Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
An analyst with BMO Capital Markets relayed his impressions following a visit to one of this gold producer’s mines and a presentation from senior management.
In a Sept. 25 research report, Andrew Kaip, an analyst with BMO Capital Markets, provided an update on some of Newmont Mining Corp.’s (NEM:NYSE) Nevada operations.
For Long Canyon, production of 77 Koz as of mid-2017 was at the mid-range of guidance (130–170 Koz), Kaip noted. “All-in sustaining costs of $351/ounce are tracking well below guidance ($405–455/oz)” and “benefitting from faster leach rates, lower consumables and mining costs.”
Regarding the overall operation, Kaip wrote, “We were impressed by Long Canyon, a high-quality mine with a great future ahead of it, in our view.”
Work currently underway for phase 2 at Long Canyon includes permitting, a three-year process according to Newmont, and a scoping study. Phase 2 “will include deepening of the phase 1 open pit and the addition of an underground and oxide mill (3–5 Ktpd),” reported Kaip. “Open pit grades in phase 2 are expected to be higher grade but offset by higher waste stripping versus phase 1.”
As for the Carlin complex of mines, Newmont has successfully implemented a number of “full potential initiatives,” the analyst indicated, “including the $20M annual savings by reducing contract mining and improving owner productivity.” At the Leeville mine, for instance, the company “designed longer life bolts that will lower underground rehabilitation costs over the long term.”
Additionally, Newmont transformed the Leeville underground mine to “semi-autonomous mining,” which should result in “productivity, cost and safety gains,” Kaip explained. Such a switch, however, requires time, capital and careful planning and design.
With two working semiautonomous loaders in place at Leeville and two more slated for delivery this year, “the plan is to reach fully autonomous loading by Q3/18,” he wrote. The company also is preparing to institute autonomous stope drilling there, “which will be rolled out in stages through 2018.”
Newmont has designed its Exodus mine to be semiautonomous as well and plans to commission it early next year.
BMO Capital Markets has an Outperform rating and $40 per share target price on Newmont, whose stock is currently trading at around $37.89 per share.
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