Newmont green-lights Long Canyon gold mine

VANCOUVER — Denver-based Newmont Mining (NYSE: NEM) is poised to open up a new gold district at its Long Canyon project along the eastern flank of the Pequop Mountains in northeastern Nevada. The U.S. Bureau of Land Management (BLM) approved the company’s permit application for a startup operation in early April, which is a relatively quick turn-around, considering a draft environmental impact statement was published in April 2014.

Newmont paid top dollar for the Long Canyon property package back in April 2011, when it forked over US$2.3 billion for Vancouver-based explorer Fronteer Gold. According to a December 2014 estimate, the project hosts proven and probable reserves of 16.7 million tonnes grading 1.9 grams gold per tonne for 1.23 millon contained oz. gold.

On April 9 Newmont announced it would build the first phase at Long Canyon, which will involve a high-grade oxide mine for mineralization that runs over a 4.8 km strike length. Annual gold production could range from 100,000 to 150,000 oz. over an eight-year mine life.

The company reports that average all-in sustaining costs should fall between US$500 and US$600 per oz. Long Canyon could generate US$100 million in earnings annually at current gold prices, and features a 17% internal rate of return.

Newmont is taking a phased-development approach at Long Canyon to keep costs down, with initial capital estimated at between US$250 million and US$300 million. The company intends to fund the requirements through available working capital and free cash flow, while leveraging equipment and infrastructure from nearby operations on the Carlin Trend.

Newmont lowered its company-wide all-in sustaining costs by 10%, or US$100 per oz. in 2014, and has nearly US$6 billion in liquidity. The company boosted its coffers by selling US$1.4 billion in non-core assets over the past two years.

According to BLM documents, Newmont gained approval for the project through an alternate mine plan that includes relocating several buildings away from the Big Spring wells, which supply water to the nearby township of West Wendover. The company will also be installing a 760-metre mule-deer migration corridor.

The BLM decision green-lights construction of an open pit, single heap-leach pad, waste-rock storage facility, tailings storage facility, natural gas pipeline from the Ruby pipeline, power generation plant and other “ancillary facilities.”

Newmont president and CEO Gary Goldberg commented in the release that “taking a phased approach to developing Long Canyon gave us the means to lower development capital and reduce the payback period to just over four years after first commercial production, which we expect to reach in the first half of 2017.”

“I’m confident that we have the engineering, orebody knowledge and community agreements in place to deliver this project safely, on time and on budget,” he added.

The operation will reportedly disturb 7 sq. km of public land, and directly employ 260 people during full production.

Newmont anticipates producing between 4.6 million and 4.9 million oz. gold in 2015 at all-in sustaining costs ranging from US$960 to US$1,020 per oz. The company could crank out in excess of 5 million oz. annually by 2017 with Merian in Suriname, Turf Event Shaft in Nevada and Long Canyon.

Newmont has traded within a 52-week window of US$17.60 to US$27.40, and jumped 17.3%, or US$3.27 over the first three months of 2015, en route to a US$22.33-per-share close at press time. The company has 499 million shares outstanding for an US$11.1-billion market capitalization.