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

Protesters in Lima, Peru express opposition to the Minas Conga Mine. Sign reads: “Democracy Now! Killing Forbidden!”Protesters in Lima, Peru express opposition to the Minas Conga Mine. Sign reads: “Democracy Now! Killing Forbidden!”

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.