Newmont (TSX: NGT; NYSE: NEM), the world's No. 1 gold miner, will make a decision on a US$2 billion investment at its Yanacocha mine in northern Peru's Cajamarca region before the end of the year, CEO Tom Palmer told investors.
The oxide resources of the open-pit Yanacocha mine are close to being depleted, and the project is designed to mine the sulfide material underground.
In a call to discuss the company's second-quarter earnings, Palmer said the Yanacocha Sulfides project, as it's known, would allow operations to continue at the massive gold mine.
Newmont plans to develop the first phase of sulfide deposits and an integrated processing circuit, including an autoclave to process gold, copper and silver feedstock.
Construction will take roughly two and a half years, so the project should start operating in 2026, the company said.
It would add 500,000 gold-equivalent ounces per year to the mine's production, with all-in sustaining costs of between US$700 and US$800 per oz. during the first five full years of operations.
The first phase focuses on developing the Yanacocha Verde and Chaquicocha deposits to extend operations beyond 2040. The second and third phases, Palmer said, have the potential to extend the mine life for "multiple" decades.
Newmont says Yanacocha Sulfides is one of the most important mining projects planned in Peru for the next five years.
All the new infrastructure will be built within the existing mine's footprint and the project will incorporate remote technology to conduct real-time inspections.
Asked about the incoming government of leftist President Pedro Castillo, Palmer said the company was ready to engage in discussions over the next six months, adding he was optimistic of the outcome.
"We've been in Peru for 30 years," he said. "The Yanacocha Sulphides project will position us to be in Peru for at least another 30 or 40 years."
The Denver, Colorado-based miner says the gold mine has provided over US$1 billion in environmental and social responsibility projects since it started operations in the 1990s.
About two-thirds of Yanacocha's revenue is ploughed back into the local economy in wages, taxes, goods and services, as the operation employs 1,400 workers directly and supports a further 40,000 Peruvian jobs, the company says. Two-thirds of workers at the mine are residents of Cajamarca.
"We see Yanacocha as a cornerstone asset in a key district that we want to be in for a very long time," Palmer told investors, adding that the company is open to opportunities to consolidate its position in the district.
Peru experienced one of its worst political crises in its history in November last year, witnessing three heads of state in a week after a battle between the presidency and Congress, along with violent protests that left two people dead.
During a tense and polarizing election process, the rural union activist from a Marxist party vowed to nationalize energy assets, block certain projects and take a bigger share of the mineral windfall to fight poverty. Castillo's rising popularity surprised investors and fueled concern that a more onerous operating environment would jeopardize projects needed to meet increasing global demand for copper.