Barrick, Newmont team up at Post

After failing to merge his company’s gold-producing assets with those of Newmont Gold (NYSE), American Barrick Resources (TSE) Chairman Peter Munk has gone ahead and done the next best thing.

Just six months after the merger talks failed, Munk has struck a preliminary agreement with Newmont that allows both companies to co-operate in areas of mutual interest around the borders of their Nevada mines. The deal is regarded as vital because the rich Post deposit, containing about 70 million tons of 0.14 oz. gold per ton (almost 10 million oz.), sits beneath the boundary separating Barrick’s Goldstrike mine from ground owned by Newmont. Data indicate that 44% of Post reserves lie on Barrick ground while the balance is owned by Newmont.

With a pressing need to access new ore to replace the 1.5 million oz. it will mine each year from deposits along the Carlin Trend, Newmont is developing the bioleaching technology needed to mine refractory ore in the Post deposit. Most of Newmont’s output now comes from lower-grade oxide material. As Barrick is accelerating production at its Goldstrike mine to over one million ounces annually from 550,000 oz. in 1991, Post is also an important part of the Toronto company’s long-term production strategy. “It was the obvious thing to do and the smart thing to do,” said Mike Jalonen, precious metals analyst at Midland Walwyn in Toronto. Under the agreement, Barrick will expand the huge Betze pit on its Goldstrike claims to allow for mining of the Deep and Lower Post deposits which contain sulphide ore grading from about 0.065-0.25 oz.

With stripping outside the Betze pit scheduled to begin next year, the companies will share the cost of mining the Deep and Lower Post reserves outlined beyond Barrick’s Betze pit in direct proportion to the benefits received.

Stripping needed to excavate the huge pit has driven Barrick’s per oz. production costs to US$279, while Newmont’s are running at US$205-210 per oz. However, Barrick will deliver to Newmont 580,000 oz. of near-surface oxide reserves that lie on Newmont ground while extending the Betze pit by about 400 ft. to access ore in the Lower and Deep Post at 1,000 ft. below surface. “This just gives Newmont a greater degree of certainty as to when they are going to get that ore,” said John Lil, Barrick’s vice-president of U.S. operations.

By 1997, when mining commences in the Post zone, Barrick will be processing oxide and sulphide ore using six autoclave units and heap leach facilities at a rate of 15,000 tons per day. Included in that will be material from the Purple Vein deposit, north of Goldstrike, which is expected to yield around 400,000 oz. annually.

At that point, Newmont expects to have commissioned a $195-million roaster and to be utilizing bioleaching technology capable of oxidizing refractory ore to treat low-grade material (below 0.065 oz.) on Barrick’s side of the boundary. In return, Newmont will receive a 50% share of profits after recovery of capital.

Other features of the preliminary agreement include the sharing of exploration data and the establishment of a framework for developing of any orebodies discovered along common property boundaries. Newmont has also consented to set aside some land near the Post area for waste rock disposal and dewatering facilities.