U.S. MINING REPORT — Newmont seeks international mining

Already big names in gold mining, Newmont Mining (NYSE) and Newmont Gold (NYSE) can only continue to grow with their recently announced merger plans.

Newmont Gold is currently North America’s largest producer of gold from domestic mines (all are in northeastern Nevada), while Newmont Mining has been making a name for itself on the international scene with projects such as the Zarafshan-Newmont joint venture in Uzbekistan and the new Minera Yanacocha mine in Peru.

Newmont Mining also has two gold projects under development in Indonesia and is actively exploring in South America and southeast Asia.

Late last year, the Denver, Colo.-based companies announced a plan to combine their assets, gold reserves and operations. Newmont Gold, 90.1%-owned by Newmont Mining, will become the operating company. The two are not merging completely, however; they will continue to trade as separate companies on the New York Stock Exchange.

Newmont Gold, well-established within Nevada’s Carlin Trend, has five operating mines and eight other gold deposits. It reported 1993 output of 1.7 million oz. In 1992, Newmont Gold produced almost 1.6 million oz. at an average operating cost of US$207 per oz.

The Uzbekistan heap-leach project, in which Newmont Mining has a half interest, is expected to yield at least 5 million oz. gold over 16 years. A deal has been struck with international lenders on US$105 million in project financing. The large credit facility was completed with a consortium of international lenders, arranged by the European Bank for Reconstruction and Development (EBRD) and Barclays Bank.

The project is the first financing by EBRD in Uzbekistan. Its portion amounts to US$52.5 million. The remaining US$52.5 million came from commercial lenders in the U.S., the United Kingdom, Switzerland, Germany, France and Austria.

Production is scheduled to begin in early 1995. Current stockpiles of gold ore at the Muruntau mine will provide an average annual output of some 310,000 oz., with production during the initial years being above 450,000 oz. per year. Newmont says the gold will be sold in international markets. The joint venture has obtained the right to acquire at least 30 million tons of additional low-grade ore. This additional material increases to 8.7 million oz. the joint venture’s total reserves.

Uzbekistan was the second-largest gold producer in the former Soviet Union (after Russia) and is now the eighth-largest in the world. Newmont is supplying the technology to leach the stockpiled material.

The joint venture was completed after 27 months of discussions and planning, which started during a time when Uzbekistan was still part of the Soviet Union. Newmont’s joint-venture partners from the republic are the State Committee of Geology and Mineral Resources of the Republic of Uzbekistan, and the Navoi Mining and Metallurgical Combinat. Each partner has a 25% interest in the venture.

A Peruvian gold deposit discovered by a Newmont Mining joint venture in the mid-1980s came on-stream during the latter part of last year at a rate of about 220,000 oz. Total output for 1993 was expected to be about 60,000 oz. Situated in northwestern Peru, Minera Yanacocha is 38%-owned and managed by Newmont Mining. It contains 1.3 million oz. of proven reserves, with additional reserves (all classes) of 5.7 million oz. Newmont believes the operation has the potential to increase its annual output significantly within the next four years because of a 63,000-acre land position. Production comes from three open pits. The oxidized ore is processed in a dump leaching operation. Total initial capital costs to develop the deposits and establish production facilities were US$45 million.

In addition to Minera Yanacocha, Newmont has a 65% interest in nearby exploration claims covering a further 500,000 acres. Exploration is under way along an extension of the volcanic belt which hosts the Yanacocha deposits.