Newmont Mining Corp. is the latest major miner to make a bet on the Canadian Arctic, striking a $1.5-billion deal to buy Miramar Mining Corp. and highlighting the massive resource potential of the region.
Large-scale metal producers like Newmont are drawn to the Far North because so few discoveries are being made in more developed areas. The political environment in Canada is also favourable for mining, compared to that of many other regions.
By buying Miramar, Newmont will pick up the Hope Bay Project, a massive, largely unexplored area where 10.7 million ounces of gold resources have already been identified.
Newmont believes it can expand that resource by adding its expertise to the project. Hope Bay is considered the largest undeveloped gold resource in Canada.
"We're going to do some additional studies and analysis and look at how we can fully maximize the potential of what we see as potentially a new core mining district in a triple-A rated country (Canada)," said Omar Jabara, a spokesman for Newmont.
The Arctic remains a difficult place to operate because of poor infrastructure and cold weather. But in recent years, companies have become more adept at dealing with the challenges. Costs are also higher, but they have been largely offset by soaring metal prices.
"You have to understand what they're going after here is not any near-term source of production, and indeed there's not a reserve that you can talk (about) in any near term on the horizon. What they're buying is a big resource," said Barry Allan of Research Capital, who follows both Newmont and Miramar.
"It is a pretty remote location. It's about as far north as you can go in Canada and not be wet."
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Thomas Winmill is president of Midas Funds, which holds more than one million Miramar shares. He says the growing popularity of mining in the Far North has helped the industry in the territories develop as miners have become more efficient at developing their projects.
"As miners have had to go farther north . . . they have figured out how to develop the ice roads and move equipment in. (And) a lot of technical aspects of developing the deposits have benefited by all the other mining going on in the Arctic."
Miramar is the third junior miner in the North to be taken over this year.
In February, both Cumberland Resources Ltd. and Wolfden Resources Inc. agreed to takeovers from big global players.
After the consolidation of the three juniors this year, only a few Arctic-focused explorers such as Comaplex Minerals Corp. and Sabina Silver Corp. remain.
Newmont, the world's second-biggest gold producer, saw the potential of Hope Bay two years ago when it bought an 8.4 per cent stake in Miramar. The Denver-based company recently warned it is having trouble replacing its gold resources as its current projects mature and it is always on the lookout for long-term producing projects.
By bidding $1.5 billion, Newmont is offering about $140 US for each ounce of gold Miramar has identified. Experts called that a full price on Tuesday, and rival bids are not expected.
However, Miramar's shareholders may push Newmont to lift its offer by a small amount. One major shareholder, Van Eck Associates Corp., was already calling for a higher bid Tuesday.
Colour Photo: Don MacKinnon, Bloomberg News / Newmont Mining Corp. has agreed to buy Miramar Mining Corp. for about $1.5 billion.
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