Newmont threatens to dump big Peruvian gold mine
Mark Mentiplay, 30th Apr 2012
DENVER, Apr 30 – There is a dark cloud hanging over the ultimate development of the $US4.8B Conga gold/copper mine in Peru, the most expensive mine ever attempted in the country, development of which was suspended in November last year.
But every cloud has a silver lining. At least, that is the prospect for other countries and projects high on 51.35% stakeholder Newmont Mining’s exploration and development list.
The Conga project has been stopped dead in its tracks by newly proposed amendments to the project’s Environmental Impact Assessment review, previously approved by the central government in 2010 but subject to review by an independent panel ordered by the new government of President Ollanta Humala following his election in July last year.
Newmont CEO Richard O'Brien has underlined comments in the company’s March 2012 quarter report that if the environment-related recommendations hurt the bottom line too much, Newmont may shift its capital to other development alternatives in Nevada (USA), Australia, Ghana and Indonesia.
With the previously approved EIA in hand, Newmont set about preparations for mill construction and mining of the opencut development to begin in 2012 with production expected in late 2014 to 2015. That ended last November.
Newmont is maintaining its 2012 attributable capital expenditure outlook of $3-3.3B, or $4-4.3B on a consolidated basis, but this assumes the Conga project proceeds.
The results of the independent review were released earlier this month and confirmed that the reviewed sections of the EIA met Peruvian and international standards, albeit with certain environment-related recommendations.
Newmont is now in the process of re-evaluating its capital costs and development outlook, but says that, should it be unable to continue, the company may “reprioritise and reallocate capital to other development alternatives”.
It is understood the recommended EIA changes concern local opposition to the location of a waste dump near some lakes.
The Conga project is 24km northeast of Newmont’s Yanacocha Gold Mine, the largest gold producer in Latin America. Both are key to Newmont’s plan to reach an annual 7Moz gold and 400Mlb copper by 2017.
Newmont is maintaining its 2012 outlook for attributable gold and copper production of 5-5.2Moz gold and 150-170Mlb copper.
With an expected mine life of about 19 years, Newmont and partners Compania de Minas Buenaventura and the International Finance Corp plan to leverage its existing operations at Yanacocha to develop Conga.
Conga has about 6.1Moz of attributable gold reserves and 1.7Blb of attributable copper reserves. Average annual attributable production is estimated at 300,000-350,000oz, with copper production in the first five years averaging 80-120Mlb pa.
Newmont recently reported attributable net income from its operations of $561M for the March 2012 quarter, up 9% on the first quarter 2011, on consolidated revenue of $2.7B, also up 9% on the prior year’s quarter. Attributable gold and copper production of 1.3Moz and 35Mlb was down 2% and 35%, respectively.
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