Newmont (NYSE, ASX: NEM) put a price of up to (C$6.4 billion) $4.8 billion on taking its Red Chris copper-gold mine underground in British Columbia, with commercial production targeted for 2033.
The project, about 1,030 km northwest of Vancouver, would produce an annual average of 275,000–325,000 oz. gold and 65,000–85,000 tonnes copper from 2035 through 2040, the company said Thursday in its quarterly results. Newmont owns 70% of Red Chris and operates it alongside Imperial Metals (TSX: III), which holds the balance.
“The cave is now larger and it’s also orientated to prevent any intersection with major fault lines,” President and CEO Natascha Viljoen said on Thursday’s third-quarter analyst call, noting that engineering is at least 60% complete.
The update sets out the funding needed for a major Canadian copper expansion backed by Ottawa. The $4.2-billion to $4.8-billion estimate includes contingency but excludes the cost of transitioning from open-pit to underground mining. It also assumes a C$500-million federal contribution, whose terms have yet to be finalized.
It puts development spending well above the $2.1 billion estimated in Newcrest’s 2021 prefeasibility study, although the scope has changed: that plan covered three mining blocks over 31 years, while Newmont’s initial stage covers two blocks over 13 years.
Newmont beat Scotiabank’s earnings forecast and outlined lower capital spending for 2027 than the bank expected, analyst Tanya Jakusconek said in a Thursday note. But “these estimates may be overshadowed by the higher capex” at Red Chris, she wrote.
Even so, changes to the project’s scope make direct comparisons with Newcrest’s earlier study unhelpful, Jakusconek said. Red Chris represents about 2% of Scotiabank’s estimate of Newmont’s net asset value.
Shares in Newmont fell 2% to $111.81 on Friday morning in New York, valuing the company at $116.1 billion. The stock has traded in a 12-month range of $76.04 to $135.29.
Construction decision
The feasibility study is nearing completion, with an investment decision expected early next year, Viljoen said. B.C. granted key permits in June through a consent-based process with the Tahltan Nation. Construction could begin in 2027, subject to board approvals.
Ottawa referred the Red Chris expansion to its Major Projects Office in September last year, placing it among the first five selected for help coordinating regulatory approvals and financing.
The initial stage is to produce 3 million oz. gold and more than 850,000 tonnes copper. Newmont sees potential for a mine life of up to 70 years through further development, including East Ridge, but those additions aren’t included in the initial plan. The company expects to fund construction from internal cash flow.
Australian progress
Down Under, Newmont brought forward commercial production at Tanami Expansion 2 in the Northern Territory to the end of June next year from the second half of 2027. Shaft construction is complete, mechanical completion is expected by year-end and commissioning should begin early next year.
The $1.7-billion to $1.8-billion expansion adds a 1,460-metre hoisting shaft and supporting infrastructure to improve underground productivity and extend Tanami’s life beyond 2040.
At Cadia in New South Wales, gold output recovered to 61,000 oz. from 34,000 oz. in the second quarter following April’s seismic disruption. Newmont completed the final blasting step needed to develop Panel Cave 2-3 in September and expects to hand the project over to operations by year-end.
Cave-establishment work at Panel Cave 1-2 has resumed after regulatory approvals following the earthquake. That project remains on schedule.
Water risk
Lihir in Papua New Guinea faces a less certain fourth quarter. Newmont expects higher grades and throughput after completing September maintenance but warned that El Niño conditions affecting water supply could intensify through year-end and hurt production and costs.
Water shortages haven’t yet affected operations, Viljoen said. If conditions worsen, Newmont will prioritize community supplies while continuing mining and stockpiling ore and could bring forward maintenance scheduled for next year.
The company maintained its annual production outlook for the operation. It continues to advance Lihir’s Nearshore Barrier project, due for completion in 2028, to unlock access to additional ore and extend the operation’s life beyond 2040.
At Mexico’s Peñasquito, fourth-quarter silver output is expected to fall to about half the third-quarter level as planned lower grades and throughput reduce production. Peñasquito’s silver output is expected to fall roughly 30% next year because of planned mine sequencing, chief financial officer Brian Tabolt said on the analyst call. The decline would reduce the revenue credits that offset Newmont’s reported gold costs.
Brucejack in B.C. increased quarterly gold production to 72,000 oz. from 53,000 oz., helped by improved access to mining areas and fewer underground bottlenecks. Cerro Negro in Argentina lifted output to 55,000 oz. from 49,000 oz. as mining rates and grades improved.
Growth returns
Across the portfolio, Newmont expects gold production to grow by a low-to-mid single-digit percentage next year, supported by Tanami’s expansion, higher grades at Lihir and Boddington, and extended mining at Yanacocha in Peru.
Development spending is expected to rise by about $500 million next year from this year’s $1.4-billion budget as investment increases at Red Chris and Lihir. Red Chris accounts for half that increase, or about $250 million, Viljoen said, subject to project approval. About $200 million of the overall increase would be offset by lower reclamation spending as Yanacocha’s water-treatment plants near completion.
Unit costs are expected to rise next year because of inflation, diesel prices, currency movements and lower by-product credits. For this year, however, Newmont cut its gold all-in sustaining cost forecast, after by-product credits, to $1,520 per oz. from $1,680, while maintaining production guidance of about 5.3 million ounces.
Third-quarter gold production was essentially unchanged from the previous quarter at 1.3 million ounces. Adjusted earnings rose 23% to $2.3 billion, or $2.20 a share, from $1.9 billion, or $1.71 a share, a year earlier. Free cash flow totalled $1.9 billion.
Newmont ended September with $8.8 billion in cash, before a planned $1.95-billion payment to Barrick Mining (TSX: ABX; NYSE: B) this quarter under their amended Nevada Gold Mines agreement. The August deal provides for adding Barrick’s Fourmile and Newmont’s Fiberline and Mike properties to the joint venture.
BMO Capital Markets analyst Matthew Murphy put Newmont’s $1.9-billion quarterly free cash flow above his $1.4-billion forecast. The company’s preliminary 2027 production outlook implies 5.4 million to 5.5 million oz., below BMO’s previous 5.7-million-oz. estimate, he said in a Thursday note. He is watching for a path back to annual gold production of 6 million ounces.
“Overall, we feel NEM continues to track well versus expectations,” Murphy wrote.
