For the price tag, Newmont will get 100% ownership in Fronteer's Long Canyon project in Nevada, which has measured and indicated resources of 1.4 million ounces of gold. Fronteer's CEO, Mark O'Dea told me at the Denver Gold Forum that cash costs are estimated to be $350 an ounce.
"The acquisition of Fronteer Gold will contribute significantly to our anticipated growth profile in North America," stated Richard O'Brien, Newmont's President and CEO. Newmont produced 5.4 million ounces of gold at cash costs of $485 an ounce and sold 5.3 million ounces for an average of $1,222. The company will report fourth-quarter earnings on February 24th.
Newmont will also acquire two other projects from Fronteer: Sandman, already a joint venture with Newmont, and Northumberland, both of which are in Nevada and will come on stream between 2012-2014. In total, the company has measured and indicated gold resources of 4.2 million ounces. In total, Newmont paid about $547 for each ounce of gold.
This acquisition has been a long time coming. The worst kept secret in the gold community is that Newmont and Barrick Gold (ABX) would be forced to make acquisitions to replenish their gold supply following their peers Goldcorp (GG), Kinross Gold (KGC) and Agnico-Eagle (AEM) who bought Andean Resources, Red Back, and Comaplex, respectively. Goldcorp paid a 35% premium, Kinross a 21% premium and Agnico a 30% premium, which had analysts worried that Newmont and Barrick would be forced to shell out the cash as well. Tom Winmill, portfolio manager of the Midas Fund, warned investors to "avoid the big ones that don't already have growth in their portfolio. Newmont comes to mind. Barrick Gold is kind of treading water on the growth profile [Barrick] probably won't do an acquisition but Newmont might."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV