Newmont Mining Corp. (NEM) reported that its plans to begin production at its Boddington gold mine in Western Australia this month is on course and the facility will ramp up to full capacity within 12 months. The mine will be Australia’s largest gold mine with reserves of 20 million ounce of gold.
The mine is expected to produce one million ounces per annum in the first five years of operation at a projected cost of $300 an ounce. The company expects total capital expenditures of $2.8 billion–$2.9 billion on a 100% basis for the project. The mine has an expected mine life of more than 24 years.
In June 2009, Newmont had fully acquired the Boddington mine by purchasing the remaining 33.33% stake from the South Africa-based AngloGold Ashanti Ltd. (AU). The Boddington mine is placed in close proximity to the Super Pit mine in Kalgoorlie, which is owned by an equal joint venture between Newmont and the world’s largest gold miner Barrick Gold Corp. (ABX).
We expect Newmont’s gold sales to rise once Boddington begins production. Increased gold sales at the lower-cost Yanacocha, Peru and Batu Hijau, Newmont’s other operations in Indonesia will also drive revenues. For 2009, Newmont expects equity gold sales in the range of 6.35 million ounce to 6.70 million ounce at lower costs applicable to sales of $400 per ounce–$440 per ounce, exceeding from 5.2 million ounce in 2008.
Indonesian Government Eyes Newmont
On Aug 10, 2009, media reported that the Indonesian state-owned nickel producer PT Aneka Tambang (ANTM.JK) along with a government investment body would buy a stake in Newmont’s operations in Indonesia, which the company would have to sell under Indonesian divestment statute. A final decision on the purchase of the unit is to be made by the government by Friday.
We maintain our Neutral recommendation on the stock with a target price of $43.00.
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