Vancouver — Denver-based
Driving the rise in production are the company’s operations in Ghana, where reserves are projected to increase to about 10 million oz. by year-end from the current 5.5 million oz. By 2007, production from Ghana is expected to add 750,000 oz. gold per year to Newmont’s global total, as the Ahafo project starts up in 2006 and the Akyem project, a year later.
Situated in the Brong Ahafo region of western Ghana, Ahafo is an open-pit target slated to crank out 425,000-475,000 equity oz. per year at total cash costs of US$180 per oz. over a 15-year mine life. Capital costs are expected to ring in at US$300-325 million.
To date, 12 deposits have been identified at Ahafo, several of which are outlined along a 76-km strike length remaining open at depth and along strike.
The Akyem mine is in the Birim North district of eastern Ghana, and is slated to produce 350,000-400,000 equity oz. gold annually over a mine life of 13 years. Total cash costs are estimated at US$155 per oz.; capital costs, at US$220-245 million.
The processing circuits at both projects will be semi-autogenous grinding and ball mills with carbon-in-leach recovery circuits, and possibly gravity circuits.
Newmont picked up the projects through its takeover of Australian-based Normandy Mining in 2002.
The Ghanaian ground had been largely ignored, but early drilling by Newmont quickly added ounces to the reserve base, expanding it by more than 60% last year.
At the end of 2002, Ahafo had 3.9 million equity ounces in reserves, while Akyem contained 1.6 million oz. However, Newmont has had up to five drill rigs working at Ahafo on a 58,000-metre program in 2003, while at Akyem seven rigs have been employed in a 36,000-metre campaign.
Newmont now owns 100% of Ahafo, as a result of having bought
Newmont has an 85% stake in Akyem, with Ghanaian company Kenbert Mines holding the remaining 15%. Both projects are subject to the Ghanaian government’s 10% carried interest after the return of capital.
A development decision on both projects is expected by year-end providing an agreement is reached with the Ghanaian government on fiscal terms and conditions. Negotiations concerning long-term taxes, import duties, exportation of production and other matters have been completed with a government team. The proposed deal still needs to be analyzed by the full cabinet and is expected to go to the Ghanaian parliament.
Ghana is expected to yield low-cost production and help Newmont’s overall cash cost per ounce, driving them down to US$170-185 by 2007, about 12% lower than the current US$198-208.
In addition to the Ghanaian projects, Newmont is planning to expand its exploration and development efforts at the Gold Quarry South Layback, Leeville and Phoenix projects in Nevada and the Boddington project in Western Australia.
“The development of these projects will, on a risk-adjusted basis, significantly enhance the company’s net asset value,” says Newmont CEO Wayne Murdy. “The projects are expected to generate double-digit rates of return based on a conservative gold price assumption of US$325 an ounce.”
The timing for production at the new Phoenix project, where 6 million oz. of reserves have been outlined, has been moved up a year to 2007. Annual gold sales from Phoenix are pegged at 370,000-420,000 oz.
Newmont’s board approved the Gold Quarry South Layback and Leeville projects last year. Development on both Nevada projects is ongoing, with gold production at the latter on schedule for the fourth quarter of 2005.
In Australia, the Boddington project carries a reserve estimate of 4.9 million oz. Startup is slated for 2006, subject to the approval of partners. Newmont’s share of Boddington production will be 270,000-340,000 oz. gold per year.
Turquoise Ridge
Meanwhile, Newmont has agreed to take a 25% stake in
Newmont will buy up to 1,800 tonnes a day of joint-venture ore at cost and process it at its nearby Twin Creeks mill. The majors will each contribute a pro-rata share of mine-development costs, as well as environmental-closure expenses related to future joint-venture operations. A current 2% net smelter return royalty payable to Newmont will be eliminated.
“The formation of the joint venture is the right business decision as it reduces capital requirements, lowers operating costs, and represents a more efficient use of resources,” says Placer Dome President Jay Taylor. “The joint venture serves as a good model for the industry in terms of efficient use of infrastructure.”
Placer has been producing gold from the Getchell portion of the property under an earlier processing agreement with Newmont. According to that agreement, Newmont received a credit for its processing cost of Getchell ore, plus a fee. The deal was inked in October 2001 and is good for 30 months (until June 2004), or until 1 million tons of ore are sold.
Ore resulting from development of the new Turquoise Ridge operation was also slated to be processed under that agreement. The Turquoise Ridge mine started up in April and is expected to hit full production of 300,000 oz. annually by the end of 2004.
Placer acquired the two deposits in 1999 as a result of its $1.1-billion merger with Denver-based Getchell Gold. Some two months after the deal was completed, Placer stopped production at the problem-plagued Turquoise Ridge in order to focus on exploration and development. Ore from the underground Getchell mine was stockpiled for later processing.
In late 2001, Placer took a US$292-million writedown on the project after extensive analysis failed to produce a mine plan that would recover the carrying value of the asset. The geology and poor ground conditions required a highly selective mining method that limited daily production to 1,500-2,500 tonnes.
Last year, Placer began evaluating the high-grade resources in the North zone of the Turquoise Ridge deposit. The program included 600 metres of drifting and 33,000 metres of diamond drilling. The results prompted the company to consider resuming production at Getchell.
Proven and probable reserves at Turquoise Ridge, based on a gold price of US$300 per oz. gold, are estimated at 3.5 million tonnes grading 23.9 grams gold per tonne, or 2.7 million contained ounces. Placer expects to convert additional known mineralization into reserves within the next 30 months.
The capital cost of ramping up to full production is estimated to be US$80 million, including US$41 million for underground development, US$26 million for refurbishing the existing mill, and US$14 million for surface work and initial operating costs.
The new deal is expected to lower operating costs and improve recoveries, with cash and total costs coming in at US$190 and US$230 per oz., respectively, compared with the original estimates of US$215 and US$265 per oz. The move saves Placer the US$26 million in capital required to refurbish the existing mill, and the expected life-of-mine capital investment in the project will be reduced by more than US$40 million as Newmont contributes its share of capital expenses.
The savings will allow the joint venture to reduce the economic cutoff grade at Turquoise Ridge, which in turn will improve the continuity of the resource, boost reserves, and extend the life of the mine beyond the existing 9-year plan. Placer aims to issue a revised production forecast, along with updated resource and reserve estimates, using the new cost structure.
Geologically, the Turquoise Ridge deposit is hosted by hornfelsed mudstone, limestones, calcareous mudstones and some pillow basalts. Mineralization generally occurs at the intersection of north-south-, northeast- , and northwest-trending faults. The North zone is hosted in interbedded, carbonaceous mudstones and limestones, as well as calcareous mudstone breccias. Gold distribution is related to low-angle structural zones and to intersecting, high-angle, north-south- and northeast-trending faults. Anticlines trending to the northwest and northeast play a significant role in localizing the gold mineralization.
The Getchell deposit is hosted in the Getchell fault, and in footwall of the fault. The footwall deposits occur at the intersections of northeast-, north-south- and northwest-trending faults and are hosted in carbonaceous limestone, silty limestone and calcareous mudstone breccias.
Gold mineralization is associated with arsenic, mercury and, to a lesser extent, antimony, as well as pervasive de-calcification, silicification and carbonaceous alteration.
The joint-venture agreement limited to an area surrounding the Turquoise Ridge shaft; Placer Dome retains 100% ownership of properties outside the area of influence.
Other core areas, which are considered growth prospects for Newmont, are the Yanacocha mine in Peru and the Batu Hijau copper-gold operation in Indonesia.
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