TORONTO (miningweekly.com) – Newmont Mining expects that the new Peruvian government will want to increase mining royalties, but will not be deterred from investing in the country, CEO Richard O'Brien said on Friday.
Newmont and partner Buenaventura announced earlier this week that their respective boards had approved the development of their big Conga project in Peru. Costs for the mine were estimated at between $4-billion and $4.8-billion.
Investors have been concerned after Ollanta Humala, a military officer who had talked about making sure Peruvians benefit more from the country's mineral wealth, was elected president.
Newmont does expect there will be discussions about higher mining royalties, O'Brien told analysts on a conference call.
“I think it will be industry-wide. And I think we have a pretty good sense of what that will be, and we've incorporated it into our economics,” he said.
“I won't tell you what our assumption is, but we have made some assumptions,” O'Brien said.
Newmont has been operating in Peru for decades, “through several changes of not just presidents but political styles”, he commented.
The company also takes a longer-term view of its investment decision, beyond the current political climate, because the Conga project is expected to be in production for some 20 to 30 years, he said.
Newmont's annual attributable production from the Conga mine in the first five years is forecast at 300 000 oz to 350 000 oz of gold and 80-million to 120-million pounds of copper, at estimated costs of $400/oz to $450/oz of gold and $1.25/ob to $1.75/ob of copper in the same period.
Production is expected to start up in late 2014 or early 2015.
Newmont and Buenaventura already operate the Yanacocha mine in Peru.
Newmont, which has mines in the US, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico, reported second-quarter adjusted net income of $445-million, 18% higher than a year earlier, after higher gold and copper prices offset lower production and increased costs.