A BMO Capital Markets report assessed this project
following a site visit.
In a Nov. 7, 2018, research note, analyst Andrew Kaip reported that the
overall impressions from BMO Capital Markets' site visit to Newmont Mining
Corp.'s (NEM:NYSE) Tanami project in Australia's Northern Territory are
that it is "a great success that keeps getting better," it is
"quickly heading to tier 1 status" and it offers a "treasure
trove of exploration opportunities."
Kaip supported those statements with evidence.
As for Tanami already being fruitful, he noted that over time there, gold
production and processing rose while costs dropped, he highlighted. Between
2012 and 2018, production increased to 440–515 thousand ounces (450–515 Koz)
from 183 Koz. Processing rates went up as well, by 80% to 2.6 million tons
per annum, resulting from mine and mill optimizations along with fresh
discoveries.
Simultaneously, the all-in sustaining cost decreased to $705–775 per
ounce, per 2018 guidance, from more than $2,000 per ounce. "Tanami is
able to keep costs in the second quartile given the morphology of ore zones
that are amenable to low cost, long hole stoping," Kaip explained.
The growth of reserves has been "impressive," noted Kaip,
doubling to 4.4 million ounces at 5.7 grams per ton (5.7 g/t) gold (Au). Further,
Tanami hosts another 700 Koz of Measured and Indicated resources at 5 g/t Au
and 800 Koz of Inferred resources at 5.4 g/t Au.
Regarding the Northern Territory mine continuing to improve and on the
cusp of becoming tier 1, Newmont began shaft development and mill upgrading
work for its next phase, an expansion, with the ultimate primary goal of
bolstering reserves. When finished, Kaip relayed, "phase 2 is expected
to lift annual production to the 600 Koz range with costs declining a further
10%, an outlook that clearly positions Tanami as a tier 1 mine."
Finally, in terms of the exploration upside at Tanami, the main ore shoots
are open at depth. Resources at Liberator, a new ore shoot at the project,
seemingly with grades better than those of the reserves, have yet to be
delineated. A third area with potential is Orac, which "could support
further mine expansion," Kaip pointed out.
BMO Capital maintains its Outperform rating and $42 per share price target
on Newmont. The stock is trading at around $32.02 per share.
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Disclosures from BMO Capital Markets, Newmont Mining, Nov. 7, 2018
IMPORTANT DISCLOSURES
Analyst's Certification
I, Andrew Kaip, hereby certify that the views expressed in this report
accurately reflect my personal views about the subject securities or issuers.
I also certify that no part of my compensation was, is, or will be, directly
or indirectly, related to the specific recommendations or views expressed in
this report.
Analysts who prepared this report are compensated based upon (among
other factors) the overall profitability of BMO Capital Markets and their
affiliates, which includes the overall profitability of investment banking
services. Compensation for research is based on effectiveness in generating
new ideas and in communication of ideas to clients, performance of
recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets
Limited are not registered as research analysts with FINRA. These analysts
may not be associated persons of BMO Capital Markets Corp. and therefore may
not be subject to the FINRA Rule 2241 restrictions on communications with a
subject company, public appearances and trading securities held by a research
analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for
products or services other than investment banking services within the past
12 months from Newmont Mining.
Disclosure 6C: Newmont Mining is a client (or was a client) of BMO Nesbitt
Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an
affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 9B: BMO Capital Markets makes a market in Newmont Mining in United
States.
Disclosure 16: A research analyst has extensively viewed the material
operations of Newmont Mining.
Disclosure 17: Goldcorp has paid or reimbursed some or all of the research
analyst's travel expenses.
For Important Disclosures on the stocks discussed in this report,
please click here.