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Newmont to Start Conga by 2015

Zacks Equity Research

Newmont Mining Corporation (NYSE:NEM - News) has announced its plans to start its Minas Conga gold project in Peru by 2015.

Conga, a joint venture between Newmont and its Peruvian partner Buenaventur, is a $4.8 billion project. Environmental protests from local community and political leaders forced the company to suspend the construction activities at the project in November 2011.

The inhabitants were afraid that the project, which is the biggest investment in the history of Peruvian mining, would cause pollution to sap water supplies used by farmers. The protesters also urged the government to issue a decree that would ban the project. However, in December 2011, the opponents accepted a review of the mine’s environmental impact study.

Moreover, Newmont is waiting for the government’s decision for hiring international consultants to review the project’s environmental impact study.

In Late October 2011, Newmont released its third-quarter 2011 results. The company’s adjusted net income rose $635 million or $1.29 per share in the third quarter from last year’s $533 million or $1.08 per share. The result exceeded the Zacks Consensus Estimate of $1.24 per share.

Total revenue was $2.7 billion in the third quarter, up 6% year over year.

Newmont reported attributable gold and copper production of 1.3 million ounces and 58 million pounds, respectively, in the quarter, at costs applicable to sales (NYSE:CAS - News) of $622 per ounce, and $1.10 per pound on a co-product basis. 

For fiscal 2011, the company reiterated its previous expectation of attributable gold production of approximately 5.1 million to 5.3 million ounces, with attributable copper production of 190 to 220 million pounds. Costs applicable to sales are expected to be between $560 and $590 per ounce for gold.  Costs applicable to sales are anticipated to be between $1.25 and $1.50 per pound for copper.

The company currently plans to spend $2.1 to $2.5 billion in attributable capital expenditures in 2011, or $2.7 to $3.0 billion on a consolidated basis.

The company faces stiff competition from Posco (NYSE:PKX - News) and Arcelor Mittal (NYSE:MT - News).

Newmont has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term Neutral recommendation.

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