Vancouver — The world’s second-largest gold producer, Newmont Mining (NMC-T, NEM-N), has given notice that bullion output from its mines will temporarily decline until it can bring new development projects on-stream in 2008 and 2009.
Newmont’s anticipated production shortfall is being attributed to government expropriation of its 50% interest in the Zarafshan joint venture in Uzbekistan, country-wide power shortages in Ghana that affected mine operations and the expected sale of its Holloway mine near Timmins, Ont.
Forecast gold production for 2006 is from 5.6 to 5.8 million attributable oz., about a 12% drop from the 6.5 million attributable oz. produced in 2005. Newmont anticipates attributable gold sales dropping further to around 5.2 to 5.6 million oz. by 2007, due to the loss of Zarafshan and lower output from Yanacocha, in northern Peru. Additionally, 2007 costs are expected to be about 20-25% higher than this year.
“With higher commodity and energy prices impacting the industry, and lower gold production at Yanacocha, we expect gold sales to reach a low point and costs to peak in 2007,” says Newmont chairman and CEO, Wayne Murdy. “Beyond 2007, we expect to return to a growth profile with improving costs as we benefit from the ramp-up of our new mines. In 2006, we anticipate growing our reserves net of depletion.”
Under the company’s new project pipeline, development at the Leeville and Phoenix mines in Nevada, and Ahafo in Ghana are currently under way. Development of Akyem in Ghana, scheduled to come on-line in 2008, has been deferred until permitting is complete and the power issues in the country are addressed. Newmont’s 66.67%-owned Boddington mine in southwestern Australia is due to begin production late in 2008.
On a positive note, third-quarter 2006 performance will realize a pretax gain of about US$296 million from the company’s sale of the Black Gold heavy oil project in northern Alberta and its Martabe project in Indonesia. The quarter will also likely see a non-cash write-off of about US$94 million for Zarafshan, although the company plans to continue to challenge its expropriation.
The company also recently agreed to pay US$153 million for a 40% interest in Shore Gold’s (SGF-T, SHGDF-O) Fort la Corne diamond project in Saskatchewan, marking some diversification from its gold roots.
Shares of Newmont have recently closed in the US$43-range in New York trading, near the bottom of its 52-week range of US$41.75-US$62.60.
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