April 27, 2012 / 6:53 PM / in 7 years

Newmont may shift spending from costly Peru mine

(Reuters) - Newmont Mining Corp (NEM.N) will put its money into projects in other countries if environmental changes to its proposed $4.8 billion Conga gold mine in Peru prove economically unfeasible, the head of the U.S. company said on Friday.

“We have other options if it is not favorable,” Chief Executive Officer Richard O’Brien told Wall Street analysts on a conference call.

Peru’s previous government approved the Conga plan in October 2010. But after a wave of protests by farmers and environmentalists, the new government of President Ollanta Humala, which came into office last July, ordered a review by a panel of independent industry experts.

O’Brien noted the review confirmed that Newmont’s environmental impact report for Conga met Peruvian and international standards. But the experts recommended some changes in the location of a waste dump near lakes to which local opponents have objected.

O’Brien said Newmont was assessing the economic implications of the changes. “If Conga cannot be developed ... in a safe, socially and environmentally responsible manner ... then we will reallocate that capital to other development projects in our portfolio, including opportunities in Nevada, Australia, Ghana, and Indonesia.”

Newmont’s plans fueled protests in the northern Cajamarca region last year on fears the most expensive mine ever attempted in Peru would leave local farmers without sufficient water supplies and cause pollution. The mine’s construction has been halted since November.

On Monday, Peru’s Mines and Energy Minister Jorge Merino said he would confer with officials from Denver-based Newmont to define how the plan would be altered after a team of independent environmental auditors recommended a series of changes that could increase the cost of the project,.

“They’ve said they are evaluating the proposed measures recommended by the auditors, but I think there’s a good willingness on their part,” Merino said.

The auditors’ recommendations called for the company to preserve two of four alpine lakes that would be displaced by the mine and replaced with reservoirs.

President Humala has urged community activists to stop protesting against the stalled mine’s construction and said the government would make sure the company adheres to strict social, environmental and labor goals.

During Friday’s conference call to discuss Newmont’s first-quarter earnings, O’Brien noted Conga is a significant investment in Peru, near Newmont’s Yanacocha mine, the largest gold producer in Latin America.

“Conga’s development would be a significant source of revenue for the government of Peru, along with significant employment.”

He noted Newmont has been operating in Peru for more than 20 years, “and we want to continue to be part of the government’s social inclusion efforts and the development of the country through responsible mining.”

On Thursday, Newmont’s first-quarter profit beat Wall Street estimates as gold prices outpaced higher labor and power costs.

Earnings were $561 million, or $1.13 per share, compared with $514 million, or $1.04 per share in the year-ago quarter. Adjusted for certain items, the profit was $1.15 per share, which beat the analysts’ average estimate of $1.14 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 9 percent to $2.68 billion.

In afternoon trading on the New York Stock Exchange, Newmont’s shares were 1.1 percent higher at $48.29.

Reporting By Steve James; Editing by Gerald E. McCormick and David Gregorio

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