Jakarta, Indonesia – Newmont Mining Corp., the second-largest gold-mining company, needs to rebuild its credibility with investors and may consider takeovers, chief executive Richard T. O’Brien said.
“It’s important for us to be attuned to the acquisition market,” O’Brien, 53, said in his first interview since he was appointed July 1. “There’s no question Newmont has underperformed gold and underperformed a number of our peers.”
Denver-based Newmont cut its sales estimate three times last year on reduced output in Ghana and Uzbekistan and was overtaken by Barrick Gold Corp. in gold sales. O’Brien said he would also consider selling the company.
“Newmont needs to lift their game in terms of getting their reserves up,” said Peter Chilton, who helps manage the equivalent of $1.4 billion at Constellation Capital Management in Sydney, Australia. “Barrick has been very aggressive.”
Newmont’s stock has lagged behind Barrick’s, giving it a market value about two-thirds the size of its main rival, which last year bought Placer Dome Inc. for $10 billion. The company’s shares have fallen 15 percent in the past year compared with the 21 percent gain in Barrick’s U.S. stock. Gold rose 11 percent.
O’Brien, formerly Newmont’s chief financial officer, replaced Wayne Murdy, 63. Five days into the new job, he shut down Newmont’s merchant banking business and canceled forward gold sales.
The decisions marked a “renewed focus on our core gold business,” O’Brien said at the time.
The company last year sold 5.87 million equity ounces of gold produced at $304 an ounce. Barrick, based in Toronto, sold 8.39 million equity ounces with costs of $282 an ounce.
“We are going to have to get our credibility back,” O’Brien said. “We’re going to have to complete our projects, getting it done on time. If we can do all that, and replace our reserves through a combination of exploration, acquisitions and development of projects, then we will get the opportunity to see Newmont turn around.”
