Newmont Mining (NEM-N) has sold its Golden Grove zinc-copper operation in Western Australia to Oxiana for US$205 million.
The purchase price comprises US$147 million in cash and 81.5 million Oxiana shares, currently worth around US$58 million. The shares represent a 6% stake in the emerging Aussie miner, and will be held in escrow for six months.
The deal is expected to close by late July, subject to financing. Newmont has agreed transfer management of the project over a three-month period, beginning in July.
The Golden Grove operation includes the Gossan Hill and Scuddles underground mines, a 1.3-million-tonne-per-year treatment plant, and a surrounding tenement package. The operation also comes with about $15.5 million in working capital.
At the end of 2004, reserves amounted to 4.8 million tonnes of 6.9% zinc, 2.1% copper, 0.9% lead, 75 grams silver and 1.3 grams gold per tonne. An additional 7.9 million tonnes of resources run 8.4% zinc, 1.9% copper, 1.4% lead, 78 grams silver and 1.5 grams gold.
The operation’s current mine life is estimated at 7 years, but ongoing drilling is aimed at converting 70% of the resources to reserves by the end of the year.
Between January and May 2005, production from the operation totalled 23,133 tonnes of zinc, 9,071 tonnes of copper, and 10,400 oz. of gold. Production for 2006 is pegged at 125,000 tonnes of zinc, 10,000 tonnes of copper, 50,000 oz of gold and 3.1 million oz. of silver during 2006; cash cost are forecast at US30 per lb. zinc, net of byproduct credits.
“The sale of Golden Grove is part of our ongoing portfolio optimization efforts and represents our continuing focus on our core gold operations," said Newmont’s president Pierre Lassonde in a prepared statement.
Newmont inherited Golden Grove via its takeover of Normandy Mining in 2002. The company expects the sale to result in a non-cash charge of US$25 million to US$35 million on its second-quarter earnings.
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