Newmont starts $1 billion gold-mining project

U.S. gold-mining giant Newmont Mining Corporation, after years of geological studies and negotiations with the government of Suriname, has started work on its Merian Gold Project a site in the northeastern part of Suriname.

The open-pit mining facility is being developed about 40 miles south of Moengo, a town of approximately 10,000 residents in mineral-rich Suriname. The 1,235-acre project is operating as Surgold (Suriname Gold Company). It promises significant riches for Suriname and Newmont, headquartered near Denver, in spite of a recent downward trend in gold prices. Merian’s gold reserves are estimated at 4.2 million ounces.

Costing Newmont up to $1 billion, Merian is expected to be completed and producing gold by the end of 2016. It will be Suriname’s second large-scale gold-mining project; Toronto-based IAMGOLD Corporation now operates its Rosebel gold mine in the mineral-rich country. Bauxite, gold and oil are the main contributors to Suriname’s economy. The mining sector accounted for 28 percent of fiscal revenue and 88 percent of exports in 2013.

“Our team has been on the ground in Suriname for 10 years, shaping Merian into a profitable project and securing a solid position in the Guiana Shield,” said Newmont President and Chief Executive Officer Gary Goldberg in a statement.

Suriname’s government is expected to buy into the Merian mine with a stake of 25 percent. Newmont, one of the world’s largest gold producers, is a publicly traded company with significant operations on five continents.

Surgold’s managing director Adriaan Van Kersen said that Suriname was attractive to Newmont because of its “favorable geological conditions and stable investment climate.” The Merian project, he added, will giveNewmont a foothold in the region, allowing it to more easily expand its gold-mining operations there.

There has been strong political support for the project. Suriname has been improving roads and transportation in the area surrounding the mine as work and planning on the project have moved forward.

Goldberg, Newmont’s CEO, explained in a statement that Merian “marks an important milestone in our portfolio optimization process we have divested nearly $800 million in non-core assets to help fund the next generation of lower cost projects in our portfolio. Equally important, we established community agreements and are working with experts to minimize our impact on the environment; getting it right from the beginning is critical.”

Newmont expects Merian to produce an average of 300,000 to 400,000 ounces of gold annually “at competitive costs” over the mine’s 11-year lifespan. During the first five years output is expected to average 400,000 to 500,000 ounces per year due to the purity of gold and ease of mining it; these are factors that will increase profitability. Newmont estimates average “all-in sustaining costs” of $750 to $850 per ounce in the first five years, and $825 to $960 per ounce for the life of the mine. The mine will consist of three open pits, a processing plant, waste-rock disposal areas, a tailings storage facility, and a camp for workers. Surgold expects to employ 2,500 people during project development and 1,300 during full operation.

Fitch Ratings said Newmont’s $1 billion investment represents 18 percent of Suriname’s GDP and, most significantly, could double gold output by the end of 2016. It added that Suriname’s “real GDP growth could rise to 4.2 percent in 2015 from our forecast 3.7 percent in 2014, driven by new mining investment.”

Suriname’s four-year-old government is welcoming foreign investment, including in the mining sector. It is part of President Desir Bouterse’s ambitious plans to develop and diversify the economy and, above all, increase social spending and quality-of-life indexes in the heavily forested nation of 542,000 people.

Referring to foreign investments in mining and other sectors, Minister of Natural Resources Jim Hok said, “This government has a socially motivated agenda that will use the wealth generated from gold, oil and bauxite to invest in education, health care and housing.”

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