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Newmont’s Strong Project Pipeline Offers Near-Term Growth Options

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Aug. 7 2015, Updated 10:05 a.m. ET

Strong project pipeline

Newmont Mining’s (NEM) project pipeline remains one of the strongest among its peer group, including Barrick Gold (ABX), Kinross Gold (KGC), and Agnico-Eagle Mines (AEM). Its three main projects are running concurrently and on schedule. These projects are the drivers for increasing production and lowering cost guidance going forward.

The above graph shows that Newmont’s three main projects—Long Canyon Phase 1, Turf Vent Shaft, and Merian—are in the execution stage. The Cripple Creek & Victor mine (or CC&V) acquisition will also contribute to the production increase going forward.

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Execution-stage projects

The Turf Vent Shaft is expected to reach commercial production later in 2015. It’s expected to contribute an additional 100,000–150,000 ounces per year to Newmont’s production volumes. Merian, which is expected to be completed by late 2016, will add around 400,000–500,000 ounces. Finally, Long Canyon Phase 1 is slated to begin production by early 2017. It will also contribute 100,000–150,000 of additional ounces to Newmont.

CC&V to drive near-term production growth

The CC&V acquisition is expected to close in August 2015. The CC&V mine’s all-in sustaining costs are $825–$875 per ounce, lower than Newmont’s current averages. The CC&V mine’s expansion includes a new leach pad, recovery plant, and mill. The mill will be completed in 2015, and the expansion will go on for the remainder of 2015. The new leach pad and recovery plant will be commissioned in the second half of 2016.

Newmont expects the expansion to increase mine life to at least 2026. The mine is also expected to add 350,000–400,000 ounces of gold per year to Newmont’s production total in 2016 and 2017. Approximately two-thirds of capital costs were already spent as of 1Q15.

If you don’t want to pick up individual miners, the VanEck Vectors Gold Miners ETF (GDX) provides an alternative means to invest in the sector. The fund invests in senior and intermediate miners. AngloGold Ashanti and Kinross form 3.7% and 2.8%, respectively, of GDX’s holdings.

To get exposure to gold prices, investors can also invest in gold-backed ETFs such as the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU).

To read more about CC&V’s acquisition by Newmont, visit Market Realist’s Newmont Mining Discovers Asset Optimization Is Worth the Effort.

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