Newmont Update: Suspends Activities at Conga Project

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Newmont Mining

A few days back, we discussed about the protests at Newmont Mining‘s (NYSE:NEM) Conga mine region in Peru over the environmental impact of development of mines in the region. Around 10 people were injured recently during the protests which has forced the company to call off its plans to go ahead with the development of $4.8 billion gold mining project. We mentioned about the conflict in our previous note on the company. Newmont, primarily a gold miner, competes with other international gold producers like Barrick Gold Corporation (NYSE:ABX), AngloGold Ashanti Ltd. (NYSE:AU) and Goldcorp Inc. (NYSE:GG)

We currently have a $76 price estimate for Newmont’s stock, implying a nearly 10% premium to the market price.

See our complete analysis for Newmont Mining here.

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The company said that this move was essential for the sake of re-establishing tranquility and social peace in the region. The locals fear that the development of the mine will dry up the four lakes that supply water to the region, however the company has planned to relocate the water bodies to higher a altitude, which will eventually help the farming in the low- lying regions.

Although the company has taken all the essential steps to make sure that the water supply and the eco-balance are maintained in the region, the locals are not willing to comply to the new development as they have had bad experiences in the past during the development of the Yanacocha mines, in which allegedly they had not received enough support from the officials in re-development of the region. The company is ready for further talks in presence of the government to negotiate with the locals.

Newmont is looking to increase its ghold output to cash upon the rising gold prices. In case the project is not developed, lower grade ore from Yanacocha will continue to hamper the company’s gold output from the South American region. Moreover, President Humala’s government has been unsuccessful in calming the local protesters, which has raised questions over international investment in the country. Peru is the world’s sixth largest producer of gold and its output continues to fall due to aging mines and lack of development of new regions.

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