Newmont aims drills deeper

The Yanacocha gold mine, high atop the Andes of northern Peru, was the golden growth story for Newmont Mining (NEW-N) in 2000, with production and reserves increasing for the seventh consecutive year. And judging by the past year’s exploration success — as demonstrated by a drill hole that returned an unprecedented 1,400 ft. of 0.1 oz. gold, including 130 ft. of 0.43 oz. — the Yanacocha growth story has many more chapters to come.

On the operations front, Yanacocha achieved record production of 1.76 million oz. last year to the account of Newmont, which owns 51.35% of the mine, and joint-venture partner Compania de Minas Buenaventura (BVN-N).

Ore comes from three open pits — Carachugo, Maqui Maqui, San Jose Sur and Cerro Yanacocha — with a fifth mine, La Quinua, scheduled to begin production shortly. The extremely porous ores can be mined and placed on heap-leach pads without crushing, which, combined with 30-to-60-day leach times, is a major factor in the mines’s low cash costs. These fell 15% to US$88 per oz. in 2000, the first full year of owner-mining, as opposed to contractor-mining.

Costs are expected to rise to about US$110 per oz. this year, as La Quinua ores will require crushing and agglomerating before heap leaching. However, the new mine will boost overall production to more than 2 million oz.

By year-end, exploration again boosted reserves, which now stand at 1.3 million tons grading 0.027 oz. per ton, up 3.4 million oz. from 1999. Oxide reserves are deemed sufficient for at least 20 years of mining.

Ongoing exploration will shift to deeper, higher-grade targets, including more drilling to test El Tapado and Corimayo, two oxide deposits found underlying La Quinua. (Corimaya returned the best hole ever drilled at Yanacocha.) Sulphide mineralization containing both copper and gold was also discovered at Cerro Yanacocha and Chaquicocha.

This year’s program is aimed at defining the sulphide potential beneath the known oxide deposits, looking for extensions at El Tapado, and searching for new gravel-covered oxide deposits, similar to El Tapado and Corimayo, in the La Quinua basin.

Last fall, Newmont and Buenaventura combined their separate holdings into their existing joint venture, a move that boosted the land package to 535 from 100 square miles.

In the past year, the partners spent US$10 million to remedy the environmental and social damage caused when a contractor spilled 151 kg of mercury along a road passing through three small villages. Numerous people picked up the substance and took it home, where it made them ill. Houses exposed to mercury were cleaned, and environmental monitoring was conducted at the spill sites. A compensation plan was implemented, which included the construction of schools, health facilities, a sewage system and roads.

On the social front, Newmont is working with local non-governmental organizations to build tourism and other enterprises.