Going for gold: Newmont’s Australian success

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Newmont’s impressive recent performance has been driven by its expansion work at its Tanami gold mine. In late 2019, the miner announced plans to go ahead with expansion work at the Northern Territory project, which will see annual production increase to up to 475,000 ounces of gold; the mine already accounts for around one-tenth of the company’s total gold production, so the expansion work could yield significant results for the miner.

The expansion project focuses on increasing the mine’s production capacity, with a new shaft measuring close to 1.5km set to be built. The company will also build what it calls “supporting infrastructure” to enable ore recovery beyond 2km below the surface, moves that will open up more of the Auron deposit to excavation, and continue the miner’s recent focus on capacity expansion in Australia.

According to its annual reports, the probable reserves across its Australian operations increased from 409 million tonnes in 2017 to 461 million tonnes a year later, with reserves at Tanami alone increasing from 16.4 million to 18 million over the same period.

The work will see the mine’s lifespan extended beyond 2040, and builds on a series of expansions already made to the project in 2017. These earlier projects saw Newmont invest $120m into a number of infrastructure projects, including a new power station that will cut carbon emissions by 20% and deliver financial savings of $34 per ounce of gold produced until 2023.

By making a long-term commitment to expansion work, Newmont has been able to progress through its expansion in a number of stages. Beginning with power and infrastructure, before moving to production capacity upgrades, the work has been widely supported, with the board of directors unanimously approving the latest expansion work.

These efforts have been supported by the company’s commitment to exploration projects, with over one million acres of land already covered by Newmont’s exploration licences. Alongside research and development, the miner’s Australian exploration spend reached $26m in 2018, up from $10m the year before, as it continues to commit to expanding its potential for new operations.

These exploration and expansion works have benefitted from Newmont’s acquisition of Goldcorp last year, a merger which made the joint company the world’s largest gold miner by production. While the acquisition didn’t bring any new Australian mines under Newmont’s ownership, with the majority of Goldcorp’s assets in North and South America, the deal did bring considerable mining production and financial capital under Newmont’s ownership.

Executives from the two companies have enthused that the miner could produce up to seven million ounces of gold a year, and Newmont’s share price has jumped from $34.90 in March 2019 to $41.64 a year later, peaking at $52.34 at the beginning of March 2020.

These moves have kept shareholders happy – the company posted returns of $400m to shareholders in its 2019 annual report – and have helped create both the financial capital and widespread support needed for the ambitious expansion works at its Australian projects. By the end of 2018, the miner boasted financial reserves of $3.4bn.

These financial indicators are particularly important considering the nature of the gold industry, which can be volatile for miners. In its annual report, Newmont noted that “our ability to raise and service significant new sources of capital will be a function of macroeconomic conditions,” highlighting the potential of external changes to impact the gold sector. The company is doing its best to control the variables that it can control, and this has yielded a significant exploration budget.

The company has also emphasised control over and expansion of its gold reserves, a variable it can wield significant influence over. “As of the end of 2019, Newmont had the industry’s largest gold reserves of 100.2 million ounces, located in top-tier jurisdictions, with 88% in Australia and the Americas,” said Newmont public relations executive Omar Jabara. “Newmont added almost 50 million ounces of gold reserves with the acquisition of Goldcorp, formation of the Nevada Gold Mines joint venture and the continuation of our leading exploration programme.”

These financial resources have also been used to fund another type of development at the company’s Australian mines, the introduction of autonomous technology at the Boddington mine in Western Australia. The region has already established itself as a hotbed of mining technology, with firms such as Rio Tinto leading the way with autonomous technology, but Newmont’s commitment to driverless vehicles will see Boddington become the world’s first autonomous gold mine when operations begin in 2021.

The miner has invested $150m into the project, which it hopes will deliver considerable financial benefits; Newmont expects the improved efficiency by removing human error from haulage and transportation to deliver an internal rate of return on investment of 35%, and is expected to increase the mine’s lifespan by two years.

This project builds further on the Goldcorp acquisition, which saw Newmont take control of the world’s first all-electric gold mine, the Borden operation in Ontario, Canada, and these mergers and investments form a cohesive commitment to financial stability and operational efficiency that has helped deliver significant returns for the miner’s Australian operations.

These investments have helped Newmont make the most of its operations by extending the lifespan of its mines as much as possible. Jabara noted that the company boasts “long-life operating assets such as Boddington with 14 years and Tanami producing through 2040", and the miner’s efforts to introduce stability and control to the sector is one of the key reasons behind its recent successes.