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Newmont chasing more African deals
Brendan Ryan
Posted: Wed, 10 Aug 2005

[miningmx.com] -- NEWMONT Mining’s success in Ghana, where it has two new gold mines under development, has whetted the US gold heavyweight’s appetite for further exploration in West Africa.

Interviewed at the Diggers and Dealers Mining Forum in Kalgoorlie, Newmont MD Paul Dowd said the group intended expanding its exploration activities in West Africa.

Newmont would get involved through joint ventures with existing junior gold mining and exploration companies rather than put its own exploration teams in on the ground, he said without naming specific destinations.
Ghana as new gold province is now reality
The US blue chip is notoriously risk-averse in the choice of countries where it operates. Its executives constantly stress the percentage of its gold reserves located in “safe” countries such as the US and Australia which are rated AAA.

Dowd did precisely that in his presentation where he put up a graph showing that some 55% of Newmont’s reserves are located in AAA-rated countries compared with an average of just over 20% for all the world’s gold majors.

Ghana is the only African country where Newmont operates at present. It got involved in Ghana essentially by accident when it bought Australian gold group Normandy Mining five years ago. Normandy owned various exploration interests in Ghana to which it attributed minimal value in terms of the merger bid.

But the follow-up assessment by the group’s geologists revealed what Newmont executives started calling a possible new gold “province” for the group. Dowd said that assessment is now reality.

Newmont has increased its gold reserve position in Ghana from 1 million oz to 16 million oz over the past five years and Dowd said this total would continue rising. These were “cheap” ounces which will help Newmont maintain its low cost position on the gold industry production cost curve, he said.

Over the past two years, Newmont has improved its cost position moving from the 56th percentile on the industry cost curve in 2002 to the 38th percentile in 2004. It will produce 925,000 oz of gold annually from Ghana when the two mines now under development – Ahafo and Akyem – are at full production.

Ahafo is expected to start production in the second half of next year. It currently has reserves of 10,6 million oz and will produce at a rate of 525,000oz/year at total cash costs which are estimated at $200/oz. Akyem will begin production during 2007. It currently has reserves of 5,4 million oz and will produce at around 400,000oz/year at total cash costs of between $200oz and $220/oz.

Dowd also clarified some of the framework regarding Newcrest’s sale of its 22% stake in the Boddington gold mine.

Newmont is a 44% shareholder in Boddington and, with AngloGold Ashanti, holds a right of first refusal over Newcrest’s stake. If Newcrest finds a buyer at a higher price than it has pitched to Newmont and AngloGold, then it is free to sell its Boddington stake to the new buyer.

But if Newcrest can only get a bid that is lower, or even matches, the price at which it offered the shares to Newmont/AngloGold Ashanti, then it cannot sell the stake without returning to AngloGold Ashanti/Newmont. Asked what happens then Dowd replied: “Then we negotiate some more.”