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Can Newmont’s Project Pipeline Support Production Growth?

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Project pipeline

Newmont Mining’s (NEM) project pipeline is one of the strongest in the sector (GDX)(GDXJ), better than Kinross Gold (KGC), Barrick Gold (ABX), and AngloGold Ashanti (AU). The pipeline also remains scattered with projects expected to come online in the near term, medium term, and long term, keeping growth ongoing. While some of these projects should replace more mature operations, others could add new production at lower costs to the company’s profile.

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Tanami Expansion and other near-term projects

As we discussed in the previous part of this series, the company started the commercial production for the Tanami Expansion in August 2017. In the last three years, the company built Merian and Long Canyon on time and 20% below budget. The company also sounded confident about finishing the next project, Northwest Exodus, in 2018. Both Tanami and Northwest Exodus are expected to add profitable production and service platforms for further exploration.

Other projects included in the outlook

Previously in 2017, the company announced it would fund four expansion projects, which are expected to improve profitability and extend mine life at Ahafo, Twin Creeks, and Yanacocha. The company had approved a total of nine projects over the last three years. Newmont’s CEO mentioned during the 3Q17 earnings conference call that these projects are expected to add annual gold production of up to 1.7 million ounces at all-in sustaining costs (or AISC) of $750 per ounce for the first five years. The company also expects these projects to generate an average internal rate of return above 20%.

The projects marked in light blue and grey in the above chart are included in Newmont’s outlook. The mid-term projects that are expected to improve its outlook are marked in green, while its longer-term projects are in dark blue.

Now let’s discuss Newmont’s cost improvement strategy in the next part of this series.

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