could more than quadruple the amount of ore it processes to 38,000 tonnes a day from the current 8,000 tonnes.

The study comes as Kinross's stock has dropped on concerns of fallout from the conflict between Western powers and Russia, where two of the company's gold mines are located.