Newmont Waihi Gold Economics 2013 Who are

Newmont Waihi Gold Economics 2013

Who are we? Newmont Mining Corporation 35, 000 staff & contractors more than 20 locations 10 countries 5 continents Newmont Waihi Gold General Induction 2

Martha Mine – Historic Workings • 1880 s to 1952 • 7 vertical shafts • 170 km drives • 600 metres deep • Open pit approx 250 metres deep

Waihi today Favona Moonlight Trio Correnso Martha East Layback NWG Office Martha Exploration Project 2 nd June 2011 Strictly Confidential 4

Demand Gold demand changes as price increases. The higher the price the less people consume. Elastic Demand ? ? Maybe the law of demand? Gold is something like a vacation - when the price goes up, less people will want to buy - because the demand is "sensitive" to the price - some of the reasons why a product is “sensitive" is because there alternatives. - a good example of a product like this is gold. - when gold is relatively cheap, people will buy lots of gold jewellery, when the price of gold goes up, people switch to silver jewellery - the demand curve is shallow because this represents the fact that when the price changes, the number of people that will buy changes a lot 5

Gold price • Last Five Years Gold price Graph Gold production has been in decline since the early 2000 s. One factor is that all the "easy gold" has already been mined; miners now have to dig deeper to access quality gold reserves. The fact that gold is more challenging to access raises additional problems: the miners are exposed to additional hazards, and the environmental impact is heightened. In short, it costs more to get less gold. These add to the costs of gold mine production, resulting in rising gold prices. Mining companies now explore • residential areas • conservation land, • difficult countries to work in. 6

What is gold used for?

Who uses Gold?

Gold Mining, The Market and Externalities “Any environmental policy that is directed towards the mining industry has to confront a very intricate trade-off. Mineral production provides society with a number of important benefits, out of which the market value of the metals and minerals produced is the most important. However, it also produces negative impacts on important environmental amenities (…), whose values are much harder to determine since these goods are not traded in the market. To what extent is society willing to give up certain environmental services in the name of mineral development and vice versa? ” Fostering the Positive Externalities of Mining. . . - University of Dundee www. dundee. ac. uk/cepmlp/journal/html/Vol 15_16. pdf 9

Definitions Market Failure – A market failure exists whenever the free market equilibrium quantity of output is greater or less than the socially optimal level of output. The free market will produce either too much of a good or too little. Negative Externality of Production – When the production of a good creates unintended spillover costs for society as a whole that are not born by the producer of that good. Positive Externalities – When the production of a good creates unintended spillover benefits for society as a whole that are not born by the producer of that good. 10

Aim: Marginal Private Cost + Tax = Marginal Social Cost Govt. Intervention – Royalties and Regulations AEP-The Amenity Effects programme pays money to people in Waihi impacted by mining activity. Gold P= Benefits/Costs P 1 Increased cost of production reducing gold output Regulations/Consents A range of strict consents are in place to reduce effects of externalities. amenity effect payments Vibration Reduction Noise reduction Dust reduction Monitoring Compliance costs P Supply 1 = Marginal Social cost 1 Supply = Marginal private cost Demand = Marginal benefit Q 1 Q Q The graph above shows that without intervention, a greater amount of gold would be produced at a lower cost with the environmental and social effects being burdened on the population NOT the company. When interventions (consent limits and regulations etc. ) are imposed, a lesser quantity of gold is produced at a higher cost. (Only high value ore bodies are worthwhile mining where Q 1 and P 1 intersect. ) 11

Government Intervention in gold mining to Internalise and minimise negative externalities Internalising externalities Dust – water trucks traveling the haul roads constantly watering down roads etc. Dust suppressants being put onto un-rehabilitated areas. Dust monitoring throughout town, recording and reporting Conveyor belt housed and watered with sprinklers Noise – Working in the Mine Pit from 7 am – 7 pm weekdays, ½ a day Saturday and not on Sundays or public holidays Sound reducers on trucks. Conveyor belt completely housed and watered to reduce dust and noise Primary crusher set down below ground Silent horn systems installed on trucks Further, if a company wants to prospect, explore, or mine, they may or will need approvals from: the Ministry of Business, Innovation and Employment (MBIE); Landowners, Iwi, Councils; Department of Conservation (for concessions, access to land, and Wildlife Act permits); and Heritage New Zealand Pouhere Taonga. Then there are consents required in relation to health & safety legislation, hazardous substances, buildings and construction, and, in some cases, overseas investment. http: //www. straterra. co. nz/Perspectives#regulatory 12

Support for mining over time Independent poll carried out by Phoenix Research Ltd 13

Which of these are negative externalities? 14

Which of these if any are positive externalities? 15

The Macro Economic Effect on a Town. What is a gold mine worth? • We employ 400 staff and contractors • Another 400 people indirectly employed • On average we spend around $190 M a year on goods, services, rates, taxes, royalties. • 32% is spent locally (within 30 km of Waihi) • 29% is spent regionally (Bay of Plenty, Waikato, Coromandel) • 21% is spent in the rest of NZ • 18% is spent overseas • In the last five years: $239 m in capital expenditure and $694 m in operational expenditure • 82% of this money is spent in New Zealand • Since 2006 we have spent $264 m on goods and services in and around Waihi, a town of 4, 500 people • Since 1987 more than 2. 5 million ounces of gold and 20 million ounces of silver have been produced

Resource Management Act to regulate and minimise negative externalities Before: evidence required for a RMA application • • • Project description (mine design, mining method, geology, etc. ) Metallurgy Air quality Vibration Receiving water quality / ecology Noise Geochemistry Hydrogeology / settlement Traffic Economic impact Property / community investment Consultation summary…. 17

Resource Management Act to regulate and minimise negative externalities During: monitoring of operations and reporting • • • Real-time monitoring of vibration Noise monitoring Dust / air quality monitoring Water levels Water quality – bores around TSF; water in discharge and overflow ponds; water treatment plant quality; upstream and downstream monitoring • Bio-monitoring • Ground settlement and tilt • Complaints Reporting on all of the above to District and Regional Councils. 18

Resource Management Act to regulate and minimise negative externalities After: rehabilitation and monitoring, Govt. Intervention • Progressive environmental rehabilitation • Economic and social sustainability • Rehabilitation and capitalisation bonds: – Martha Pit Rehabilitation Bond: $26. 2 m (two separate bonds - jointly overseen by HDC and WRC). – Ministry of Energy and Resources Bond: $1. 25 m – Water rights bond with WRC: $2 m – Conservation bond: $0. 057 m (for Do. C land) – Capitalisation bond: $10. 4 m (formation of Martha trust) • Martha Trust: responsible for management of sites, rehabilitation, and monitoring in perpetuity. 19

Resource Consents • Community Relations – NWG must appoint a Company Liaison Officer to receive complaints from the community 14/09/11

River monitoring sites f) OH 1/UPD e) OH 3/A d) OH 6/DPD c) OH 5/B b)RU 1/R 2 a) OC 2 - Upstream of site Ruahore confluence OH 3 – u/s of upper discharge OH 1 u/s of lower discharge OH 5 d/s of upper discharge OH 6 – d/s of lower discharge 14/09/11

TSF management • Pond water level monitoring Bird monitoring Peak recorded number of birds taking sanctuary on any day = 900 14/09/11

Vibration Monitoring System • Compliance Requirements – Monitoring specifications comply with the criteria set down in the Hauraki District Plan – A complete record of each blast is required, including all blast design details – Any complaints are documented 14/09/11

Dust Monitoring Ambient air trigger limit = 45 µg/m³ Trigger limits are from the National Air Quality Guidelines and not a compliance limit. The Mining Licence limit = 100 µg/m³) 14/09/11

Positive Externalities • Tourism – From our gold mining venture many groups, individuals, couples and families arrive to look into our Mine and watch our operation. This has an impact on our town in relation to tourism and spending in our township. • Riparian planting -–In line with consents to ensure that river quality of our local river the Ohinemuri River was in the best possible health, the mining company planted over 200, 00 native trees and shrubs along the river embankment. This has helped improve the water quality of the river. The Ohinemuri river was chosen as one of the World Fly Fishing competition rivers in 2008 and is well used by anglers today. • www. marthamine. co. nz/environment/biodiversity-projects/bridge-to-bridge/ www. nzfishing. com/Fishing. Waters/Auckland. Waikato/AWFishing. Waters/AWOhinemuri. htm • NZ Dotterels • have been found breeding on our waste rock embankments which are small hills we have built out of all of the waste rock from our mine pit. This is the first inland breeding area for Dotterels in the North Island. We came across this in 1997. They are a threatened species with around 1600 left in NZ • www. marthamine. co. nz/environment/biodiversity-projects/the-nz-dotterel/ • Walk ways around black hill have been created which are used by the public • Manuka plantings are well used by beekeepers, orchards benefiting from this also 25

Negative Externalities Negative externalities • Dust – during mining operations dust may affect air quality and may land on housing and cars costing residents time to clean these. • Noise – noise pollution can occur with our mine pit being in the middle of town. • Vibration – residents of our town at times are affected by vibrations which can cost them sleep hours, especially day shift workers. • Mine Pit – some residents see the Open Cast mine as an eye sore • Waste Rock Embankments – people living next to the waste rock embankments have a changed landscape and may not get the same amount of sun on their grass reducing milk production. • Housing – Some people believe that the gold mining operation reduces the value of their house in Waihi. 26

Rehabilitation Plans for the Future • Martha Pit filled to create recreational lake and park – Estimate 27 years to fill with rain and natural groundwater inflows – Est. 6 -7 years to fill if supplemented by Ohinemuri River flood flows Tailings Storage Facilities Wetlands and native plantings Grazing 14/09/11