Newmont settles in Uzbekistan

Newmont Mining (NMC-T, NEM-N) has settled with the Uzbek government over its 50%-stake in the Zarafshan heap-leach operation in the country.

Last August the government seized gold and other assets belonging to Newmont over tax and criminal allegations.

But those bitter days seem long behind the two parties now as a joint statement from Newmont and Uzbekistan’s state-owned Navoi Mining and Metallurgical Combinat (NGMK) and the State Committee for Geology and Mineral Resources said they had reached and amicable and final resolution to all disputes.

Last week Newmont said it would receive $80 million as part of the settlement that will see it lose its stake in the project.

Last October, an Uzbek court said the Newmont gold venture which held the stake — was bankrupt after it seized $49 million in taxes.

At the time Newmont said the bankruptcy proceedings and criminal investigations of the operation were part of a government ploy to expropriate its interest in the asset.

Newmont, in turn, wrote off the book value of its interest in the project for a loss of US$101 million.

Zarafshan which sits in the Kyzylkum desert 402-km west of the Uzbek capital of Tashkent — produces gold from low-grade oxide ore stockpiles generated by the massive Muruntau open-pit gold mine, which has been in operation since the 1960s. The project is expected to run into mid-2011.

At the end of 2005, Newmont’s shares of reserves at the project were roughly 1.7 million oz.

Newmont became active in the project back in 1992 when it signed a joint venture agreement with the State Committee for Geology and Mineral Resources and the NGMK. In 2005, the mine produced 122,700 ounces of gold.

The Uzbek government also worried investors back in August of 2006 when it revoked a license from Britain’s Oxus Gold (OXS-L) to develop the Khandiza base metals deposit.

In New York on July 23 Denver-based Newmonts shares were up 27 to US$43.27 on 6.8 million shares traded.