Newmont starts ramp-up at Peñasquito as strike ends

Newmont (TSX: NGT; NYSE: NEM), the world’s largest gold producer, has begun restarting operations at its Peñasquito mine in Mexico, after reaching a definitive agreement with striking workers last week.

Unionized employees at Mexico’s largest gold mine downed tools for over four months, costing Newmont millions of dollars a day.

“This unnecessary strike has caused significant hardship for all of our employees, contractors, host communities, suppliers and customers,” president and chief executive officer Tom Palmer said. “We will continue to honour our commitments, comply with the law and the collective bargaining agreement, and work to protect the long-term value of Peñasquito.”

Newmont said that, as part of the final deal, the company will not pay any additional incremental profit sharing for 2022, which was the basis for the drawn-out strike. 

The U.S.-based gold major noted the amount it paid this year in terms of profit sharing “fully complied with Mexican law and the Collective Bargaining Agreement.”

Another key point in the agreement indicates that, if Peñasquito reports no profit in 2023 as a consequence of the strike, Newmont will pay an additional bonus in the second quarter of next year, equivalent to two months’ wages.

The gold giant also said it would give workers a fixed amount, equivalent to about 60% of wages lost, retroactively effective on June 7, when the strike began. The move seeks to mitigate the financial impact that the strike has had on the company’s workforce, Newmont said.

Additional gains

Newmont said that as part of scheduled and separate annual wage negotiations, the company and the union have agreed to an 8% wage increase, in line with the country’s mining industry wage increases for 2023. 

Newmont noted these wage negotiations were not part of the union’s claims as grounds for the latest stoppage, which was the third labour dispute at Peñasquito since the company acquired the mine through its merger with Goldcorp Inc. in 2019. 

Peñasquito, about 770 km northwest of Mexico City, is Newmont’s third-largest mine by sales. It brought in US$2.8 billion ($3.8 billion) in sales in 2022, down 17% from the prior year because production lagged.

The operation also contributed US$1.9 billion in economic value to Mexico, including US$643 million in employee wages and benefits, taxes, and royalty payments, the company said.

Newmont stated that its priority was to safely return the workforce to Peñasquito, adding that it would provide a status update next week during its third-quarter earnings call.

Company shares were up more than 2% to $55.51 on Tuesday morning in Toronto, valuing the company at $44.1 billion. Its shares traded in a 52-week range of $47.93 and $76.08.