Newmont Mining (NEM) has four projects in final stages, all of which will start production either this year or next. As we discussed in the previous part of this series, one of its major projects, Merian, came online in October. It was completed on time and below budget.
Long Canyon to complete before time
The next project scheduled to come online is Long Canyon in Nevada. The company expects the first gold pour from this project next month, which is two months ahead of schedule. The construction on the project is nearly complete. During its 3Q16 earnings call, the company mentioned that its internal rate of return on the $1,200 per ounce gold price is in the high teens. Production is estimated to be between 100,000–150,000 ounces per year over an eight-year mine life.
The company approved funding for Northwest Exodus in June 2016, and the project is now under construction.
According to the company, this project is a profitable expansion located near its existing underground mine in the Carlin North area. It will use the existing infrastructure at the site to add to low-cost ounces to the company’s portfolio. It will add ~700,000 ounces later this year while extending the mine life by seven years. It’s expected to reach full production in 2018.
The Tanami Expansion in Australia is also on budget and on schedule. It’s expected to start production by the second half of 2017 and will increase the production and lower all-in sustaining costs at the existing Tanami operation. The company expects to generate an internal rate of return in the mid-30% range on this project. The company also mentioned during the call that the recent exploration results at Tanami have confirmed the potential to double the current reserve base.
Meanwhile, Goldstar, which is a located in the Carlin North area, is expected to deliver over 500,000 ounces of production over a 13-year period.
Newmont’s project pipeline continues to be one of the strongest among peers, including Barrick Gold (ABX), Kinross Gold (KGC), and AngloGold Ashanti (AU). Notably, AngloGold Ashanti and Kinross make up 3.7% and 2.8%, respectively, of the VanEck Vectors Gold Miners ETF (GDX).
In the next part of this series, we’ll look at the advances Newmont Mining has made on costs as of 3Q16—and how far it still has to go.