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10/12/05 Response to Fact Checking Questions of NYT and Frontline
Contact: Deb Witmer, VP, Global Communications, Newmont
The following are responses sent by Newmont Mining (in email attachment) to questions posed by The New York Times and PBS FRONTLINE/World during the reporting of this story. Also, see company statements on the Newmont Mining Web site: "New York Times/Frontline Series on Gold Mining"
All Questions Related to Control of Yanacocha and BRGM
The Yanacocha shareholder dispute was resolved almost five years ago, following execution of definitive settlement agreements among the parties. It has been the subject of multiple investigations by the Peruvian Attorney General's Office, the Peruvian Congress, and the U.S. Department of Justice. In July 2003, the Peruvian Attorney General's Office announced that its investigation had concluded without finding any evidence of improper conduct in relation to the outcome of the Yanacocha shareholder dispute. In October 2004, Newmont was notified that the DOJ had closed its inquiry into the matter.
Based on our review of the evidence and discussions with the officers involved in the dispute, we are satisfied that the company complied in all respects with applicable laws, including the US Foreign Corrupt Practices Act. We see nothing to be gained from yet another round of accusation and rebuttal.
Mr. Kurlander states that he had warned Newmont that it had lost the trust of local people. Further, he says that he informed senior management of the company's failure to conduct its operations in accordance with American or Peruvian environmental standards. We need Mr. Murdy to respond and describe what steps the company has taken to resolve these problems.
Newmont is proud that all of our operations comply with the same rigorous environmental standards whether they are in the U.S. or overseas. Newmont operates under a system of continuous improvement. Review of Yanacocha's environmental performance has been and is a consistent, repetitive, and ongoing process. As such, issues related to environmental performance at Yanacocha are managed as they are identified.
Newmont has for decades used its internal audits, including environmental audits, as an early warning tool to identify potential problems at our operations. This audit process allows the Company to resolve or mitigate potential problems at an early stage thereby avoiding the development of more serious issues at our operations.
Our internal environmental audits take a very conservative approach to identifying potential issues, to the extent that we encourage our audit teams to be extremely aggressive in these reports so that even low level concerns are identified and addressed.
Father Arana and others contend that the company has not been forthcoming with the local community about environmental shortfalls, and that pollution problems continue. Mr. Hinze says this is untrue. Father Arana's suspicion appears to us to be an example of the kind of distrust, whether or not it is warranted, that you sometimes confront in developing countries. We understand Newmont is considering a bold plan to bridge this gap.
While it is difficult to respond to vague accusations, we can cite several publicly available audits and reviews of our environmental performance, including those conducted by the Government of Peru and the IFC's Compliance Advisor Ombudsman, that clearly show a deep commitment to very strong environmental performance at Yanacocha. On a separate but very significant point, Yanacocha's willingness to submit their operations to this type of third party, publicly available reviews is clearly indicative of a commitment to transparency and public participation. These are indicative of the detailed external oversight and review that is part of our operating practice. We do recognize that our activities create change and have impacts, and that this change and the impacts, no matter how well managed, can be difficult and engender distrust. For that reason, we are very proactive in seeking dialogue with our stakeholders to ensure that concerns are addressed promptly.
Ann Maest, author of the Stratus report, says that when Yanacocha stops working as a mine the sulfates in the leach pads will produce acid unabated and that Newmont is aware of this. We need a description of Newmont's commitment to perpetual treatment of runoff and other problems described by her that have been created by mining the site.
Newmont recognizes that the leached material can be the source of metals and contaminates if left unmitigated. As such, Yanacocha has reviewed and selected technological solutions to manage the future, potential releases from the leached material. Upon closure, Yanacocha will construct caps over the leach pads that will prevent rain water from seeping into the material and allow it to run-off. Over the long-term, this will reduce the seepage from the leached material. Any water flow will be collected and treated, as is necessary, before it is discharged. Yanacocha has included the costs associated with the post mining water management activities in its life-of-mine cost projections. At the appropriate time, Yanacocha will set aside funds for both the closure and reclamation and long-term water management requirements.
As the social tensions around the Yanacocha mine continue, the International Finance Corporation has used a dialogue table to try and diffuse the tensions. The IFC now says the table has lost its usefulness and wants to pull out. Does Newmont have a new plan to put in its place?
Newmont has a number of dialogue tables in use in Yanacocha for the purpose of identifying and understanding concerns of the communities surrounding the mine. It might be useful to talk with Meg Taylor of the CAO, the IFC's ombudsman, to get more information on the use of the specific dialogue table referenced here.
By taking Cerro Quilish off its books, and because of the growing scarcity of oxide ore at Yanacocha, it appears that production at the mine will drop steeply by 2007, according to public record documents and reports. What provisions is the company making to replace that shortfall?
Newmont has a promising pipeline of new projects in development and actively manages its worldwide portfolio of properties. We expect to invest about $150 million in global exploration in 2005.
Newmont's partner in Minera Yanacocha, the CEO of Buenaventura, Mr. Benavides, says he "hates" the term social license and that he does not understand what it means. This needs a reply or comment from Newmont.
Newmont clearly understands what the term social license means. We seek to apply best practices in every aspect of our operations and continuously measure, assess and audit, our performance in order to ensure that the communities surrounding our mines are confident in our commitment to protecting the environment as well as their health and safety. Mr. Benavides and Buenaventura have always been supportive of our efforts in this regard.
We were trying to determine what Yanacocha's ranking would be among the world's gold mines. It has been described to us as one of the great gold strikes of the last century. Based on Mr. Hinze's statements and additional research, we believe it remains the world's "most productive gold mine" and amongst the most profitable.
While we cannot say with certainty exactly where Yanacocha ranks in terms of profitability and production, because we don't have access to other companies' data, it is accurate to say that Yanacocha is one of the world's most profitable and productive gold mines.
The Yanacocha mine operation is spread across 600 square miles at altitudes as high as 14,000 feet.
The actual operations area covers approximately 60 square miles. The area that MYSRL holds mineral concessions for is approximately 172,000 ha (664 sq miles) the highest elevation in the operations area is 13,812 feet.
The Yanacocha mine operation moves half a million tons of earth each day.
This is more or less correct on an average basis
Each gold bar produced at Yanacocha is worth $180,000.
More or less correct given current metal prices
More than $7 billion worth of gold has been extracted from Yanacocha since 1993.
MYRSL will reach the 20 million ounce production level in October. Given an assumed average price since 1993 of $350.00 per ounce, $7 billion would be correct.
The Cerro Quilish site is projected to contain 3.7 million ounces of gold worth more than a billion dollars.
Reported reserves for Cerro Quillish in 2003 were 3.85 million ounces.
What percentage of the profits at Yanacocha in 2004 were dedicated toinvestment in social responsibility in the region? What percentage will bededicated in 2005?
Yanacocha does not determine its social responsibility investment based upon a percentage of profits. Yanacocha has invested $4.7 million in 2003, $6.7 million were invested in 2004 and the estimated investment for 2005 is $6.8 million. Moreover, Yanacocha invests in major works for the Cajamarca region. For example at present, Yanacocha is constructing a $40 million bypass road in the Chilete-San Pablo-Granja Porcón area and investing $900,000 dollars in a joint venture with other mining companies to remediate environmental liabilities of past decades in Cajamarca (Not related whatsoever with Newmont or Yanacocha activities).
The "Fact Sheet Minera Yanacocha Community Investment" (as of May 2005) provided to Mr. Bergman in Peru states Yanacocha invested $13,512,000 in "Investment In Social Responsibility" in 2004, and is projected to spend between $15,000,000-17,000,000 this year.
There is a discrepancy between the above figures and what I found inNewmont's annual report on social responsibility, "Now and Beyond" for 2004 which reports the company spent $6.7 million on community investment around Yanacocha, and was "a large increase from the $4.6 million invested in 2003." All other economic "contributions and payments" relate to payroll, goods & services and taxes. If you could break this down, it would be very helpful.
The figure stated in the "FACT SHEET MINERA YANACOCHA COMMUNITY INVESTMENT"($13,512,000 for 2004 and $19,960,000 for 2005) responds to the operational budget of the Yanacocha External Affairs Department. The operational budget would include staffing costs and general operation of our outreach and community relations department. From these figures, $6.7 million correspond to Social Investment in 2004 and $6.8 million is projected for the year 2005.