Newmont Declares Super Pit A Concern
Sydney Morning Herald
Friday November 2, 2007
NEWMONT MINING has deemed the Kalgoorlie Super Pit "an area of concern" after gold production costs spiralled to $US609 an ounce in the third quarter, up from $US481 last year.
The Super Pit was Newmont's most expensive gold operation in the world during the quarter as it faced higher milling costs from processing increased sulphur grades. Newmont's Super Pit joint-venture partner, Barrick Gold, reported lower production costs of $US524 an ounce during the third quarter since it had currency hedges in place. "Our initial outlook for the Aussie was based on US75c," Newmont's chief financial officer, Russell Ball, told an analysts' teleconference. "While we have started a disciplined Aussie dollar hedging program, we are essentially fully exposed to the Australian dollar for the remainder of the year." In contrast, Barrick is fully hedged at US75c this year, US77c next year and US78c in 2009. The Super Pit is particularly sensitive to the rising cost of oil, given it takes 45 minutes for 240-tonne trucks to transport ore to the surface from the bottom of the massive open pit. Barrick said the ore grade had fallen during the quarter. "The [Super Pit] operation continues to be an area of concern and we continue to work through issues and potential solutions to that with our joint-venture partner, Barrick," Mr Ball said. He added that although operation costs were rising throughout the world, Newmont's margins were increasing due to the higher gold price, which has hit $US800 an ounce.Newmont, the world's second-largest gold producer, earned $US397 million in the third quarter, while its larger rival Barrick earned $US345 million. But Newmont's earnings benefited from $US138 million in foreign tax credits and asset sales. The miner produced 319,000 ounces from its Australian and New Zealand operations during the quarter, while Barrick produced 558,000 ounces from Australia and Papua New Guinea.In its quarterly report, Newmont said the capital costs of its $2 billion Boddington joint venture with AngloGold Ashanti in Western Australia were under review, but it did not report any delays. The project will produce 1 million ounces a year, making it Australia's largest goldmine once it starts operations late next year or early in 2009.
© 2007 Sydney Morning Herald
