Why Newmont’s South American Gold Mining Division Is Getting A New Lease On Life
________________________________________________________________________________________________
Editor’s Note: Every day we wonder what our readers think, and we are inspired when our readers challenge us to answer questions, and conduct analyses that are relevant and critical to them. Nothing delights me more than to hear about what is interesting to you.
So if you have any comments or suggestions on this article or on what type of articles you would like to see more of in the future, please let us know. Thank you. Write: doug.nathman@trefis.com_
________________________________________________________________________________________________________________________________________________________________________________________________
The Yanacocha mine, located in Peru, is the only operating mine in Newmont Mining’s South American Gold Mines division. However, the Yanacocha mine is a maturing mine characterized by declining ore grades and production. As a result, the division’s shipments (and consequently its share in the company’s overall revenue), as well as profitability, have gone down over the years as illustrated by the graphs shown below.
Though lower gold prices have contributed to a shrinking of the division’s margins, an increase in unit production costs as a result of the mining of lower grade ore and a decline in production have also had a significantly negative impact on the division’s profitability. However, the commencement of mining from the Merian mine in Suriname in the fourth quarter of this year will lead to a revival in fortunes of the division.
The Merian mine is expected to produce an average of 400,000-500,000 ounces of gold annually in the first five years of production at an all-in sustaining cost (AISC) of around $675 per ounce, which is much lower than the Yanacocha mine’s expected AISC of $1135 per ounce (considering mid-points of guidance). [1] [2] With the ramp up of production from the low-cost Merian mine, the South American Gold Mines division’s margins and contribution to Newmont’s total revenue will increase significantly, as summarized by the table shown below.
Have more questions about Newmont Mining? See the links below.
- What Is Newmont Mining’s Revenue And EBITDA Breakdown?
- What Is Newmont Mining’s Fundamental Value Based On Expected 2015 Results?
- How Has Newmont Mining’s Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Did Newmont Mining’s Revenue & EBITDA Decline In The Last 5 Years?
- By What Percentage Can Newmont Mining’s Revenue & EBITDA Grow In The Next 3 Years?
- How Will Newmont Mining’s Revenue Composition Change by 2020
Notes:
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Notes:
- Newmont Mining Q2 2016 Earnings Presentation, Newmont Mining Website [↩]
- Newmont Welcomes Suriname’s Decision to Participate in the Merian Gold Project, Newmont Mining News Release [↩]