Newmont CEO sees gold higher, maybe more M&A

By Steve James

NEW YORK (Reuters) - The head of Newmont Mining Corp (NEM.N), the world's second-largest gold producer, said on Thursday he expects the gold price to rise even higher.

"It still has room to run," President and Chief Executive Officer Richard O'Brien told Reuters in an interview.

He gave no forecast for how high the price could go, but when asked if Thursday's price around $767 per ounce in New York reflected gold's value, he said: "Prices seem in line with indications they will go up further."

O'Brien also said Newmont was "still in the market for opportunistic acquisitions," following its pending $1.52 billion purchase of Canada's Miramar Mining Corp MAE.TO.

And he said Newmont's Midas mine in Nevada, which was closed after a fatal accident in June, could resume some production in the fourth quarter.

Since succeeding Wayne Murdy as CEO on July 1, the company's former chief financial officer has eliminated Newmont's entire 1.85 million ounce hedge position, moved to sell or spin-off its merchant banking business and made a major acquisition with the Miramar deal.

"You are not going to turn around the company in one quarter, or one year," he said by telephone from Denver.

"But in the first 100-odd days, I think there has been a focus on taking on difficult projects, like de-hedging and selling the merchant banking."

Asked about his pledge last month to improve Newmont's stock price, O'Brien admitted there were "lurches" recently between a year low of $38.10 in August and a high of $48.42 in September. It has since slipped after warning that costs in Nevada, which accounts for 40-45 percent of its worldwide production, would exceed previous estimates.

The stock rose 1.7 percent to $46.10 in Thursday afternoon trading on the New York Stock Exchange.

"I don't watch the share price every day, but over time, there is a continued focus on shareholder value," he said.

O'Brien said the current gold price was related not only to the U.S. economy and the weak U.S. dollar, but also to other burgeoning economies such as China and India.

The combination of less gold supply, more demand and a weaker U.S. dollar was creating a favorable environment for the gold price to rise, he said.

O'Brien said the acquisition of Miramar in northern Canada, one of the largest undeveloped gold deposits in the world, would help Newmont supplement its reserves.

He said he expected the deal to close in January or February, but did not envision plans for its starting production for four or five years yet.

O'Brien said the Midas mine, where one miner was killed in June, could reopen with some limited production some time in the fourth quarter.

The company was awaiting the go-ahead from the U.S. Mine Safety and Health Administration. Lost production at Midas and higher-than-expected startup costs at another Nevada mine, Phoenix, had exacerbated the cost outlook, he said.

But Newmont's plans to reduce costs in Nevada by approximately $25 per ounce are closer to being realized through a power plant the company is building in the state.

Construction should be completed by December or January and the plant should start producing some electricity soon after and generate at a commercial level during the third quarter next year, O'Brien said.

Asked if Newmont was seeing the benefits of scrapping its hedging plan, he said one million ounces of gold hedged at $384 per ounce under the plan would now be sold next year at the prevailing world price, which is likely to be twice as much.