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Can Newmont Mining Offset Declining Gold Production?

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Maturing mines

Some of Newmont Mining’s (NEM) gold mines, including Yanacocha, Boddington, and Twin Creeks, are maturing. This will mean the company’s production will decline beyond 2018. In the meantime, Newmont is trying to find ways to replace the reserves from its maturing mines.

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Declining production

Reserves at Newmont’s Yanacocha mine are being depleted and stockpiled ore is being processed. When grades start to revert to average, production will also decline at Batu Hijau and Twin Creeks. But it will take a few years before this happens.

Other gold miners, including Kinross Gold (KGC) and Iamgold (IAG), are also seeing reserves decline.

KGC and IAG respectively form 2.9% and 1% of the VanEck Vectors Gold Miners ETF’s (GDX) holdings. The SPDR Gold Trust (GLD) gives exposure to gold prices.

Organic growth projects, including Merian, Long Canyon, the Turf Vent Shaft, and Turquoise Ridge, along with the contributions from the Cripple Creek & Vector mine, should be able to more than offset the overall decline at Newmont Mining.

Contribution from organic projects

Newmont is on track to deliver new, profitable gold production from its organic growth projects. These include:

  • the Turf Vent shaft in Nevada – Production is expected to start in late 2015. It could add 100,000 ounces to 150,000 ounces to annual production totals. The shaft provides the ventilation required to increase production and decrease mine costs over the 11 year mine life at Leeville.
  • the Merian gold project in Suriname – Production is expected to start in late 2016. Merian is expected to produce between 400,000 ounces and 500,000 ounces during the first five years of production at all-in sustaining costs, or AISC, of $650 to $750 per ounce.
  • Long Canyon, Phase 1 in Nevada – The company forecasts between 100,000 ounces and 150,000 ounces of gold per year from this operation, over an eight-year mine life, at AISC of $500 to $600 per ounce. Production is expected to start in 2017.

In the next part of this series, we’ll see how Newmont’s portfolio optimization efforts are helping it reduce unit costs.

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