Newmont Mining Corp. said mining costs for gold and copper are expected to rise this year, mainly because of higher labour and power prices in Australia, and it forecast a drop in copper production because it was currently mining lower-grade ores in Indonesia.
The outlook sent the Denver-based company’s shares more than 3.5 per cent in morning trading on the New York Stock Exchange.
Newmont, the world’s second-largest gold producer, said it produced less gold and copper in 2011 and the fourth quarter than a year earlier. Preliminary results showed it mined 5.2 million ounces of gold and 206 million pounds of copper in 2011. That compares with 5.4 million ounces of gold and 327 million pounds of copper it produced in 2010.
In the fourth quarter of 2011, Newmont said it produced about 1.3 million ounces of gold and 48 million pounds of copper – down from 1.4 million ounces of gold and 74 million pounds of copper in the same quarter of 2010.
In November, Newmont said lower output in Nevada and higher costs at its Boddington mine in Australia could affect results.
The company said it expects 2012 gold production of about five to 5.2 million ounces and copper production of 150 to 170 million pounds.
It also expects the cost of mining gold to rise to $625-$675 (U.S.) an ounce, from $560-$590 in 2011. The cost of copper production, too, will rise to $1.80-$2.20 a pound, from $1.25-$1.50, the company said in a news release.
It gave no reason for the lower copper target or the cost increase, but a spokesman later told Reuters the lower copper production was a result of “stripping” at its Batu Hijau mine in Indonesia. During the process, the company was digging more rock containing lower-grade ore, in order to gain access to part of the mine with higher grades.
“It’s part of the mine plan,” spokesman Omar Jabara said. “Our cost jump is largely due to the APAC [Asia-Pacific]region, Australia and New Zealand – labour and higher power prices.” He added that a new carbon tax in Australia will add some $15 an ounce to the cost of gold production.
The company said it expects to invest about $3- to $3.3-billion in capital expenditure this year. About 60 per cent of that will go towards growth projects like Akyem in Ghana and Conga, in Peru.
The proposed $4.8-billion Conga project has been beset by protests by environmentalists who claim it will damage the local water system. The government says the project will be the largest mine operation in Peru and generate thousands of jobs.