Newmont seeds growth expectations
By: Tim Wood
Posted: 2003/07/31 Thu 20:00 EDT / © Mineweb 1997-2003
NEW YORK -- Newmont [NEM] has a persistent, anonymous critic on Mineweb. Just yesterday, "Nevada Jim" reappeared to lambaste Newmont for lacking an exploration discovery to match Placer Dome's [PDG] Cortez Hills. He may soon have reason to stop complaining.
Newmont gave its strongest indication yet that a project pipeline worthy of a senior gold producer will be unveiled before the end of the year.
The best signal were several statements alluding not only to reserve replacement, but addition. Newmont surprised the market last year by replacing the gold reserves it had mined out - a mammoth 9 million ounces. Not all of those were high quality ounces, but they were much more than Newmont was ever expected to accomplish. The burden is not as great this year, but the capacity to find 7 million new reserve ounces and some for the future, is no mean feat.
Wayne Murdy, chairman and chief executive, said in a statement: "Our exploration team had another successful quarter and we expect to increase reserves after depletion in 2003."
This was reinforced during an investor conference call when Newmont president, Pierre Lassonde, told participants: "In Nevada, Ghana and Peru our near-mine exploration teams are doing a fantastic job.
"In September we will announce our 5-year plan and will give you a much more detailed update on where we are. I can say that we are more than confident that not only will we replace reserves, but Newmont has started on the path of growing reserves once more."
Newmont revealed a preliminary project pipeline in October 2002 during the Denver Gold Forum, which Mineweb will again be covering this year, but went silent on it after professional investors criticized the lack of detail.
At the time, Barrick [ABX] had impressed the market with news on four projects - Alto Chicama, Cowal, Veladero and Pascua-Lama. After investing $2.1 billion, Barrick expects to be mining 2.1 million ounces a year from the projects at a weighted average cash cost of $125 per ounce. The projects have a combined 29.6 million ounces of potential reserves although Pascua-Lama's 16.9 million ounces are generally excluded by analysts until there is certainty that it is economic.
Newmont's approved projects, the Gold Quarry South Layback and Leeville Underground, are on schedule and without budget according to the latest report. Pending approval - and possible wrangling with joint venture partners in some cases - are Boddington (Australia), Akim and Yamfo-Sefwi (Ghana), Martabe (Indonesia), Corimayo and Cerro Quilish (Peru), Phoenix and Emigrant Sprints (Nevada). The Batu Hijau mine in Indonesia is also slated for a large and rich underground development.
The best prospect remains Ghana where sources say drilling has progressed well and Newmont has made good progress on permitting issues. The Boddington expansion still has a lot of proving to undergo before it can be approved, but it has a feasibility study in place and could likely move faster with restructured ownership.
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