Four months into the Nevada Gold Mines joint venture, the Mining Quarterly sat down Greg Walker, the NGM executive managing director, to talk about how the joint venture is going so far. The joint venture, which became official on July 1, brings together the Nevada mining operations of Barrick Gold Corp. and Newmont Goldcorp. It is owned 61.5 percent by Barrick and 38.5 percent by Newmont, and is operated by Barrick.
Walker said overall, the joint venture is going well.
“The production has been going along the lines we expected it to,” Walker said. “There have been a few issues with the integration and getting the right people in the right place and the right ore in the right place, but generally we hit our targets. … A lot of the improvements we expected to see, we’re now seeing materialize. … So it’s pretty much as we expected it would be.”
The integration of the operations of the two companies into one new company is still a work in progress. A lot of work has gone into bringing together the companies’ email, information technology and human resources systems.
Two different financial management systems are still being used to manage the mines. Barrick uses Oracle, and Newmont uses SAP. What this means is, to get a tire changed or some other type of equipment maintenance done, employees have to log into the system of the legacy company that owned that piece of equipment. It’s not the most efficient way to do business, but it’s a temporary situation. Within six to eight months, all of Nevada Gold Mines will be using the SAP system.
“It’s a huge project,” Walker said. “It’s a lot of money to change the financial management system over, and a lot of work. … It will be much better when we’re all on one system. At the moment it’s still a bit disjointed.”
Also, all the approximately 7,000 employees working for Nevada Gold Mines are not yet Nevada Gold Mines employees.
“Newmont people are still employed by Newmont, and Barrick people are still employed by Barrick,” Walker said. “They’ve been effectively contracted to NGM while we work through the administration process.”
Walker said it took time to consolidate the two payroll systems into one structure, and they also wanted to make sure employees didn’t see any tax disadvantage from leaving a company mid-year and starting with a new company.
The administration process is now almost complete, and the Barrick and Newmont employees will be Nevada Gold Mines employees as of Dec. 23, because that is the start of a payroll period.
Walker said in November all the employees would be getting more information about the new terms and conditions for Nevada Gold Mines employees.
“We’ve sort of been doing that over the last three months, but this month we’ll be really focusing on what people are going to expect to see in January,” Walker said.
Walker said there won’t be big changes when everyone becomes Nevada Gold Mines employees.
“We’ve always said that base pay won’t go down, and we’re going to be offering similar positions with similar packages.”
The NGM medical package will be similar to the Barrick and Newmont medical packages, but not exactly the same. There will also be some differences in the retirement plans.
“Newmont had a pension scheme which Barrick didn’t have, so we won’t be having a pension scheme going forward, but we’ve improved the 401k to offset the pension scheme,” Walker said.
“They’re not identical packages to either company, but we’ve come to something in the middle to give people a comparable package.”
There have been rumors going around town that NGM will have a reduction of personnel around the start of the new year. Walker said these rumors are simply not true.
“There are no planned terminations, there’s not going to be redundancies on December 23, that’s not the case, that’s not true,” he said.
“Rumors are usually made by people who either have got nothing better to do with their time or they just like stirring trouble, and fear I suppose.”
“I get wound up about that,” Walker said. “Because it causes a massive distraction.”
He said when people get distracted by and concerned about the stories they hear, they can start to lose focus on their work, and people get hurt. Walker said that in July, when people were concerned about the changeover to the Nevada Gold Mines joint venture, the number of workplace safety incidents went up.
The number of safety incidents always goes up around Christmas, Walker said, because workers are thinking about the holidays, and the weather is also changing to winter conditions. If people are also concerned about what will happen with the Dec. 23 changeover, that will be an additional distraction.
“It’s a concern for us in many ways,” Walker said. “But no, there are no plan for mass reductions or redundancies.”
When the joint venture got started in July, there was a reduction in personnel. A lot of that was because there were people in duplicate roles at the two companies. There has been some further reduction in personnel since then.
“I think we made redundant 68 or 69 people,” Walker said. “But we actually reduced the organization by 130 roles back then—that was the Elko-based management. A big chunk of them were the technical people that stayed with Newmont—so all of their senior people, most of their general managers stayed with Newmont and were reallocated globally somewhere else. Most of their senior technical people either went to Vancouver or Denver.
“When we say we cut 130 roles, we didn’t sack 130 people. A number of people just stayed with their parent company.
“And then since then, the last three or four months, through natural attrition and moving people around, we’ve reduced some more roles, as well. So there’s been a further reduction. But they’ve mainly been in the technical and senior management levels—semi-professionals and professionals.”
Currently, Walker said, Nevada Gold Mines is working to hire a lot of people to work at the mine sites.
“We’ve got well in excess of 200 vacancies that we’re trying to fill at the moment,” Walker said.
Walker said at the same time some employees are concerned people will be let go on Dec. 23, his concern is maybe some employees will decide not to make the changeover to Nevada Gold Mines. Then Nevada Gold Mines would have to look for people to fill those roles at the same time they are looking to fill the more than 200 current vacancies.
Another concern, Walker said, is that as new mines in the region get up and running, they will work on hiring away the best Nevada Gold Mines employees.
Good management and good communication are central to employee retention, Walker said.
“Managing employees’ expectations and making sure you’re a good manager is important part of the business nowadays,” Walker said. “You’ve got to make sure that you look after your most valuable asset.”
He said saying that people are the company’s most valuable asset may sound like a cliché, but it really is true.
There will always be some people who leave to explore other pastures, “which means we’ve got to have a better training and development plan,” Walker said. “That’s an issue we have to focus more on—growing better miners and more miners from Nevada and from Elko, instead of bringing in people from the outside. That’s one of the areas we’re focusing on with the Nevada Mining Association—how to develop skills and develop people within Nevada rather than relying on people coming from other states.”
Another change which has taken place since the start of the joint venture is that some of the people who used to work in the central offices in Elko are now working at the mine sites. Walker said dozens of people have been reassigned from the central offices to the mine sites.
“I’m a big proponent of having operators on the sites operating,” Walker said. “Both companies had a bunch of engineers, metallurgists, geologists, all sitting in Elko … A lot of the technical people who used to be based in Elko at both offices have been reallocated back out to the sites.
“My concern always is that technical people become very disconnected from the day to day operations, and therefore they generate a plan that can’t be executed by the operators,” Walker said. “So get them back out on the sites and they can keep in contact with the operators and they can work together and come up with a plan that’s feasible going forward.”
The expansion project at the Long Canyon Mine is one example of this reallocation of personnel, Walker said.
“That was predominantly driven from Denver with support out of this office for Newmont. We now have moved that back under Megan (Long Canyon General Manager Megan Tibbals). It’s her project and she’s responsible for it, it’s her future, and we’ve given her the resources to be able to execute that plan and do the feasibility study they’re doing.”
The joint venture is seeing a lot of savings through synergies, Walker said. They have budgeted $311 million in savings in 2020. The goal is to have about $450 to $475 million in annual savings, so they are working toward realizing about an additional $150 million in savings for the coming year.
A lot of the $311 million in savings budgeted for 2020 comes from the supply chain, Walker said. He explained some of the ways the joint venture is seeing about $115 million in supply chain savings.
“You can imagine both Barrick and Newmont have got lots of different contracts,” Walker said. “The first thing we did is go back and read the two different contracts and we went to the supplier and said, ‘Newmont got it for $20 and we got it for $25, we want the Newmont price.’”
“And then we changed our freight forwarders. Both Newmont and Barrick used different freight forwarders to get freight to Elko. So we’ve consolidated under one company, and that certainly helped us reduce our freight costs of getting goods here.”
The combined company also went to the big suppliers like Komatsu and Caterpillar and asked for some better deals.
The joint venture is also seeing some savings on electricity by being able to optimize its two power stations. Newmont had the coal-fired TS Power Plant between Winnemucca and Carlin, and Barrick had the gas-powered Western 102 Power Plant near Reno.
“Put them together and we had some cost savings out of being able to get better deals from NV Energy and from Shell,” Walker said.
The joint venture is also seeing savings by being able to haul ore on more logical routes between mines that used to be owned by the two different companies. They have also been able to keep operating a mill which was going to be shut down.
“There have been a lot of benefits in Turquoise Ridge,” Walker said. “Initially we thought we’d only save about $50 million a year, but that’s gone over; it’s about $73 million a year now in synergies from running Twin Creeks and Turquoise Ridge as one entity. That’s been good.”
Increases in ounces
With lower production costs, the joint venture has been able to lower its cutoff grades, so that material which previously would have been waste can now be mined profitably.
“Material that wasn’t economic is now economic,” Walker said. “That’s made a significant difference.”
“Cutoff grade is basically at what point do we make money. And we mine, obviously, above the cutoff grade, because you want to make money.
“You’re always leaving ounces behind in the ground. You never mine 100 percent of every ounce that’s in the ground. Or very rarely is an ore body so clean that you can mine all of the ounces. There are always bits on the edge, and that changes as you change the cutoff grade.”
Since the start of the joint venture, Walker said, Turquoise Ridge, Carlin and Goldstrike have all seen significant increases in ounces produced or counted in year-end reserves.
“In excess of two million ounces have been added to the organization through the synergies,” Walker said.
Advances in technology
A variety of recent technological advances are now in use at or are being tried out at various mine sites.
The Phoenix Mine now has three Pit Viper autonomous drills.
“When I went to see the project the operator in the control room was controlling three drill rigs, drilling blast holes. They’ve got some good stuff,” Walker said.
“With our autonomous trucking at Arturo, we’ve had lots of problems getting it going. Most of the issues are around the WiFi network. Over the last couple of months, we’ve done a lot of work to address the problems. The trucks are going well now.”
The Turquoise Ridge underground mine will be trying out a battery-powered 40-ton underground haul truck. It will be commissioned in December and should be in use in January or February.
“Electric underground has a lot of advantages,” Walker said. “First of all, it’s a lot less emissions. The cleaner air underground is better for your people and better for your machines.”
“Heat is still a challenge. But certainly diesel particulate is a big issue in underground mining. So you use less ventilation. You don’t have to pump as much fresh air down. There’s a huge cost in ventilation. It’s a significant cost to an operation.”
Turquoise Ridge can’t really add more ventilation until the third shaft is completed in 2023, Walker said, so having an electric truck to reduce underground pollution will be a big help.
“We’re hoping the underground technology we’re using will roll into Goldrush when we develop that mine. We plan to start development of Goldrush in the second half of 2021.”
“The technology is going OK,” Walker said. “It’s not our primary focus, but it’s certainly still a focus of our business. Barrick was obsessed by it. We’ve moved away from that. Newmont had a much more balanced look at automation, so we’re following that sort of model.”
Even though technology is not the primary focus of Nevada Gold Mines, changes in technology, automation, autonomous machines and machine learning are sure to keep rolling along, and Nevada Gold Mines will work to harness the efficiencies and improvements to health and safety brought by technology advances.
Expansion and exploration
Walker said Nevada Gold Mines has several planned and ongoing projects which are progressing well.
“The Turquoise Ridge project is going well,” Walker said. “That’s an expansion, and putting another shaft in. Our big expansion project out at Goldrush at Cortez is also going well. That’s slightly ahead of schedule, so that’s good. Usually projects are behind schedule and over budget, but that one is under budget and slightly ahead of schedule, which is good.”
Nevada Gold Mines also is planning an increase in exploration.
“We’re going to be focusing a lot on exploration in this immediate area in the next 12 months,” Walker said. “We’ve just been finalizing our budgeting and we’ve increased our budget for exploration in the region. In what we call the area of influence … we put a bracket around all of the Nevada Gold Mine assets … we operate inside that boundary. It’s basically from Winnemucca out to Wendover. So we’ve built a fairly big box. And we’ve just significantly increased our budget for exploration in that box. We’re looking at growing our business in this area.”
Walker said most of the exploration will be around NGM’s operating gold mines.
“We’ll go further afield in some areas, but most of our time will be particularly around Leeville and Turquoise Ridge, around Cortez, and Goldstrike, and the Carlin assets. So there are a lot of opportunities.
“Some assets are side by side, and you had boundary lines before, and you couldn’t cross boundary lines. Now we’ve removed the boundary lines, so now we’ve got some targets on those boundary lines that we can look at.
“And then Leeville itself has a high potential for extension north of Leeville. That’s looking good.
“Within where we are, there’s a lot of opportunity, so we’re looking there first. … It’s pretty exciting.”
The Nevada Gold Mines complex produces about 3.5 million ounces of gold per year.
“So we have to find 3.5 million ounces every year just to stay stable,” Walker said. “That’s our challenge, and that’s why we’ve had to rachet up our exploration budget. There are not many mining companies in the world that find 3.5 million ounces a year, and just to stay relevant we have to do that.
“If you Google mines, you’ll find that not too many of them have got 3.5 million ounces in their entire reserve resource.
“So it’s a big challenge. It’s something we’re focusing on.
“We have our immediate growth projects, and then exploration to maintain the business. Because we’ve got a long-term view. We’ve got a 30, 40, 50-year view. We’re not running this business as a five or 10-year business. We’ve got a very good, stable platform, we’ve got a good 10-year platform. In the first quarter next year we’ll be bringing out a 10-year outlook. And then we’ll be expanding that to a 30, 40, 50-year outlook with exploration.”
Fourmile a significant assetThree projects in development – Newmont’s Fiberline and Mike, and Barrick’s Fourmile—were left out of the joint venture when it was formed earlier this year because the value of the sites could not be determined yet. These sites can join the joint venture once their value is determined. Walker said he thinks the development of Fiberline and Mike is still a long ways away, but the exploration at Fourmile is progressing well and is continuing to yield impressive results.
“That’s going to be a significant asset,” Walker said, “so sometime in the next few years that will come into the JV.”
Fourmile is near the Goldrush project at Cortez.
“The Fourmile project, that’s going to be really special,” Walker said. “It’s exciting. Now you’re starting to talk about another Carlin/Goldstrike. They’re pretty ambitious numbers. You’re starting to talk 20, 30 million ounces. It’s looking positive, and they’re huge grades.
“You don’t see those numbers, ever.
“The grade and the quality of the resources in this area are just phenomenal, it’s unbelievable. Which has led to some bad practices, because you get to the point where you think it’s easy. To stumble over that—A geologist, he’d be lucky to see those sorts of drill holes in his life. And here, it’s just every day, it’s ho-hum, we do it all the time.
“They talk here about low grade being five to six grams per ton for underground. My first job in Barrick, we were producing at three grams per ton as an underground operation. Here they would say it’s waste and they wouldn’t even bother. Back where I come from, that’s a good ore body, let’s go and get it.
“This is a great area.”
The buildingsBefore the joint venture, Barrick and Newmont had six or seven buildings in Elko, and they have consolidated operations down to primarily just two buildings. The former Newmont office building on Mountain City Highway, which was owned by Newmont, is now the Nevada Gold Mines office building. Nevada Gold Mines also has a centralized warehouse on the east end of Elko.
There are a few buildings near the NGM office building, including the former home of the Barrick digital/automation group, which have recently been relinquished as the leases expired.
Nevada Gold Mines still holds the lease for another couple of years on the former Barrick main office, a big building just down the street from the NGM office building. Nevada Gold Mines still uses the Barrick building for some overflow training.
“We’re looking at other ways can use it under the NGM banner,” Walker said.
Nevada Gold Mines is also looking into the possibility of subleasing the building.
“If anyone’s got a good idea, if they want to lease it off us, they can lease it,” Walker said.
NGM also still holds the lease on the building on Spruce Road where Barrick had its exploration team. NGM is working on subleasing that building.
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