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The Tasiast pit gold mine in Mauritania.

Five years and billions of dollars after venturing into West Africa, Kinross Gold Corp. is finally delivering some encouraging news from its Tasiast mine.

The Toronto-based miner said Wednesday it is going ahead with the first stage of a two-phase expansion designed to boost gold production and drive down costs at the problem-plagued project.

The resulting output from the mine in Mauritania will be considerably smaller than first envisioned back in the heady days of 2010, when commodity prices were booming and Kinross paid $7.1-billion (U.S.) for Red Back Mining Inc., owner of Tasiast.

But the new plan marks an end to the years of persistent disappointment that followed the acquisition. Sagging gold prices and cost overruns during that period forced Kinross to write off most of the money-losing mine's acquisition cost and Tasiast became Exhibit A in any discussion of overpriced purchases made by miners at the height of the commodity cycle.

Kinross's new plan calls for the company to invest a relatively modest $300-million in capital expenditures during the first step of an expansion plan that makes extensive use of existing infrastructure. The company will also spend about $428-million in stripping costs, or expenses involved in removing waste material to get at ore.

By spring 2018, if all goes according to plan, Tasiast's production will nearly double to 409,000 ounces of gold a year, while all-in sustaining costs will fall to $760 an ounce from well over $1,000.

"This is a great solution for the environment we're in," Kinross chief executive Paul Rollinson said in an interview. "We're going to transform Tasiast into a mine that anyone would be happy to have."

He said he expects to make a decision on proceeding with a second phase of expansion by the end of 2017. If approved, the additional phase would boost annual gold production to 777,000 ounces. All-in sustaining costs would drop to $665 an ounce.

Mr. Rollinson said the phased plan is designed to allow the company to expand the mine without jeopardizing its balance sheet. The fall in the gold price over the past few years has sent the company back to the drawing board a few times.

"Necessity is the mother of invention," he said. "Keep in mind that when we started with this project, gold was around $1,700 an ounce." It is now around $1,225.

Back in 2012, shortly after stepping into the CEO job, Mr. Rollinson killed plans for an expansion that would have boosted the throughput of the mine's mill to 60,000 tonnes of ore a day. As gold prices kept falling, he also trashed a $1.6-billion plan to increase throughput to 38,000 tonnes a day.

The new, more modest, plan is designed to increase mill throughput from 8,000 tonnes a day to 30,000 tonnes a day once both phases are complete, but Mr. Rollinson says that can be done for an initial capital expenditure of only $920-million, in part because the commodity slump has brought down construction and equipment costs.

"It's a great time to be building," Mr. Rollinson said. "There's not a lot going in new mine construction right now, so that really allowed us to sharpen our pencils and get some very competitive bids."

Kinross's share price has jumped 75 per cent since the start of the year as the price of gold has climbed higher. The Tasiast expansion had been widely expected and the official announcement had little immediate effect on the stock price, but was generally applauded by analysts.

Kinross "offers high leverage to the gold price and improving margins due to currency tailwinds," Anita Soni of Credit Suisse wrote in a research note.

Others welcomed the development because it will help keep Kinross's production levels stable at a time when some of its mines are nearing the end of their lives.

The miner expanded its portfolio last year by striking a deal to acquire two Nevada properties – the Bald Mountain mine and 50 per cent of the Round Mountain mine – from Barrick Gold Corp.

It also recently raised $288-million through a public share offering. It used the money to reduce debt.

However, Standard & Poor's cut the company's credit rating to junk in February amid a wave of mining downgrades.

With a report from Bloomberg News