EDITORIAL PAGE — The necessity of going global

To remain a force in this business, a gold mining company must face the relentless challenge of replacing the reserves it mines. The task is especially daunting for majors that surpass the production threshold of 1 million oz. annually.

So how are today’s top-tier producers planning to retain their hard-won status? By heading off to new frontiers — both geographic and geological — and boldly going where no gold miner has gone before.

Consider Newmont Gold. Today, the company’s fortunes and status are closely linked to Nevada and the multi-million-ounce deposits along that state’s famous Carlin Trend. The company still has 17.8 million oz. of proven and probable gold reserves in the Carlin area, but about half of that is contained in refractory ores, which require roasting before conventional cyanidation can be applied.

In the future, however, Newmont may be more closely linked to countries farther afield, such as Indonesia. In early August, the major announced that construction had started on its Minahasa gold project on the island of Sulawesi. The project is expected to produce 1.8 million oz. over 13 years, which is relatively modest on the Newmont gold scale.

But even more recently, the company revealed that an engineering contract had been let for a first-phase optimization study of its 80% owned Batu Hijau copper-gold project on the Indonesian island of Sumbawa. It is the largest single gold occurrence ever discovered by Newmont, with reserves estimated at 12.6 million oz. gold, 25 million oz. silver and 10 billion lb. copper. The project poses some challenges. The study is aimed at finding the best way to develop the mine, process the orebody and design and build a port, roads, power plant and worker accommodation. A final production decision will await this work, as well as results from a second-phase feasibility study. Newmont is also one of the more active majors in Peru, a country with considerable potential for large gold discoveries. And it is a pioneer in the former Soviet Union, where a project is under way in the now-independent republic of Uzbekistan — a project that contributed one of the largest gains in reserves at the end of 1993, when the 50-50 joint venture reported reserves of 4.3 million oz. contained in low-grade stockpiles. Based on its growing reserve base, Newmont expects to increase production to more than 2 million oz. in 1997, up from 1.6 million oz. in 1994. Newmont isn’t the only major spreading its wings worldwide. American Barrick Resources is eying opportunities in China and South America. Barrick’s recent bid for Lac Minerals was triggered by a keen interest in that company’s Chilean assets and the potential for more large discoveries. Placer Dome was a pioneer in Venezuela, where its Las Cristinas gold deposit is still the envy of a host of companies hoping to make similar discoveries in that country.

But the nature of the exploration business is such that, just when we all least expect it, some upstart junior will make a major discovery right here at home, where the experts say such a find is least likely to happen, in a geological setting bypassed by a Who’s Who of the exploration fraternity, and next to the Trans-Canada Highway to boot. After all, it has happened before.