What is Newmont’s portfolio optimization approach?



How Newmont is optimizing its portfolio

Newmont Mining (NEM) ranks and rates all assets and opportunities based on the following four criteria:

  • generate value
  • improve mine life
  • lower position on cost curve
  • represent acceptable risk

In accordance with the above matrix, Newmont has closed or divested some of its projects like the Midas mine in Nevada, the Jundee mine in Australia, and La Herradura joint venture in Mexico. All of these divestments are part of the company’s policy to focus on lower cost, longer life operations. The projects mentioned fell in the high-risk, low-value quadrant.

In an effort to optimize its portfolio of assets, Newmont is improving the value of projects that fall in the low-risk, low-value quadrant, like Tanami in Australia. Newmont can optimize these projects to perform at their highest potential through operational improvements.

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Reducing risk in Conga

Newmont is also looking to reduce the risk in high-value, high-risk projects like Conga in Peru. As we’ve discussed in one of the earlier articles in this series, Newmont stalled Conga and started it again on a “water first” approach. Under this approach, Newmont will first build the water reservoirs before proceeding with any kind of mining-related construction. This will ensure water supplies for locals, which was the main reason for stalling the project.

Newmont is also planning to leverage its infrastructure of the Yanacocha project, which is in close proximity of Conga to ensure risk-adjusted returns that justify future investment.

Newmont isn’t alone in embarking on a portfolio optimization path. Its peers (GDX) like Barrick Gold (ABX), Goldcorp (GG), and Agnico Eagle Mines (AEM) have also started optimizing their portfolios through divestments of non-core, high-cost assets.

SPDR Gold Trust ETF (GLD) provides exposure to the spot gold prices.


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