Newmont Mining Plans Large Production Boost
Posted: Apr 12, 2011 09:58 AM by Eric Fox
Newmont Mining (NYSE:NEM) set aggressive production goals for the company over the next six years, and will also link its future dividends to the realized price of gold. These and other operational and financial details were disclosed during the company's annual investor day.
Production
Newmont Mining plans to increase gold production to 7 million ounces by 2017 through the aggressive development of various projects. This production level would represent a 35% increase over the company's estimated 2011 production range of 5.1 million to 5.3 million ounces.
Newmont Mining also estimates that its annual copper production will reach 400 million pounds by 2017, a 90% increase over expected 2011 levels.
Projects
Newmont Mining plans to accomplish this production goal by spending $7 billion in capital to complete gold projects with annual production of 3.2 million ounces. The company expects this to be enough production to offset a decline of 1.2 million ounces and provide the needed growth. While these projects are scattered across the globe, South America and Africa will provide two thirds of this new production.
South America
Newmont Mining will spend $3.2 billion in capital on projects in South America through 2017 and get 1.3 million ounces of new annual production from here. The largest project expected to come on-line is the Conga property in Peru, which will start up production beginning in 2014. The company will spend $1.8 billion and add annual production of 400,000 ounces of gold and 100 million pounds of copper.
Other mining companies active in South America include Freeport McMoRan (NYSE:FCX), which has four active mines in Peru and Chile that produce gold, copper and silver. Barrick Gold (NYSE:ABX) is also a large operator in South America, with 39% of the company's proved and probable gold reserves.
Africa
Newmont Mining will spend $1.4 billion in capital on projects in Africa through 2017 and get 800,000 ounces of new annual production from here. The company's largest project in Africa is the Akyem property in Ghana, which will ramp up production over the 2013 to 2014 time frame. The company will spend $900 million and add annual production of 400,000 ounces of gold.
Other mining companies active in Africa include Kinross Gold (NYSE:KGC), which has mines in Ghana and Mauritania.
Dividend Policy
Newmont Mining has decided to link its quarterly dividend payout to the average gold price that the company realizes in the previous quarter. The company established an annual dividend of $1 per share based on the current gold price, and plans to increase that dividend by 20 cents for every $100 increase in the price of gold.
Bottom Line
Newmont Mining plans to develop a large number of projects across its portfolio to provide 35% production growth through 2017. The company also announced an innovative new dividend policy with the amount linked to the price of gold. (Throughout history, gold has held its value against paper currencies. Learn how it can help offset market risks. Check out Gold: The Other Currency.)
My posting contains many opinions. So please do your own research and validation.
