Newmont Goldcorp releases update on Canadian ops

Mine haul trucks at the Eleonore gold mine in northern Quebec. Source: Newmont Goldcorp Corp.

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Newmont Goldcorp Corp. [NGT-TSX, NEM-NYSE] has started the integration process of Goldcorp’s legacy assets, with synergies and efficiencies expected to be realized at the full run rate of US$365 million the company said.

Holding operations that result from Newmont Mining’s recent US$10 billion takeover of Canadian mining giant Goldcorp, Newmont Goldcorp now ranks as the world’s largest gold producer with assets across the Americas, Africa and Australia.

By combining their operations, the duo are seeking profitable gold production and targeting between 6.0 million and 7.0 million ounces of steady gold production over a decades long time horizon.

The combined entity will also have the largest gold reserves and resources in the gold sector.

On July 25, 2019, the company reported a lower than expected second quarter profit of US$1 million, or $0.00 per share on revenue of US$2.26 billion. Second quarter gold production came in at 1.59 million ounces.

Profits fell by US$273 million from year ago levels due to a varied of factors, including integration costs associated with the Goldcorp and Nevada joint venture transactions, costs incurred while the Penasquito and Musselwhite mines were not operational, higher interest expense, and a prior year gains resulting from the sale of the company’s royalty portfolio in June, 2018.

Newmont Goldcorp said it is on track to produce 6.5 million ounces of gold this year at an all-in-sustaining cost of US$975 an ounce (these numbers exclude the company’s Nevada joint venture with Barrick Gold Corp. [ABX-TSX; GOLD-NYSE]). The forecasts assume annual production from former Goldcorp operations of 1.41 million ounces.

Newmont Goldcorp is expected to shed up to $1.5 billion worth of assets over the next two years, enabling it to function with a more reasonable size and stable production level. It will be looking to achieve up to $100 million in annual pre-tax synergies.

During a conference call with analysts Newmont Goldcorp’s incoming CEO Tom Palmer said he is “very confident” that the Goldcorp assets will deliver on outlined guidance, as Newmont Goldcorp has applied its “rigour” and discipline to these forecasts.

While stating that several operations are still under review, including Goldcorp’s former underground mines, Newmont has released some specific updates on two former Goldcorp assets, including the Coffee gold project in the Yukon and the Musselwhite Mine in Ontario.

Newmont Goldcorp said the Coffee Project has been moved to pre-feasibility stage from feasibility. The mining giant said it has taken this step because it needs to conduct further exploration work, confirm the resources, advance permitting activities, and improve its knowledge of the asset.

At Musselwhite, the company said work is focusing on the rehabilitation of the conveyor, which is currently 70% complete. A secondary egress has been established, and hence Newmont Goldcorp re-commenced development activities and work on the material handling system project earlier this month.

The focus for the remainder of the year will be on replacing the conveyor system and using this period to get ahead on development work. Newmont Goldcorp expects the system to be fully operational by 2020.

Newmont Goldcorp recently said it was ramping up operations at its Penasquito Mine in Mexico following the lifting of an illegal blockade and the establishment of a dialogue process sponsored by the national government.

The Penasquito polymetallic mine is a key asset within the Newmont Goldcorp portfolio. It ranks as the fifth largest silver mine in the world and the second largest in Mexico. It is located in the northeastern corner of the state of Zacatecas and is wholly-owned by Newmont Goldcorp.

The mine produced 272,000 ounces of gold in 2018 and directly employs more than 6,000 people, while supporting another 20,000 indirect jobs in the region.

On Friday, Newmont Goldcorp shares eased 3.3% or $1.67 to $48.69. The shares are trading in a 52-week range of $40.01 and $53.

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