Newmont launches bio-leach project

In a move aimed at upgrading its processing capabilities at a time of prolonged low gold prices, Newmont Mining (NEM-N) has started an US$8-million bio-leaching and milling project at its Carlin operations in Nevada.

The Denver-based company intends to use the additional mill capacity to process refractory gold-bearing material.

Plans call for the extraction of 645,000 oz. gold from 11.7 million tons of stockpiled material that averages 0.055 oz. per ton.

The material will be crushed and submitted to a 100-day bioleach cycle, after which the company will send the ore to mill No. 5 at Carlin. The project, which should take a year to construct, is expected to require less capital and less leach time, while yielding greater recoveries than the originally proposed heap-leach bio-oxidation process.

For several years now, Newmont has been tinkering with carbonaceous refractory ores to unlock gold from otherwise uneconomic material. With this project, Newmont expects to generate US$40 million in cashflow between 2000 and 2003.

Newmont’s North American production was down in the second quarter, owing to reduced mining rates and lower grades at its Nevada operations. Also, the company was processing transitional ores (with a moderate refractory content) through its oxide mills, resulting in lower recoveries and higher costs.

Newmont produced 634,200 oz. at a total cash cost of US$211 per oz., during the recent quarter, compared with 773,200 oz. at US$199 in the corresponding period last year. Higher costs were partially offset by a 14% reduction in cash costs at the Mesquite gold mine in southern California.

While domestic production had its troubles, overseas production was up 20% from a year ago. Overseas operations contributed 318,100 oz. during the quarter, with cash costs down US$6 per oz. to US$127 per oz.

At the Zarafshan-Newmont joint venture in Uzbekistan, production hit a record 133,800 oz. at US$172 per oz. Newmont’s 50%-share amounted to 66,900 oz.

Production at the Yanacocha operation in northern Peru increased 26% to 363,700 oz. at US$111 per oz., compared with 287,900 oz. a year ago at US$109 per oz. The company’s 51% share of production amounted to 186,700 oz.

The Minahasa mine in Indonesia, in which Newmont owns an 80% interest, contributed 64,500 oz. at US$124 per oz. However, harder ores reduced mill throughput to below year-ago production levels of 73,900 oz. at US$108 per oz.

Elsewhere in Indonesia, the company has nearly finished building the mammoth Batu Hijau copper-gold mine. Mining has reached more than 300,000 tons per day, an increase of 50% over the quarter. The company is making last-minute preparations for production and expects to complete two semi-autogenous grinding mills, as well as the crushing and conveying system, port and power plant during the third quarter. Startup is scheduled for the fourth quarter.

Back in Carlin, Newmont began constructing the Deep Post underground mine, which is expected to boost domestic production by 10% in the second half of 1999. Cash costs for that period should decline correspondingly to US$200 per oz.

Newmont posted second-quarter earnings of US$7.1 million (or 4 cents per share), compared with US$24.6 million (16 cents per share) a year ago. For the first half of 1999, earnings totalled US$17 million (10 cents per share), compared with US$54.9 million (22 cents per share) in the initial six months of 1998.

Production in the recent second quarter generated US$110.9 million in operating cash flow, despite a US$35 per oz. drop in the price of gold. The company, which remains largely unhedged, realized a price of US$287 per oz. during the 3-month period.

However, Newmont recently sold forward 161,100 oz. gold per year for the years 2005 through 2007, representing under 4% of estimated annual production. The put options value the gold at US$300 per oz., though the company could realize prices of up to US$380 per oz. should the spot price increase. As a result, Newmont realized an immediate gain of US$137 million, which it used to pay down its revolving credit line.

For the remainder of the year, Newmont expects to produce 2.2 million oz. at a cash cost of US$175 per oz. Total production costs are pegged at US$230 per oz.