Mighty Martha reaches rock bottom

One 80-tonne truckload of ore from the opencast mine in Waihi produces about five or six teaspoons of gold. Photo / Greg Bowker

Goldminer Newmont is on an increasingly desperate hunt to avoid going the same way as the last big company in its unprepossessing Waihi headquarters.

Philips stopped making Pye televisions and other appliances in the mid-1980s in the face of a looming import glut; Newmont faces quitting the town because of a gold shortage.

On current activity, the Colorado-based miner is on track to stop mining in the town by April 2011 and cease processing a year later.

Under another scenario being considered, mining could be spun out to the end of 2013. But unless Newmont finds another "elephant" gold deposit, mining in Waihi will end.

Underground mining of the Martha Lode - a giant ore body by world standards - started in the 1880s and by the time the mine closed in 1952, 5.6 million ounces had been dug from depths up to 600m.

New technology and the more brutal opencast technique made it viable for modern miners to pick over what the old-timers had left behind and make the return to Martha in 1987.

While Martha and the nearby Favona underground mine are reliable producers, it's the investment in the gold mill and other infrastructure that is providing the underlying incentive to find more.

That is why Newmont is spending $10 million a year searching, preferably close to its massive Martha opencast mine. But prospecting has fanned out over a 100km radius, including a controversial search behind Onemana Beach farther up the Coromandel Peninsula.

When it gets to the core sample drilling stage just one in a thousand holes may be "of interest", so with the easy pickings already gone the chances of large discoveries are starting to have the look of Lotto odds.

Opponents to mining of any sort are still active, but Newmont's general manager of Waihi operations, Glen Grindlay, sums up the company's biggest problem succinctly: "The main obstacle is that we can't find any bloody gold."

While it still has a growth strategy, its closure contingency has more certainty to it. The plan is to transform the 200m-deep mine in the middle of Waihi into a recreational lake, turn tailings dams into wetland areas and create a network of walkways.

For Newmont and the town of 5000 it is the second time closure has loomed. In 2006 the miner was within six months of shutting down, but shifting a historic pumphouse allowed Martha to keep going. The Favona mine, a stone's throw away, has also has extended Newmont's presence in the town.

Although a residents' action group says it has heard the closure story before, Newmont's external affairs manager, Kelvyn Eglinton, says it is obliged to be upfront about legacy plans for the community.

"How we close this place determines how we open doors farther down the track."

Newmont is contributing to a $21 million gold discovery centre where New Zealand Mint (which is contributing around $15 million) will have a shop-front among cafes and other shops.

It is part of a tourism push the company hopes will help ease the town through the economic jolt that will hit if and when the gold stops flowing.

The community and workforce of 350 have already tasted the end of production from new ore. On May 5 an electrical fire destroyed the gold processing mill's control room, effectively shutting down gold production and costing the company $4 million in revenue a week.

Gold already in the system is providing some cashflow and the Waihi operation is drawing off an intra-company loan of about $10 million a month. Repairs mean production should resume by August 19 but shifts have been cut down in the pit from 12 to nine hours and mill staff have been redeployed to maintenance jobs and training.

In the meantime, the mountain of freshly mined ore is growing - waiting to be crushed then treated with cyanide and carbon to separate out the gold and silver which is poured into 20kg bars before being flown to the Perth Mint where the metals are separated.

In the pit this week it was business as usual, albeit for shorter days. A third of the way down the 2km road to the bottom of the pit, rock containing gold-bearing ore is being blasted at 6000 tonnes a time into workable piles before being loaded onto a fleet of 85-tonne Caterpillar trucks for the haul up to a crusher at surface level on the eastern edge of the crater.

One in three trucks will cart up ore, as opposed to waste rock, and in that 80-tonne load is around five or six teaspoons of gold - around five ounces.

There are about 100 truckloads a day being pulled out from the pit bottom and with gold at US$934 an ounce, the incentive to keep going is obvious even when taking into account the US$440-an-ounce production cost at Waihi.

Grindlay says one option that would extend the pit's life to September 2013 is pushing east and digging down. This would mean relocating the crusher, a $40 million job, so it is only the high price of gold that's keeping that option on the table, he says.

Newmont uses a three-year rolling average price when weighing up the benefit of new projects so spectacular spot prices that have nudged US$1000 an ounce last year are less relevant.

Prospecting efforts are concentrated around the eastern part of town and near the Favona Mine, where ore from the underground mine is two and a half times as rich in gold as Martha. Since 2004 about 20km a year of drilling from portable rigs has been done in and around Waihi.

If gold is discovered in sufficient quantities it would be extracted by underground mining in the future as it has a fraction of the environmental footprint of opencast mining, Grindlay says.

It may be less disruptive but at Onemana, a beachside community north of Whangamata, many residents from 50 properties and about five times that number of holiday-home owners are gearing up for a fight.

The chairman of the Onemana ratepayers mining subcommittee, Barry Hunt, says Newmont will have a big fight on its hands if exploration work leads to mining.

The company can drill for samples in the area within a kilometre of the township but will have to apply for resource consent if it chooses to go further.

"Whilst we can't stop it [prospecting and exploration], it's what comes next that worries us. It would have a disastrous effect."

If large-scale mining eventuated, truck movements along the 45km to Newmont's Waihi base would disrupt the southeastern part of the Coromandel Peninsula and guarantee the mobilisation of a wide variety of opposition groups, he says.

Eglinton is well aware of the feeling, having faced what he described as "the firing squad" at a public meeting earlier this year. And given the affluence (beachfront properties range into the millions of dollars) and older age of the community, the promise of jobs is not going to gain much traction. But he stresses the company is still at an early stage and points to the relatively small area required for a drilling rig set-up (about a third the size of a rugby field) and that they are used within metres of houses in Waihi.

There Newmont's operation has always been a hard sell, given that it has created a gigantic crater in the middle of town. The PR job got harder after subsidence caused by mining resulted in one house collapsing and other homeowners being resettled in 2001.

The company pays up to $4000 a year to homeowners affected by noise, dust and vibration.

Eglinton has been in his job for 18 months and acknowledges that the company has not always got it right in the past.

It now believes it's best to send in a "sociologist before the geologist" to tap into community concerns instead of moving in with drilling rigs and diggers first.

Distressed Residents Action Team secretary Collette Spalding says the company may have improved its dealings with opponents but they still want it out.

"It's not about being anti-mining, it's about taking care of residents and the community."

She's like many in the community steeped in mining. There is an acceptance of the economic benefit but a preference for it not to be right next door.

Newmont contributes $2 million to community projects directly and calculates it pumps in around $40.3 million, but even given that figure (about 22 per cent of gross town product) it is wary of overplaying the economic contribution angle.

And while Newmont Mining Corporation is one of the world's largest gold miners - with revenue last year of around $10 billion - signs on company cars are discreet and the entrance to its industrial rather than corporate-style head office sits next to the local toy library.

Eglinton says low key works.

"What we do here will determine how we're accepted elsewhere."

THINKING BIG

A mining industry group believes New Zealand needs to do more to push itself as a target for exploration.

Newly formed umbrella group Straterra says there are misconceptions about difficulties doing work in New Zealand.

The group, which started last year, estimates the minerals and petroleum sectors generate more than $4 billion a year and contribute $2 billion to exports.

Straterra chief executive Richard Michael said resource consent and environmental processes needed to be rigorous but they appeared daunting from the outside.

"What we've really got to be doing is put some effort into saying New Zealand is a good place to explore."

He said the appointment of a Minister of Resources (Gerry Brownlee) sent a positive signal to the industry.

'We're talking about an encouraging attitude from the Government - that probably hasn't been there in the past."

Government land agencies, including the Department of Conservation, were supportive of the mining industry where they could be. The Pike River coal mine was on DoC land and although the process had been lengthy the company and the department had reached an agreement that suited them both, resulting in a mine that met stringent environmental criteria.

Like Australia, New Zealand needed to become more ambitious about tapping into its mineral wealth.

"As a nation we need to get back into the habit of starting on big projects," Michael said.

Straterra represents the NZ Minerals Industry Association, Aggregates and Quarrying Association, Coal Association of NZ and Minerals West Coast.