Future growth visibility boosts stocks. For miners, project pipelines and past execution are key factors in determining future production. Newmont Mining (NEM) has one of the best project pipelines in the sector (GDX)(GDXJ)—it may be stronger than Kinross Gold’s (KGC), Barrick Gold’s (ABX), and AngloGold Ashanti’s (AU).
Newmont Mining is poised to overtake Barrick Gold as the world’s largest gold producer in 2018. For more on this, please read Barrick Gold versus Newmont Mining: Comparing Miners in 2018 and Beyond.
The eight projects that NEM has approved since mid-2014 are expected to add annual gold production of up to 1.2 million ounces at all-in sustaining costs of $750 per ounce.
Projects providing short- to medium-term returns
As we discussed in the previous part of this series, Newmont has already declared commercial production for two projects this year. In addition, it remains on track to reach commercial production at Subika Underground in the fourth quarter. The work at its Ahafo Mill Expansion is also ramping up and is expected to reach commercial production in the second half of 2019.
In South America, its Quecher Main project to extend oxide production is underway. This would extend oxide production at Yanacocha. In Australia, it is progressing with its Tanami Power project, which is expected to reduce costs and emissions and facilitate future growth. The two completed projects, as well as the four near-term projects, are expected to generate an average internal rate of return above 20.0%.
Other projects included in the outlook
Among its longer-term projects, Newmont has started advancing Long Canyon Phase 2 to a pre-feasibility study. Among its latest investment initiatives, NEM acquired NovaGold’s (NG) 50% ownership interest in Galore Creek. It has also formed a partnership with Teck Resources (TECK), which owns the other half.
Newmont’s CEO, Gary Goldberg, mentioned in the second-quarter earnings call that Galore Creek is the largest undeveloped copper-gold project and holds the potential for multiple decades of profitable production.
As shown in the chart above, all sustaining and current projects are included in Newmont’s outlook, while mid- and long-term projects are excluded. In the next part of this series, we’ll discuss Newmont’s cost improvement strategy.