Case Study

Contributing to Economic Development in Russia

Our Kupol operations, which began production in 2008, are located in the remote Chukotka region of northeastern Russia, 200 kilometres from the nearest town. Development of the project has resulted in significant economic stimulus for the region.

In 2009, the direct economic value we distributed locally in Russia from our Kupol operations totalled some $369.0 million, including wages, purchase of goods and services, taxes and charitable donations. Of this, approximately $221.1 million was realized within the Chukotka region itself. This includes:

Wages and Benefits: In 2009, we paid approximately $4.0 million to about 175 of our employees who were residents of Chukotka. At the end of 2009, 63 indigenous people were employed by Kupol and its major support contractors.

Purchase of Goods and Services: Wherever feasible, we provide supply contracts to local and regionally based businesses. In 2009, we spent $55.9 million on fuel, contractors to provide road and aviation transport, and agricultural products, such as reindeer meat and fish, within Chukotka.

Taxes: In 2009, our activities generated $134.9 million in taxes and payments in the Chukotka region. Our tax payments amounted to more than 30% of the total budget of the regional government.

Dividend Payment: The Government of Chukotka holds a 25% share in Kupol through the State Unitary Enterprise “Chukotsnab”. Upon demonstrating to the project’s international lenders that Kupol had completed the successful transition from construction to full economic operations, Kupol declared a special distribution to shareholders and, as a result, the Chukotka region received a dividend of $23.3 million net of withholding tax in 2009, and a further $6.4 million net of withholding tax in March 2010.

Elsewhere in Russia, our Kupol operations contributed another $147.8 million, $55.5 million of which was realized within the Magadan region, in wages, goods, services and taxes. The Magadan region remains an important area of operations for Kinross, even after the Company divested its assets there (the Kubaka and Julietta mines) in 2008. Not only are 80% of our Kupol employees residents of the Magadan region, but the doré from Kupol amounts to more than 85% of the total material that is processed by the Kolyma Refinery, a centrepiece of the Magadan regional economy.

Mining has been and continues to be a cornerstone of the economy in northeastern Russia, and the economic benefits generated by Kupol support that tradition. Looking to the future, Kinross and the Chukotka government are working together to develop mining-related professionals in Chukotka through education and training initiatives. Under a licence obtained in 2008 from the Department of Education in Chukotka, we have created training and education programs that build skills in mining and related industries. By the end of the year, Kinross had issued more than 700 certificates to 250 employees, including 12 indigenous residents of Chukotka, in 45 training programs. We know from our experience at Kubaka, which Kinross operated until January 2008, that our employees are in high demand at other mines throughout the Russian Federation.