- Newmont has announced that it signed a deal with the Indonesian government that will allow for the resumption of copper concentrate exports.
- Once things are up and running again, the company is expected to ship around 200,000 tons of copper concentrate for the rest of 2014.
- Despite the decline in shares since I last opined given the sell-off in precious metals, the present news release helps strengthen my thesis that Newmont is a best-of-breed miner.
Today it was announced by Newmont Mining (NYSE:NEM) signed a deal with the Indonesian government that will allow for the resumption of copper concentrate exports next week which will finally put an end to an eight-month tax dispute that had limited Newmont's activity in the region. If you recall, NEM had stopped all copper shipments in the area back in January after the Indonesian government levied a massive export tax which Newmont viewed as violating the terms of its mining contract. According to the filing, the signed memorandum of understanding with the government will allow Newmont to start exporting copper next week and also allows all of the employees who lost their jobs over this dispute to return to work. Newmont agreed to pay a $25 million assurance bond for the building of an Indonesian smelter with fellow U.S. miner Freeport-McMoRan Inc. Newmont will also pay a 3.75 percent royalty on gold and 4 percent for copper, up from 1 percent and 3 percent previously. The government has agreed to significantly reduce its export tax on concentrates to 7.5 percent from 25 percent this year for companies building smelters.
Once things are up and running again, the company is expected to ship around 200,000 tons of copper concentrate for the rest of 2014. When I last opined on the company, I highlighted Newmont's production, including its copper exports as a strength of the company relative to other dividend paying gold miners. At the time, the stock was trading around $45, and now has lost nearly half its value since that time following a major sell-off in gold, silver and copper prices, while production costs rose.
Despite the sell-off in shares given the severe price cuts in precious metals, the present news release helps strengthen my thesis that Newmont is among the best of the gold miners. While copper production accounts for little in earnings relative to gold, and all-in sustaining costs are very high for copper, having this bump in copper production will increase quarterly production by about 10%, which is not insignificant. I remain behind the company long-term and expect that things will improve once gold, silver and copper prices rebound.