Newmont Mining Discovers Asset Optimization Is Worth the Effort

(Continued from Prior Part)

Newmont Mining (NEM) has increased its exposure to North America. It has acquired the Long Canyon mine and now plans to buy the CC&V (Cripple Creek & Victor) gold mine, selling some of its non-core assets along the way.

Newmont’s management says there’s lower technical risk with the CC&V mine because its operations are similar to Newmont’s other operations.

This acquisition will help Newmont achieve a lower-cost profile. The CC&V mine’s cost attributable to sales is $725 to $775 per ounce and all-in sustaining costs are $825 to $875 per ounce, lower than Newmont’s current averages. Sustainable capital is expected to be $10 million to $15 million per year.

The CC&V mine’s expansion includes a new leach pad, recovery plant, and a new 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 will increase the mine life to at least 2026. It’s also expected to add between 350,000 and 400,000 ounces of gold per year to Newmont’s production total in 2016 and 2017. Approximately two-thirds of capital costs had already been spent as of 1Q15.

Additional upside could be had through surface and underground mine expansion options, but that would require further definition and optimization.

Newmont has optimizations planned to increase production and decrease costs from operating the CC&V mine. These optimizations will include lowering the direct mining costs by up to 10% through improved productivity. The CC&V mine’s operations are similar to Newmont’s existing operations. By applying enhanced flotation technology, Newmont should be able to increase mill recoveries by 2%.

Goldcorp (GG) acquired Probe Mines in March 2015. Meanwhile, Barrick Gold (ABX) is getting rid of most of its non-core assets to optimize its portfolio and reduce debt.

Barrick forms 7% of the Market Vectors Gold Miners ETF (GDX). To get exposure to gold prices, investors can also invest in gold-backed ETFs such as the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU).

In an effort to optimize its portfolio, Newmont has not only bought assets, it has sold some as well. In the next part of this series, we’ll see how its non-core asset sales are progressing.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Newmont Mining Asset Optimization Efforts Encourage Analysts
• Part 2 - Newmont Mining Acquires Cripple Creek from AngloGold
• Part 4 - Newmont Mining’s Non-Core Asset Sales to Include the Waihi Mine