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Newmont Says Too Early to Call Conga Project Amid Review

Newmont Mining Corp. (NEM), the world’s second-largest gold producer, said it’s too early to say whether its proposed $4.8 billion Conga mine in Peru will proceed while a state-commissioned review is in progress.

Consultants from Spain and Portugal hired by Peru yesterday began a 40-day review of an existing environmental impact assessment, or EIA. Greenwood Village, Colorado-based Newmont halted construction in November at the project in the northern Andes mountains following clashes between police and opponents of the development.

“It’s too early to say” if the project will move forward, Chief Executive Officer Richard O’Brien said yesterday an interview in Hollywood, Florida.

O’Brien said Conga must be a “viable” project to proceed. “I don’t think we can call that until we get through with the EIA review, assuming that happens in a reasonable period of time.”

Conga may yield 680,000 ounces of gold and 235 million pounds of copper annually in its first five years. O’Brien said Jan. 17 that Newmont may increase spending on projects in Nevada, Australia, Ghana and Indonesia if it’s unable to continue developing the Peruvian mine.

Newmont will seek “a balance between the EIA that we already have approved and whatever additions that the government thinks they need to make.”

Reservoir Construction

Under Newmont’s current plan, building Conga will require the construction of four reservoirs to replace four lagoons. That’s failed to win over farmers in the region, some of whom protested in November by blocking roads and destroying Newmont installations.

The demonstrations stopped after PresidentOllanta Humala on Dec. 4 granted the country’s armed forces extra power for 60 days, including the right to make arrests without warrant.

Newmont, which owns 51 percent of Conga, is partnering with Peru’s Cia. de Minas Buenaventura SAA on the project. The U.S. company also controls Peru’s Yanacocha, South America’s largest gold mine.

“If we don’t have this done within the next three months, we are going to be extremely disappointed,” O’Brien said, referring to the review process.

Newmont may consider selling its Hope Bay project in the Canadian Arctic, he also said. The company announced last month it would halt work at the site. Newmont said Feb. 23 it recorded a $1.61 billion writedown on the project. Hope Bay is relatively expensive to operate because of its location.

‘Opportunistic M&A’

“Could it be worth something to somebody else? Yes,” said O’Brien, who was in Florida to attend BMO Capital Markets’ Global Metals & Mining Conference. “I think you’ve got the potential to see that district expand over time, but just not right now and not on our time frame.”

O’Brien said he views $1,750 to $2,000 an ounce as a “reasonable estimate” for the gold price in 2012, and that the price may rise to $2,300 in the next three to four years. Gold futures for April delivery fell 0.1 percent to settle at $1,774.90 an ounce yesterday on the Comex in New York.

Newmont’s strategy is to increase production through a combination of exploration, project development and “opportunistic M&A,” he said. He declined to comment further on the potential for acquisitions.

Newmont is the second-largest gold producer ranked by revenue, after Toronto-based Barrick Gold Corp. (ABX)

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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