Posted: ’28-SEP-06 07:00′ GMT – Mineweb.net – Archive 

Newmont announced Wednesday that it was investing in diamonds, taking a $94 million write-down on the expropriation of its Uzbekistan operation, and would lose 300,000 ounces of gold production compared with previous estimates.

It means that Exploration Vice President Steve Enders will just have to work a little harder finding those 44 million ounces of gold just to cover reserve depletion.

Even though Enders believes “Newmont and the rest of the industry are really behind in greenfields and generative exploration,” and the 14.5% escalation in drilling costs in one year “is killing us,” the ebullient geoscientist simply loves his job.

Speaking to an audience of miners, analysts, investment bankers and fund managers attending the Denver Gold Forum, Enders proclaimed that “it’s all about selecting the right land to explore, that has the highest prospectivity.” And, Enders claims that Newmont is identifying “the most prospective districts in the world.”

His motto: “Discovery is money. Money follows discovery.” With a $188 million exploration budget this year, Enders is pretty confident that his team of geoscientists can make the near-mine discoveries that replace mined reserves. However, it’s the big greenfields find, such as Yanacocha and Batu Hiju that he really is after.

The company’s team of 300 geoscientists and 500 support people are part of a program that spends three times the average exploration budget and employs twice the staff of most of its competitors, he said. Despite the fact that his Chairman and CEO and President and COO were sitting in the audience, Enders declared that “you can never spend too much on exploration.”

Nevertheless, he asserts that the best policy is simply deciding what not to do, and “focus on opportunities that give you the most value.”

“It’s all about area selection,” Ender declared.

He estimated that as many as 855 deposits exist that are greater than 100,000 ounces worldwide. Enders said 40% of Newmont’s deposits are orogenic gold deposits. From 1986-2004, Newmont has discovered 15 million ounces in greenfields projects, which when combined with near-mine deposits total 49 million ounces.

Ghana’s Sefwi Belt is particularly appealing to Enders because Newmont has discovered 12 gold deposits during the first phase of an exploration program which may go on for years.

Enders is particularly impressed with the upcoming generation of geoscientists. “They are incredible,” he exclaimed. However, he urged mining and exploration companies to mentor them, and not to “wait to give them opportunities to expand and develop.” Unfortunately, most of these young professionals are interested in greenfields exploration, making the hiring of mine geos “just brutal,” according to Enders.
Newmont’s 2006 exploration focus includes $43.3 million in greenfields exploration in Suriname, Nevada, Peru, Australasia, West Africa, North America and Turkey.

CONNECTING THE DOTS

Newmont also announced Wednesday that equity gold sales are expected to temporarily decline before increasing after development projects in Nevada, Ghana and Australia achieve full production rates in 2008 and 2009.

The company now anticipates gold sales between 5.6 million and 5.8 million ounces, primarily as a result of the effective expropriation of the company’s 50% interest in the Zarafshan-Newmont joint venture in Uzbekistan, lower production in Ghana caused by national power outages, and the expected sale of the Holloway mine in Canada.

Newmont also deferred development of the Akyem project in Ghana, pending completion of permitting and resolution of the power-shortages.

Basically, Newmont executives claim that the Uzbek Government “stole 90,000 ounces of gold this year.” Meanwhile, 80,000 ounces are at risk due to the power supply woes in Ghana.

Newmont Chairman and CEO Wayne Murdy told the audience at the Denver Gold Forum that “it’s no secret that we’ve struggled in Nevada,” and will probably experience a production decline of 50,000 ounces this year.

Finally, the company announced that it has acquired a 40% interest in Shore Gold’s Fort a la Corne diamond Joint Venture in Saskatchewan, Canada for $153 million. Newmont said it believes that “this investment represents an opportunity to participate in a significant district-scale diamond project.”

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