October 1, 2013 12:02 am

Newmont looks at Glencore Peru project for copper diversification

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Newmont Mining has joined the ranks of miners interested in Glencore Xstrata’s Peruvian copper mining project, underlining an attempt by the US’s largest gold producer to diversify.

Glencore is selling Las Bambas in an auction that it hopes could fetch up to $5bn, with Chinese mining groups among the favourites to acquire the asset.

Newmont, the world’s second-largest gold producer with 5m ounces annually, has told investors it wants to acquire copper assets. In an interview with the Financial Times, Gary Goldberg, Newmont’s chief executive, said Las Bambas, under construction by Xstrata when it was acquired this year by Glencore, was “an interesting prospect” as his company looked at opportunities.

“The thing that is interesting is that it is further down the development path, it is closer to production,” said Mr Goldberg. “Clearly we wouldn’t do that on our own. We would look at doing something with other partners.”

Mr Goldberg said he “wouldn’t speculate” on whether Newmont remained in the running for Las Bambas. “It is an interesting prospect but there are others out there,” he said.

Copper is often found alongside gold but gold miners have usually resisted diversifying because they have generally been more highly valued by investors as “pure play” producers. Barrick Gold, the world’s largest gold miner, angered its investors when it bought Equinox, a copper producer, two years ago for $7.6bn.

However, Mr Goldberg said he believed gold companies would no longer receive premium valuations.

“I have to do what is right for our shareholders and leverage the value we have in our competencies,” he said. “I am talking about it before I do it and testing so I don’t surprise the market.”

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Gold prices

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Gold prices have suffered their sharpest fall since the 1980s, heightening fears that the metal’s decade-long bull run has ended

Mr Goldberg, who became Newmont’s chief executive in March, once ran copper operations including the huge Bingham Canyon mine for Rio Tinto.

Glencore is selling Las Bambas to comply with conditions set by Chinese regulators during its acquisition of Xstrata and first-round bids were accepted this month. Glencore declined to comment.

Newmont has had problems at Conga, another mine in Peru, where it has suspended construction amid local concern over water resources. But Mr Goldberg said Peru was “not a bad place” for further investment.

The US miner produces about 65,000 tonnes of copper annually, whereas Las Bambas is expected to produce more than 400,000 tonnes of copper a year.

Newmont this month struck a deal to sell a small Nevada gold mine and Mr Goldberg has rowed back on the miner’s ambitions to increase production in favour of a “value over volume” strategy.

This story has been amended since first publication to clarify that Newmont has not confirmed whether it has bid for the Las Bambas copper project.

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