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NEM's $4.8B Project Under Review - Analyst Blog

Posted: 2/29/2012 12:30:00 PM
Referenced Stocks: ABX;AU;CAS;GFI;NEM

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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