Mining merger called good for Nevada

Thursday, Nov. 15, 2001 | 10:54 a.m.

The deal that would turn Newmont Mining Corp. into the world's largest gold producer will strengthen Nevada's mining industry, a state industry leader says.

Denver-based Newmont, already the largest gold-mining company in Nevada, announced Wednesday that it has agreed to acquire Normandy Mining Ltd. of Australia and Canada's Franco-Nevada Mining Corp. for an estimated $4.41 billion in stock and cash.

"It's got large implications for Nevada because both Franco and Normandy have significant assets in Nevada and Newmont already is the largest," said Russ Fields, president of the Nevada Mining Association. "Newmont is stable now and it will become even stronger after this consolidation."

The industry has been consolidating since 1996 in reaction to plunging gold prices. The metal currently is valued at $277.80 an ounce, about one-third of what it was five years ago.

Newmont, which employs 2,500 people in Nevada, is expected to maintain the current work force at the mines it is acquiring, since the active mines the company will get are self-contained and a significant distance from existing Newmont processing plants.

Work force consolidations are expected to occur on the executive level at Franco-Nevada and Normandy offices.

Doug Hock, a spokesman for Newmont, said the acquisition won't change the company's gold development strategy in Nevada, but will give it more flexibility.

"It will enable us to exercise greater discipline," Hock said. "We'll be able to pick and choose and only develop those projects that make sense at that moment."

Normandy and Franco-Nevada have Nevada assets that are a good fit for Newmont, Fields said.

Normandy has one active gold producer in Nevada, the Normandy-Midas Mine north of Winnemucca. But the value of acquiring Normandy is that it will give Newmont a strong base of operations in Western Australia, where Normandy is based and Newmont has no presence.

Franco-Nevada, meanwhile, owns a percentage of 11 mines scattered across the state -- which Fields called "royalty interests." Other companies operate those mines, he said, and Newmont will be in the unusual position of collecting royalties from its biggest Nevada rival, Barrick Gold Corp., Toronto, Ontario, which operates the Betze-Post mine, one of the largest open-pit gold mines in the state.

Also of importance to Newmont is Franco-Nevada's five unexplored holdings at Mountain View, Seven Troughs, Tuscarora, Goldfield and Hasbrouck. Hock said his company will be able to evaluate each holding and use existing resources for processing.

Newmont's acquisition would give it resources in three of the world's premiere gold prospecting regions, Nevada, Australia and Peru. The acreage it would control worldwide for mining and exploration is about the size of the state of Wyoming.

The Nevada Mining Association said Newmont produced about 3 million ounces of gold in 2000, with 1.7 million in the company's Eureka County operations in the Carlin Trend between Elko and Winnemucca. The company also produced 779,000 ounces of gold at Twin Creeks and 281,000 ounces at Lone Tree, both in Humboldt County.

By comparison, Barrick produced 1.6 million at the Betze-Post mine and 806,000 ounces at its Meikle mine, the two largest operations for the company.

Hock said Newmont's Nevada production represented more than one-third of the 8.2 million ounces of gold the company produced last year. Of the estimated 97 million ounces of gold held in reserve under the acquisition, 34 million ounces are in holdings in Nevada.