ASIA — Batu Hijau Newmont’s Indonesian crown jewel

A long-term approach to doing business in Indonesia is paying off for gold major Newmont Mining (NEM-N), which has one mine in the Southeast Asian country up and running and a second scheduled to come on stream in late 1999.

Newmont’s Minahasa gold mine on the island of Sulawesi, though a sizable producer by industry standards, will be dwarfed by Batu Hijau, the company’s largest greenfield discovery and the largest capital project in its history.

The US$1.9-billion project, which is on the island of Sumbawa, is more than one-third complete, with 6,600 workers on site developing the huge open-pit mine, mill and related infrastructure, including employee housing, a port and electrical generation facilities.

Average annual production from this copper-gold deposit over a 20-year life is expected to be 550,000 oz. gold and 270,000 tons copper, at a cost, after gold credits, of under 50 cents per lb. copper.

Last year, Japanese conglomerate Sumitomo acquired a 35% interest in the project, leaving Newmont with 45%. An Indonesian partner holds the balance.

Batu Hijau will feature a twin-train mill with a capacity of 132,000 tons per day. It will produce a concentrate grading roughly 32.4% copper and 0.79 oz. gold per ton. Long-term sales contracts have already been put in place for 65% of the concentrate at smelters in Asia and Europe.

Proven and probable reserves at Batu Hijau are reported to contain 10.6 billion lbs. copper (4.8 billion equity lbs.) and 12.1 million oz. gold (5.4 million equity oz.) within 1 billion tons grading 0.01 oz. gold per ton and 0.53% copper.

Meanwhile, Newmont is reporting operating improvements at its 80%-owned Minahasa mine. The operation, which came on stream in 1996, processes ore from three open-pit mines, the largest of which contains refractory ore.

Minahasa produced 112,700 oz. gold at a total cash of US$225 per oz. for the partial year of 1996. Production increased to 206,500 oz. gold at a total cash cost of US$167 per oz. in 1997, the first full year of production.

First-quarter 1998 production was 58,400 oz. gold, compared with 39,000 oz.

a year earlier. Total cash costs fell US$52 to US$140 per oz., reflecting higher throughput and grade at the roaster.

The roaster at Minahasa was commissioned in early 1997 to process refractory ore found in the Mesel deposit. Because of the ore’s high mercury content, Newmont also installed an US$8-million scrubber.

At the end of 1997, reserves at Minahasa stood at 6.7 million tons grading 0.23 oz. gold, plus additional resources not yet classed as proven and probable reserves. Last year, Newmont obtained a new contract of work for an area west of Minahasa that it plans to explore. Newmont Mining’s sole asset is its 93.75% ownership of Newmont Gold (NGC-N), the second-largest gold producer in the world. The company’s worldwide operations are targeted to produce between 3.8 million and 4 million oz. gold this year at total cash costs of under US$200 per equity oz.