Newmont Goldcorp Starts Production in Mexico After Blockade

Leading gold producer Newmont Goldcorp (TSX:NGT,NYSE:NEM) will restart production at its Peñasquito mine in Mexico after the lifting of an illegal blockade and months of negotiations with local officials, protesters and a transport company.

The blockade, which began in March and saw some 1,000 people and 200 trucks take turns preventing access to the asset, was aimed at forcing the company to restore and guarantee local water supply.

The government of Mexico tried to intervene; however, talks to get the barricade lifted reached a stalemate in mid-September, at which time the world’s leading gold miner released a statement saying it has enhanced water availability to residents in recent years.

Located in Mexico’s Zacatecas state in the north, the open-pit mine produced 272,000 ounces of gold in 2018, according to company documents. It is estimated that the Mexican mine accounts for roughly 17 percent of Newmont Goldcorp’s net asset value.

With state and federal government support, the illegal blockade was lifted on October 8, with an established ongoing police presence to deter another barricade from being erected.

“We appreciate the government’s efforts to uphold the law by assuring ongoing access to and from Peñasquito while continuing to sponsor the dialogue process, should that continue to be needed,” said Tom Palmer, president and CEO of Newmont. “Our focus is on ensuring a safe start-up of operations so our workforce can return to their jobs in an orderly manner.”

While the barricade may be gone now, the five and half months of precarious access impacted the company’s output.

According to a Wednesday (October 23) press release, Q3 production was reduced by approximately 11,000 gold ounces, 1.7 million silver ounces, 13.7 million pounds of lead and 22.8 million pounds of zinc.

The reduction will weigh on the precious metals miner’s ability to reach its yearly guidance. It may also affect Wheaton Precious Metals’ (TSX:WPM,NYSE:WPM) bottom line, as it entered into a purchase agreement with Goldcorp in 2007 to buy 25 percent of the silver produced at the mine over its entire life.

Prior to the mega merger earlier this year that combined Newmont Mining and Goldcorp’s assets into one gold major, Goldcorp operated Peñasquito. During its sole proprietorship Goldcorp also encountered issues with residents who claimed the company said it would hire locally.

As mentioned, Newmont Goldcorp asserts that it has increased water availability for the 25 communities that neighbor the project through a number of initiatives, some of which include water treatment plants, new wells, pipelines and water trucks.

“This includes installing and operating a reverse osmosis water treatment plant in the Cedros community in 2018 with a capacity of 600,000 liters of drinking water per day,” the company said.

Shares of Newmont Goldcorp climbed 2 percent on Wednesday (October 23) following the news to trade at C$50.70 in Toronto.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.