Feb 12, 2008

Mineweb: Newmont predicts all major gold miners will see production decline

Newmont predicts all major gold miners will see production decline

As gold prices continually break records, Newmont Mining President and CEO Richard O’Brien warned analysts that the number of major gold prospects are declining globally.

Author: Dorothy Kosich
Posted: Monday , 11 Feb 2008


With only 800 known gold deposits globally that actually contain 100,000 or more ounces of gold--and as the number of new discoveries declines -- Newmont Mining President and CEO Richard O' Brien warned analysts and fund managers that every gold miner will experience production falls unless a technological breakthrough occurs.

During a presentation Friday to analysts, O'Brien and a number of Newmont executives discussed the dire predicament which is bound to be faced by any major gold company in the future. The number of new discoveries is trending down, fewer and fewer deposits are out there, and it takes much more money to find them.

And, O'Brien declared, it is "more and more unlikely that we are going to find big deposits near the surface that are going to be economical."

"Even if you find something, it's tough to get it over the line and it takes longer."

During the period from 1985 to 2003, 190 deposits were discovered by the international mining industry that ranged from 895 million to 1 million ounces of gold. Approximately five out of 10 deposits may contain about 3 million ounces of gold, while only 14 of the entire 190 deposits contained gold deposits equal to 10 million ounces.

The average cost for the greenfields and advanced projects was $32/oz, for a total cost of $28.6 billion.

One Newmont exploration manager estimated that the average cost of drilling alone will increase an average of 11% this year, while some contractor drilling costs have gone up 30%. The manager-identified only as Ian on the conference call-told analysts that Newmont has found 15 million ounces of gold from greenfields discoveries at an average cost of $15/oz. From those discoveries, a total of 49 millions ounces was realized, he said.

During the past five years, Newmont has added another 52 million ounces of gold to its portfolio, he noted.

This year Newmont will give its highest priority to the Hope Bay exploration project in Nunavut ($29.4 million in exploration dollars), the extension of drilling at the Boddington project near Perth, and the Nassau JV ($17.4 million in exploration) in the Guiana Shield of Suriname. O'Brien likened the geology of Nassau to the Rosebel mine.

O'Brien told the analysts that a number of Newmont mines "are getting older. We are dealing with some of the lowest grades in the industry." Nevertheless, he remains confident that "when we have a problem, we have the best people to focus on those problems." However, O'Brien admitted that Newmont missed on the timing, dollar amount, grade and throughput for mines including Leeville and Phoenix in Nevada.

"Nevada appears to be a bit of a black hole," he noted, due to complex ores at Phoenix and other issues.



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