What Were Newmont’s Key Events Since Its Last Earnings Release?
Investors should be aware of two key events for Newmont Mining (NEM): the go ahead for Long Canyon Phase 1 and the renewal of the contract at Batu Hijau.
May 4 2015, Updated 4:05 p.m. ET
Newmont’s key events
Investors should be aware of two key events for Newmont Mining (NEM) that have taken place since its last earnings release. These events could impact the company’s production profile going forward.
Long Canyon Phase I gets the go ahead
Newmont Mining (NEM) reported on April 8 that it will proceed with developing Phase I of New Long Canyon Mine. The first phase of development consists of an open pit mine and heap leach operation. The company expects that the operation will produce between 100,000 and 150,000 ounces of gold per year over an eight-year mine life. The estimated all-in sustaining cost (or AISC) will be between $500 and $600 per ounce.
At current gold prices, the project is expected to generate around $100 million in EBITDA annually, beginning in 2017. Capital expenditure is projected at $250 million to $300 million. The company is projecting a four-year payback and a 17% internal rate of return (or IRR) at the current gold price.
There are projects in the pipeline for other miners, like the Goldrush project for Barrick Gold (ABX), the Penasquito, Eleonore, and Porcupine expansion projects for Goldcorp (GG), the La Coipa project for Kinross Gold (KGC), and Meliadine for Agnico Eagle Mines (AEM), which will be positive for these companies’ respective production profiles.
KGC and AEM form 2.9% and 4.8% of the VanEck Vectors Gold Miners Index ETF (GDX). The SPDR Gold Trust ETF (GLD) tracks spot gold prices.
Six-month export permit renewed at Batu Hijau
PT Newmont Nusa Tenggara (or PTNNT), a subsidiary of Newmont Mining Corporation, announced that it has received the renewal of its six-month export permit from Indonesia’s Ministry of Trades on March 30. The renewed permit will expire in late September of 2015. The permit has been renewed on the assurance from Newmont that it is committed to building a smelter with Freeport McMoRan (FCX).
The PTNNT is continuing to work with the Indonesian government to amend its contract of work (or CoW) to resolve ongoing issues pertaining to in-country smelting and refining and export of copper concentrate. Under the CoW, PTNNT has the right to continue to operate the project for 30 years from its start-up. Commercial production at Batu Hijau began in 2000.
Both of these events are positive for Newmont. There are, however, other catalysts that investors should look out for in Newmont’s 1Q15 results, which we’ll discuss in detail in the next part.