Newmont May Abandon Minas Conga Plans, Forbes Predicts 14th April

Forbes has pub­lished an analy­sis spec­u­lat­ing that New­mont Min­ing Cor­po­ra­tion may be prepar­ing to cut its loss­es and aban­don its much-embat­tled plans for the Minas Con­ga gold mine in Yana­cocha, Peru:

Accord­ing to the company’s 2012 annu­al report, while it remains com­mit­ted to the $4.8 bil­lion project for the time being, con­tin­ued oppo­si­tion may force it to divert invest­ments else­where. This may be a sign that New­mont is look­ing for an exit strat­e­gy from the project.

The mine, which would be the largest gold mine in Peru, has suf­fered fierce oppo­si­tion from local indige­nous com­mu­ni­ties and from the region­al gov­ern­ment, in spite of its pro­mo­tion by the fed­er­al gov­ern­ment. Clash­es over the mine in 2011 led to the deaths of five pro­test­ers. And just a few days ago, 400 pro­test­ers stormed the mine site and set fire to con­struc­tion equip­ment.

That means any­thing to make Newmont’s investors more skit­tish about the Minas Con­ga project — such as protests or more bad pub­lic­i­ty — could help tip the scales. So con­tact New­mont and tell them to aban­don Minas Con­ga. Say no to destruc­tion of indige­nous com­mu­ni­ties and the mur­der of pro­test­ers!

Forbes also pre­dicts that the com­pa­ny could suf­fer severe finan­cial loss­es if forced to aban­don the project:

We believe that if the Con­ga project gets can­celled, it will have seri­ous ram­i­fi­ca­tions for New­mont. The com­pa­ny will find it extreme­ly dif­fi­cult to meet its annu­al pro­duc­tion tar­get of 7 mil­lion ounces by 2017, up from the present pro­duc­tion lev­els of 5 mil­lion ounces. The pro­duc­tion short­fall has obvi­ous impli­ca­tions for rev­enue as well.

In order to sal­vage its rev­enue growth and gold oper­at­ing mar­gins of $985 an ounce, the com­pa­ny would have to find anoth­er source of pro­duc­tion quick­ly. The com­pa­ny has acknowl­edged in its 2012 annu­al report that any inabil­i­ty to con­tin­ue to devel­op the Con­ga project could have an adverse impact on its growth if it is not able to replace the expect­ed pro­duc­tion.

New­mont point­ed out in the annu­al report that the region­al gov­ern­ment remains stri­dent­ly opposed to the via­bil­i­ty of the project in con­trast to the stand adopt­ed by the cen­tral gov­ern­ment. This it fears could make oper­at­ing dif­fi­cult. It could face more protests as well as new and tougher reg­u­la­tions and tax­es. If unable to con­tin­ue, the com­pa­ny will change pri­or­i­ties and real­lo­cate cap­i­tal to devel­op­ment alter­na­tives in Neva­da, Aus­tralia, Ghana and Indone­sia.

This may mean that New­mont will fight as hard as pos­si­ble to hold onto Minas Con­ga, although its skit­tish­ness sug­gests it may already be reach­ing its lim­it. In any case, if you live in one of the “alter­na­tive” areas list­ed above, get ready to fight New­mont on the ground at home.