Everything is large in scale at Newmont Mining Corporation’s Boddington mine in Australia, including ethical responsibility. Tim Netscher, senior vice president of Asia Pacific operations, tells Gary Toushek about it.
The Asia Pacific region of the world’s second-largest gold miner, Denver-based Newmont Mining Corporation, will shortly become the company’s largest production region; (its other three regions are North America, South America and Africa.) Newmont Asia Pacific includes the Batu Hijau mine in Indonesia (45 percent), which produces mostly copper and smaller quantities of gold; the Martha and Favona mines at Waihi, New Zealand; the Tanami mine in the remote Tanami Desert of the Northern Territory in Australia; a complex of mines at Jundee, Australia; the Kalgoorlie Consolidated Gold Mines in Kalgoorlie, Australia (50 percent); and the Boddington mine in Western Australia, destined to become Australia’s largest gold producer within a few years.
“When Boddington is up and running at full capacity,” says Tim Netscher, senior vice president of Asia Pacific operations, based in Subiaco, Western Australia, “for a while we’ll be producing nearly half the volume of Newmont’s global gold output—approximately two and a half million ounces annually. Of course, gradually we’ll have projects coming up in other regions, and the volume from this mine relative to the company’s total production will go down. And Boddington will also produce a fair amount of copper.” In fact, most of Newmont’s copper is produced in its Asia Pacific region.
Mining began at Boddington in 1987, when Billiton (now BHP Billiton) was the main owner and also owned the Worsley Alumina refinery, a large-scale processing plant about 150 kilometers away on the coast. Boddington has changed owners over the years, and in 2001, when the market for gold was in decline, mining at Boddington was stopped and a maintenance program put into effect until 2006, when an expansion was begun by joint venture partners Newmont Boddington Limited (two-thirds) and AngloGold Ashanti Australia Limited (one-third). Three years later Newmont bought out its partner.
Because of the capital investment and certain risk involved in gold mining, does Netscher think it’s more advantageous for a company to enter into joint venture partnerships or to operate a mine independently? “Gold mining is circumstance-driven and depends on the size of the company as well as the region in which one is operating,” he says. “There has to be a good reason to enter into a partnership, since it brings complications. So it’s simpler to operate without one. However, if you’re operating outside of your home territory, in a more challenging region, it makes a lot of sense to work collaboratively with a partner, in a joint venture or other structured arrangement. For example, Newmont has partners in Peru and Indonesia, where they bring good local knowledge. For a really big investment, partnerships help spread the risk but also the reward.”
Since the best gold at Boddington has been mined in its early years, the remainder is a lower-grade ore, and the priority now is to move and process a large volume. The mine there is sizable enough to allow a large-scale operation, with the processing plant within conveying distance from the mine. “The mine has to be large in order to make the economics work,” Netscher says. “The key to success is sufficient scale and world-class operating techniques, in terms of double-sided loading of trucks, efficiency in use of the amount of cyanide per ton of gold, and other measures,” he says.
“We have benchmark standards that we have to deliver to once Boddington is up and running. We’re mining around one gram of gold per ton of ore, with large-scale equipment. At full production, we’ll be moving 10 million tons of material per month. In a month, we will process about what we process at our Jundee and Tanami mines in one year, and at Waihi in two years. That gives an indication of the size of the processing plant. The only other mining operation this size in our portfolio that moves comparable quantities of material is Batu Hijau in Indonesia.”
Boddington is nearly a $3 billion investment for Newmont, which is significant when you consider that the company has a market cap of $20–25 billion. The second month of a one-year ramp-up of this large-scale mining operation has just been completed, as per plan, which means Boddington will be operating at full capacity by August 2010—“and by world-class standards on all parameters sometime in 2011.”
Netscher reflects pride as he notes the evolution that the mining industry has undergone over the decades. With over 35 years’ experience in the business himself, including gold, copper, nickel, cobalt, coal and platinum group metals in South Africa, Indonesia, the US and Australia, he’s seen the giants like Newmont embrace a smarter way of mining, learning a better way of using resources, of improving energy consumption, water use, safety, relations with local communities and indigenous peoples, environmental concerns and regulations, sustainability, and the other factors that are changing the image of an industry that historically had a track record of being not exactly the most socially and environmentally responsible.
“To put it into context, I’m spending more than half my time on what we call the soft issues. And the same applies to my counterparts in Newmont’s other regions. If we’re developing a new mine project, associated with it are hard measures such as on-time delivery, on-budget delivery, fit for purpose and so on. In this industry 25 or 30 years ago, that would have been typical. Today it’s less than half the focus, because the majority of our effort is on those other issues. And we have no choice ethically or legally except to do those properly. Quite frankly, it takes years to build a company’s reputation, plank by plank by plank, and it takes only one or two incidents to destroy that reputation, so you don’t want to get into those situations. You simply have no choice but to devote the time to them.
“I’ve been very fortunate in my career,” Netscher continues, “in that I’ve been exposed to those soft issues in various countries, so I understand cultural sensitivity and I honestly believe in those things. I couldn’t work in this industry if I was destroying the environment or if I wasn’t advancing local and indigenous people. Whenever I leave a job or a project, I want to leave that community in a better position than it was in before I got there, across the entire spectrum of issues. And if I don’t believe that honestly myself, then it’s time to hang up my boots. And I look for that sort of thing in the people I hire as well. What’s really important in communities—and we’re still getting there at Boddington—is that the people who work on the mine are involved in the community. So it’s not a question of the company just throwing money around in the community, for example, sponsoring the local football club. I actually want our people to volunteer their time to go in and help with these things; we encourage our people to volunteer and we give them time off to do that, and I want people to participate in the local football club, training kids and things like that. It’s hard work, but that’s where we get our mileage, not just writing checks.”
For three years Newmont has been part of the Dow Jones Sustainability Index (launched in 1999, it’s the first global index tracking the financial performance of the leading sustainability-driven companies worldwide), and during the first two years the price of gold was rather low at times, Netscher points out, “and yet we’ve met all the requirements that allow us to maintain a position on that index. And I feel really good about that. I find this work very rewarding; when I look at Indonesia and see the people that I helped in their personal development, it’s nice to reflect on that. And Boddington is located in a picturesque, rural area of Western Australia, so it’s important to us to bring the local people along with us and to lead and support conservation efforts with respect to endangered bird species, as well as making sure that the locals get work and business opportunities, in terms of supplying us with services and materials. It’s an ongoing journey that we can track from month to month.”
The new federal government is working to fulfill an election promise to introduce a carbon-trading scheme with credits and taxes for industries and public institutions beginning in 2010, in an attempt to curb the production of greenhouse gases, and Netscher is getting his Australia mines prepared. “It will impact us; we already have the details of it, and initially it will be an added expense to us. I’m trying to turn it into an opportunity for our company; we’re looking at a number of innovative, energy-saving approaches to reducing our carbon tax. At Boddington, at some time in the future, we’re looking at introducing hybrid or electric-driven trucks in one form or another. We’re looking at this as an incentive that ultimately makes us a better corporate citizen.”