Newmont boosts exploration as gold reserves fall

By Steve James

NEW YORK, Feb 8 (Reuters) - Newmont Mining Corp (NEM.N: Quote, Profile, Research), is boosting its exploration budget by approximately 10 percent to 15 percent this year and will target smaller-size gold deposits to help build up dwindling reserves, its chief executive said on Friday.

Richard O'Brien also told Wall Street analysts that the world's No. 2 gold producer will spend some $1 billion in capital investment this year, focusing on three major projects -- its Boddington gold mine in Australia, Yanacocha in Peru and completing its own power plant to fuel Newmont's Nevada mines.

And he did not rule out making more acquisitions or Newmont possibly expanding into China, Russia, Democratic Republic of Congo (DRC) and other politically risky regions, in its efforts to seek out increasingly challenging gold deposits.

"You will continue to see Newmont invest in projects like Miramar," he said referring to the recent $1.52 billion deal to acquire Canadian explorer Miramar Mining Corp MAE.TO MNG.A. The deal gives Newmont control of the undeveloped Hope Bay project in the far north Canadian territory of Nunavut.

Gold miners have struggled recently to find reserves to ensure future production. Last September, Newmont warned the mature and low-grade nature of current gold deposits could limit its ability to replace reserves this year.

While gold prices have reached record highs recently, the rise has been matched by soaring costs for labor, energy, and industrial commodities, which have pressured company margins.

Denver-based Newmont reported proven and probable reserves at the end of 2007 of 86.5 million equity ounces compared with 93.9 million equity ounces a year earlier. Equity ounces are the portion owned by Newmont as opposed to project partners.

At Friday's "analyst day," O'Brien said Newmont expects to spend approximately $220 million to $230 million on exploration activities in 2008, including approximately $29 million at Hope Bay. That is up from the $198 million exploration budget last year, $188 million in 2006 and $180 million in 2005.