Thanks to ptero on the other board for reminding me that the 2010 report is out. Forgive me the long-ish post here, but I figured it was worthwhile to read the report carefully for its implications to Teryl. You can view or download the Kinross Fort Knox 2010 report from the following location:

http://dnr.alaska.gov/mlw/mining/largemine/fortknox/pdf/fgmi2009ar.pdf

Of additional note, he reminded us that Kinross is doing their Fort Knox Agency Meeting on Mar 19 in Fairbanks:

http://dnr.alaska.gov/mlw/mining/largemine/fortknox/index.htm

Looking at the 2010 report, some key information comes forward (pdf page numbers are given here, not report page numbers, which differ by a couple of pages):

5 - Heap leach has been the focus of Fort Knox for 2009, and took the majority of Kinross' attention so that production and pouring of gold from the heap leach could be accomplished. The implication is that from now on continued development of the heap leach will take care of itself, and Kinross will likely return to improving overall mine profitability, which will mean developing for production resources outside of the Fort Knox pit and low-grade stockpiles.

8 - This page shows an excellent map of the relationship between the heap leach, the Fort Knox pit and Fish Creek.

8 - Pit Production - the majority of pit production is no longer "Ore" (i.e. material suitable for the mill), but instead Leach Grade Ore (for the heap leach) - 12.70 vs. 11.96 million tons. The remainder of production was "Transition Grade", 4.11 million tons, which would also likely end up on the heap leach. Millable ore is 42% of production in 2009.

9 - Fort Knox pit expansion Phase 7 will build up millable ore production through 2011. The Fort Knox pit as an ore source is projected by Kinross to sustain the pit to 2016 - but not necessarily sustain the mill to 2016 - this is glossed over in the report but is an important distinction. The pit may continue til the, but the mill might not - not if the grade keeps descending. The report projects that material for the heap leach will continue to be moved from stockpiles until 2021.

10 - The report quietly shows that mining ore tonnage is projected to drop from 28.7 million tons total in 2009, to a total of 21.7 million tons for 2010, a drop of 24.4%. Waste rock increases from 20.03 to 28.2, an increase in waste rock of 40.8%. The grade is not mentioned, but it is known that ore grade extracted in some areas has dropped to 0.1g/t

10 - Fort Knox pit dewatering is become an increasing burden, jumping 25% from 2008 to 2009, producing 1518 acre-feet. "The increase in the pumping rate is a result of expanding the pit and mining deeper." Eventually water inflow becomes too costly and environmentally difficult to content with, as well as compromising pit wall stability due to water transport.

12 - Fort Knox milling and gold production are dropping. Milling is, in 2008, 2009 and projected 2010, in million tons of ore: 15.11, 14.14, 13.7.

The report states that gold production is expected to be 269,000 ounces in 2010, but neglects to compare this with previous years. However, other sources show that gold production has been declining - see the following reference:

http://www.petroleumnews.com/mnarch/04-07-2.htm

"Kinross said output fell at Fort Knox primarily due to lower grades, which more than offset the larger amount of ore processed and the slightly higher recovery."

Drawing from both reports, gold production is expected to decline - 2008, 2009 and projected 2010: 329,105; 263,260, and 269,064 ounces/year respectively. So, although ore throughput is declining 9.3% over two years (15.11 to 13.7mt), gold production from the mill is dropping a full 18.2% (329 to 269 k ounces), meaning that the gold ore grade milled is steadily dropping. (For reference, Kinross expects to globally produce 2.2 million gold equivalent ounces in 2010, cf. the above report).

26 - Exploration plans - changing from 2009: Gil + Gilmore Dome + Steamboat, to 2010: Gil + Gilmore Dome. Kinross has set aside the Steamboat prospect due to unsuitable metallurgy and now has only two prospective areas: the Gil, and the Gilmore dome. Only the Gil project is far enough along to mine soon.

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Kinross won't spell it all out for us, as they don't want to raise their own price in buying Teryl's portion of the Gil, but we can read between the lines. The profitability of the mill is dropping precipitously, and Fort Knox mining would benefit tremendously economically by development of the Gil - mixing in the much higher grade Gil would boost profits dramatically. Kinross has already put $10 million of their own money into the Gil, so they have every reason to develop it.

Hopefully some of the Toronto financial team from Kinross will be taking in an internal update in the days before & after the Mar. 19 review meeting in Fairbanks. They may then become clearer on the importance of the Gil in maintaining reasonable profitability in the Fort Knox project, and give it more attention. The heap leach is a huge benefit but there is little point in operating the mill at a loss.

In the meanwhile, Teryl's new geologist will be increasing the substantiveness of Teryl's position in its 20% of the Gil JV with Kinross. It will be interesting to see at which point Kinross begins to feel that its delay is working against it, and comes to the table in a serious manner

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FYI - Here is the great map from the 2010 report: