“After more than two years of negotiations on exploitation and investment protection agreements for the project, the government of Ecuador and Kinross have been unable to agree on certain key economic and legal terms which balance the interests of all stakeholders,” the Kinross announcement said. “Therefore, despite pending legislative amendments to the mining and tax law regime in Ecuador, Kinross has concluded that it is not in the interest of the company and its shareholders to invest further in developing Fruta del Norte.”

Kinross acquired the Fruta del Norte project in September 2008 when it acquired Aurelian Resources in a friendly takeover valued at $1.2 billion. At year-end 2012, the project had proven and probable reserves of 25.44 million mt grading 8.21 g/mt gold and 11 g/mt silver, for 6.7 million oz of contained gold and 9 million oz of contained silver.

A Fruta del Norte technical report and prefeasibility study dated December 31, 2010, envisaged two phases of development for the project as an underground mine and processing operation with a total life of 16 years. Phase 1, at 2,500 mt/d, would have treated non-refractory ore through a wholeore carbon-in-leach processing circuit. Phase 2 would have ramped-up to 5,000 mt/d and treated refractory ore through a whole-ore pressure oxidation plant.

Combined capital expenditures for the two phases were estimated at $1.12 billion. Life-of-mine production was estimated at 6.3 million oz of gold and 6.8 million oz of silver.

Concerning Kinross’s decision not to proceed with development of Fruta del Norte, company CEO J. Paul Rollinson said, “We have said that we will exert strict capital discipline across our company, that we will allocate our capital only to projects that meet our investment criteria, and that we will only enter into agreements that are in the best interest of the company and its shareholders. After a great deal of effort to arrive at a mutually agreeable outcome, it is unfortunate that Kinross and the government of Ecuador were unable to reach an agreement on Fruta del Norte that would have met those criteria. That said, we respect the government of Ecuador’s sovereign authority and its right to determine how its resources are developed.”

The Kinross announcement also said the government indicated it would not support efforts by Kinross to solicit a potential new partner, or a buyer.

The current economic evaluation phase of the Fruta del Norte project expires on August 1, and the La Zarza concession, which contains the entire Fruta del Norte mineral resource, will revert to the government. Until that time, Kinross will focus on assisting its employees and local stakeholders during a transition period as it reduces its level of activities in Ecuador. The company asked that the government cooperate in ensuring an orderly transition that respects the interests of both parties.

Kinross’s decision to stop development of Fruta del Norte resulted in a charge of approximately $720 million in its secondquarter financial results.