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Newmont adjusts investment plans amid Newcrest takeover

Newmont has begun cutting its planned investment spending on new projects following the proposed US$17.8 billion takeover of Newcrest (ASX:NCM). The world’s largest gold miner recently announced that its least profitable project in Peru would be deferred for at least two years, possibly longer.

This decision marks the third deferral concerning the US$2.5 billion Yanacocha Sulfides expansion project since 2021, when the initial wave of the Covid pandemic forced a halt. In 2022, the project faced further delay due to declining gold prices and increased costs caused by material and labor shortages.

Despite committing to invest US$350 million in water treatment facilities, Newmont appointed a senior executive to reassess the project.

The uncertain environment created by aggressive resource nationalism in Peru has made it difficult for Newmont to solidify its decision on the Yanacocha Sulfides project, which aims to extend the life of the Yanacocha gold mine beyond 2040 until the second half of 2024.

By deferring the project, the company aims to reduce its expenditure by at least US$300 million in 2024 while pursuing savings during the planned integration of Newcrest (subject to approval in Australia, PNG, and Canada). Newmont justified the deferral as part of its portfolio optimization strategy to maximize returns for shareholders and create long-term value for stakeholders.

Newmont CEO Tom Palmer expressed confidence that the acquisition of Newcrest would establish an industry-leading portfolio and enhance their pipeline of value-accretive projects. The company aims to achieve at least $2 billion in near-term cash flow improvements through portfolio optimization within the first two years.

The deferral of the Yanacocha Sulfides project serves as an initial step towards realizing this target, as Newmont evaluates opportunities to restructure project capital and streamline their combined portfolio for a more profitable and resilient future. The project’s first phase focuses on developing Yanacocha Verde and Chaquicocha deposits, with subsequent phases potentially extending the operation’s lifespan for multiple decades.

This move reflects Newmont’s assessment of its prospects as it prepares to integrate Newcrest and its major mines: Cadia in NSW, Lihir in PNG, Brucejack and Red Chris in Canada, and Telfer (alongside the prospective Havieron project) nearby.