Fronteer acquisition, Newmont continues to bet on Nevada gold
With the acquisition of Fronteer Gold's Long Canyon, Newmont is betting it can discover another major Northern Nevada gold trend.
Posted: Friday , 04 Feb 2011
RENO, NV -
Despite potential threats of mining tax hikes combined with a tougher and more litigious federal permitting environment, Newmont Mining is still betting on the future of Nevada mining and the promise of future Carlin-type gold trends with the proposed acquisition of Fronteer Gold (TSX:FRG) and its 4.2 million ounces measured and indicated Nevada gold ounces.
Newmont and Fronteer Gold announced Thursday they have entered into an agreement for a Plan of Arrangement in which Newmont will pay Cdn$14 per share or a total of Cdn$2.3 billion for Fronteer Gold. The sought-after prize is Fronteer's Long Canyon viewed by a number of Northern Nevada geologists as a major discovery in a potential new gold district.
Another bonus is Newmont's 100% ownership of the joint venture Sandman project, which abuts near Newmont's checkerboard pattern lands in Nevada. Located in the same neighborhood as Newmont's Twin Creeks operation near Golconda, Nevada, Sandman could use Twin Creeks' infrastructure to process up to one million ounces of gold.
During the conference call, O'Brien noted that Newmont's Carlin mine began its long life as a 260,000-ounce gold annual operation with 3.5 million ounces of gold reserves and only one open pit mine. He forecast that Long Canyon also has the potential to evolve way beyond its current configuration.
Grigore Simon, Newmont's vice president of generative exploration, stressed that as far as Long Canyon is concerned-"the prize is in the bigger trend." He feels Long Canyon has the potential to exceed 10 million ounces of gold production.
"These sorts of opportunities in Nevada are rare," O'Brien told analysts. Long Canyon will be ranked third in priority among Newmont's current portfolio of Nevada projects, he added.
Currently Long Canyon is a 10-kilometer long trend of which Newmont will own 90%. The current resource stands at 2.2 million measured, indicated and inferred ounces of gold. Newmont plans to spend US$10 million to US$15 million in drilling and geochemical surveys this year in a Long Canyon program, he added.
Dave Baker, Newmont's vice president and chief sustainability officer, estimated the company could permit Long Canyon in three years with construction beginning in 2015. Guy Landsdown, Newmont's executive vice president, discovery and development, estimated it would take a total six to seven years to bring Long Canyon into commercial production.
Fronteer Gold CEO Mark O'Dea said the deal with Newmont will continue to expose Fronteer's current shareholders "to our ongoing exploration and development success through Pilot Gold." Fronteer shareholders will receive one share in Pilot Gold for each share of Fronteer Gold in addition to Cdn$14 per share in cash.
The new exploration company will own a portfolio of Fronteer's exploration properties in Nevada, Turkey and Peru and will be capitalized with Cdn$10 million of cash. Fronteer shareholders will own am 80.1% interest in Pilot and Newmont holding the remaining 19.9%.
Newmont and Fronteer anticipate that the Plan of Arrangement will be finalized by April 2011.
On Feb. 1, 2011, Fronteer sold the uranium assets of Aurora Energy Resources to Paladin Energy. The uranium deal was in the works well in advance of the Newmont-Fronteer deal, analysts were told Thursday.