TORONTO, ONTARIO, Dec 05, 2011 (MARKETWIRE via COMTEX) -- Kinross Gold Corporation CA:K -1.00% KGC -0.59% announced today it has reached a non-binding agreement in principle with the government of Ecuador regarding key fiscal and legal parameters for the exploitation of the Fruta del Norte (FDN) deposit in Ecuador's Zamora Chinchipe province.

A number of additional steps are required to conclude a final and binding agreement, including: the completion and approval of the project feasibility study by Kinross; a change in project status from economic evaluation to exploitation in accordance with Ecuadorian law; and, following the completion of negotiations, entering into definitive exploitation and investment protection agreements in a form satisfactory to the parties.

"This agreement represents an important milestone in the development of FDN," said Kinross President and CEO Tye Burt. "Key objectives are to develop the mineral resources at FDN in a socially responsible manner and to work closely with the government and local communities to establish FDN as a flagship mining project in Ecuador."

The key terms of the agreement in principle include the following:

An obligation to maintain the government's share of project economic
            benefits at a minimum of 52%. Project economic benefits are defined as
            the cumulative sum of the Government's share (comprised of the royalty,
            corporate income tax, the state portion of the profit sharing
            contribution, and windfall profit tax, as described below, plus a 12%
            value added tax applied to customary project expenditures) and Kinross'
            share (comprised of the after tax free cash flows of the project),
            calculated annually;
        --  A sliding-scale net smelter return royalty linked to the realized gold
            price, with a royalty of 5% for gold sold at a price of $1,200 per ounce
            or less, 6% for gold sold above $1,200 up to $1,600 per ounce, 7% for
            gold sold above $1,600 up to $2,000 per ounce, and 8% for gold sold
            above $2,000 per ounce. The net smelter return royalty is calculated on
            the basis of revenues after the deduction of windfall profits tax
            payments (see below) and customary transportation and refining charges;
        --  Advance royalties of $65 million credited against future royalty
            obligations and payable in two installments, subject to various project
            development conditions;
        --  A corporate income tax rate of 22%, to be fixed under the proposed terms
            of the investment protection agreement;
        --  A profit sharing contribution equal to 15% of earnings before tax, to be
            fixed under the proposed terms of the investment protection agreement.
            This 15% contribution includes two components, with 12% to be paid to
            the State and 3% to be paid to employees. Profit sharing contributions
            are deductible expenses for the purpose of calculating corporate income
            tax;
        --  A windfall profits tax, whereby the government would receive 70% of the
            excess of the realized gold price above an agreed base gold price. The
            base gold price is defined as the greater of $1,650 per ounce and the
            spot gold price at the time of signing of the definitive exploitation
            agreement. The base price is indexed to the United States Consumer Price
            Index (CPI) on a monthly basis. The windfall profits tax would be
            deductible for the purpose of calculating royalties, profit sharing
            contributions and corporate income taxes;
        --  An exemption from customs duties payable on capital goods to be
            purchased during construction, as approved by the Ecuadorian government;
        --  Electrical power to be provided from the national grid at the industrial
            customer rate (currently 6.8 cents/KWH);
        --  Disputes arising between the parties will generally be subject to
            customary dispute resolution mechanisms including binding arbitration in
            Chile under UNCITRAL Rules;
        --  If new Ecuadorian laws are passed that adversely impact the fiscal and
            economic parameters of the exploitation agreement, the right of Kinross
            to seek amendments to the fiscal parameters of the exploitation
            agreement to preserve the original economic equilibrium and/or seek any
            remedies, pursuant to customary dispute resolution mechanisms;
        --  Kinross undertaking various social infrastructure initiatives to benefit
            local communities, including the construction of a road and training
            center, airport improvements, and contributions to local social programs
            through domestic and international not-for-profit partners selected by
            Kinross.
        
        

Kinross is finalizing a project feasibility study, expected to be completed at year-end 2011. As previously disclosed, the Company is experiencing industry-wide escalation on FDN project costs, and both capital and operating costs for the project are expected to be approximately 25-30% higher than estimates included in the project pre-feasibility study. Kinross and the Ecuadorian government are currently completing negotiations and drafting of the definitive exploitation and investment protection agreements.

About Kinross Gold Corporation

Kinross is a Canadian-based gold mining company with mines and projects in Brazil, Canada, Chile, Ecuador, Ghana, Mauritania, Russia and the United States, employing approximately 8,000 people worldwide.