Newmont sticks to plans as gold soars

Kelvyn Eglinton. Photo / Richard Robinson

Newmont's decision to expand its Waihi gold operation was based on a rolling average gold price of US$900 ($1272) an ounce.

The miner uses a three-year rolling average to assess the viability of projects, the latest of which was the decision to extend mining of its 250m deep pit in the middle of Waihi.

With gold now at more than US$1200 an ounce, Newmont, one of the world's biggest gold miners, has reset its rolling average at US$950 an ounce with a New Zealand dollar exchange rate of US72c against the greenback.

A spokesman for the Waihi operation, Kelvyn Eglinton, said the rally in gold prices was good for margins relative to the US$550 an ounce average production cost.

However, a sharp rise in gold prices did not necessarily affect long-term planning.

"The spot price only impacts on what we're selling today. Projects are costed on three-year rolling averages. It evens out the peaks and lows."

The extension of work to the eastern side of the pit will extend the life of the mine until late 2013 or early the following year.

While the extra work will not deepen or widen the pit it will see 10 per cent more material scooped from within it.

This equates to around 1.7 million tonnes of ore more for processing from the mine.

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.

The company also wants to start another underground operation on the outskirts of the town.

Mining at its Favona mine is expected to finish next year so Newmont wants to develop the Trio project using existing tunnelling from Favona.

The project will have to go through the full resource consent application process and, if approved, mining could start around the middle of 2012 from the 330m deep mine.

Eglinton said the current gold price spike would not lead to a sudden surge in gold mining given the time and huge cost it took to prospect, prove up resources, establish infrastructure and start processing.

"The public perception that if the gold price goes up everything becomes a viable mine is just not correct.

"The affects of the exchange rate and the affects of costs are also relative."