Newmont Selling Aussie Gold Mine for $91M


As part of its continued portfolio optimization actions, gold miner Newmont (NEM) has cut a deal to divest its Jundee underground gold mine in Australia to Northern Star Resources for roughly $91 million, consisting of around $77 million of cash and $14 million for working capital.  

The Jundee gold mine in Western Australia began production in 1995 from a complex of open pit mines. It started operation as an underground mine in 1997. The mine produced 279,000 ounces of gold last year.

Under the binding agreement, Northern Star is buying all of Jundee’s assets and liabilities including all environmental and employee obligations. The closure of the transaction, which is conditional upon Northern Star securing financing and subject to a third party right of refusal, is expected in early July 2014.

Following the sale, all existing fixed plant and onsite equipment owned by Newmont will be transferred to Northern Star. Moreover, most of Jundee’s non-contract staffs will be offered continuing employment.

The divestment underscores Newmont’s strategy to focus more on its core assets that have longer life and lower cost. As part of this strategy, the company has sold its Midas mine in Nevada to Klondex Mines Ltd. It has also sold its equity interest in Paladin Energy Ltd.

Gold miners are shedding non-core assets to optimize their portfolio as they grapple with lower gold prices and high mining costs. Another gold major Barrick Gold (ABX) also sold its Kanowna and Plutonic gold mines in Australia to Northern Star as part of its aggressive portfolio optimization strategy.

Newmont's profit from continuing operations (as reported) slid roughly 63% year over year in first-quarter 2014 as it saw lower pricing for gold and copper in the quarter. Nevertheless, the company witnessed a rise in gold and copper productions in the quarter.

Newmont is a Zacks Rank #3 (Hold) stock.

Better-ranked gold stocks include Agnico Eagle Mines Ltd. (AEM) and AngloGold Ashanti Ltd. (AU) with both retaining a Zacks Rank #1 (Strong Buy).

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