NEM's $4.8B Project Under Review - Analyst Blog
February 29 2012 - 7:30AM
Zacks
Newmont Mining
Corp.'s (NEM) Minas Conga gold and copper project of
$4.8 billion is under Peru government's 40-day review over concerns
regarding its impact on the local water supply.
The Peru government has appointed
two Spanish engineers to review the project, which was temporarily
suspended in November 2011 following violent demonstrations by
local residents.
The project will provide the
company with significant revenues by the taxes levied on the mined
product. Newmont expects to boost its production at Conga by the
end of 2014 or early 2015.
During the first five years, the
company expects average annual production output of 580,000 ounces
to 680,000 ounces of gold and 155 million to 235 million pounds of
copper.
Newmont owns 51.35% of Conga,
Peru's biggest mining project, while the remaining portion is held
by Compania de Minas Buenaventura SA and the International Finance
Corp. Peru is highly rich in mineral resources and the locals
complain that the mining companies and the government have not done
enough toward the communal development of the regions surrounding
the mines.
Recently, Newmont announced its
fourth-quarter 2011 results. The attributable gold and copper
production was 1.3 million ounces and 47 million pounds,
respectively, in the quarter at costs applicable to sales (CAS) of
$602 per ounce, and $1.58 per pound on a co-product basis.
For fiscal 2012, the company
expects attributable gold production of approximately 5.0 million
to 5.2 million ounces, with attributable copper production of 150
to 170 million pounds. Costs applicable to sales are expected to be
between $625 and $675 per ounce for gold. Costs applicable to
copper sales are expected to be between $1.80 and $2.20 per pound
of copper.
On the other hand, Newmont has
proposed re-location and capacity expansion of the existing lakes
so that the local water supply is not hampered.
Currently the shares of Newmont
retain a Zacks #3 Rank (short-term “Hold” recommendation). The
company competes with the likes of AngloGold Ashanti
Ltd. (AU), Barrick Gold Corporation (ABX)
and Gold Fields Ltd. (GFI).
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
GOLD FIELDS-ADR (GFI): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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