Denver (Kitco News) - With the recent sale of Newmont Mining Corp.’s (NYSE: NEM) Penmont mine, investors shouldn’t be looking for a fire sale of assets from the company.
Newmont recently announced the sale of its 44% stake in the Penmont mine, located in Mexico, to its joint venture partner Fresnillo PLC, for roughly $450 million.
Speaking with Kitco News at the 25th Denver Gold Forum, Gary Goldberg, president and chief executive officer of Newmont, said it was just a good business for the company.
“We aren’t under any pressure to divest to help the balance sheet sort of thing, it’s a more of a let’s make sure the underlying assets are performing well,” he said. “As part of that, we looked at our assets on a value versus risk basis.
“So we’ve divested both Jundee (to Northern Star in Australia) and Penmont last week,” he continued. “For us it’s good value, it's capital that we can use to direct towards other projects to help pay down debt along the way.
“As we look at the rest of the portfolio, we don’t have any specific targets, we have no reason to fire sale anything,” he added.
The company recently announced it was green lit for its Merian project, located in Suriname, which is expected to average between 400,000 and 500,000 attributable ounces of gold, during its first five years of production, at all-in sustaining costs of between $750 and $850 per ounce.
“We’ve been working in Suriname for the last ten years and we’ve come to the point where we’ve come forward and approved Merian to be developed,” Goldberg said. “We’ve received our right of exploitation from the government a few weeks ago. For us it’s a great new district, we see a lot of upside in that region, large area for exploration around it.
While adding intelligent production to the asset portfolio is watched under a microscope these days, being mindful of cost cutting is still a major part of the equation in the sector.
During the company’s second quarter results released in late July, the company noted it had dropped $220 per ounce on its all-in sustaining costs year-on-year to $1,063 an ounce.
Asked whether or not lower gold prices may spook gold producers to reevaluate what gold price they use for their assets, Goldberg doesn’t have to worry about that just yet. And should prices dip further, he said Newmont is well prepared.
“We use the $1,200 gold price in our plans for the next three years so we’ve been enjoying the higher than planned price assumption,” Goldberg said. “More than a year ago we started a very rigorous program called ‘Full Potential’ to go through each of our operations and it’s looking at ways we could sustainably reduce cost.
“Last year we took nearly $1 billion out of cost, this year, through the first half of the year, we’ve taken out $450 million in all-in sustaining cost removed,” he continued. “Our target was $600 million to $700 million by 2016 – we’re well ahead of target.
“We stress test below $1,200 so we’re not looking around wondering what to do should prices go lower,” he said.
By Alex Létourneau of Kitco News aletourneau@kitco.com
Follow Alex Letourneau @alex_letourneau
