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CANADA: Newmont joins the gold rush to Nunavut

by Richard Blackwell and Andy HoffmanGlobe and Mail
October 10th, 2007

Newmont Mining Corp. has delivered a vote of confidence in Nunavut as a potential new gold mining hot spot with its bid to buy Miramar Mining Corp.

Newmont unveiled yesterday a friendly $1.5-billion cash offer for Vancouver-based Miramar, which owns the massive Hope Bay project on the mainland coast of the Arctic Ocean. More than nine million ounces of gold have been identified at the deposit.

Denver-based Newmont, the world's second-largest gold producer, already owns about 8.4 per cent of Miramar's shares, and holds warrants that could bring its stake up to 15 per cent. It is offering $6.25 for each Miramar share, 20 per cent above last Friday's closing price of $5.19.

Miramar's board has given its approval, and its financial advisers have also signed off on the deal, which is set to close at the end of the year.

Newmont spokesman Omar Jabara said Miramar is an attractive partner because it holds a key property in one of the largest undeveloped gold deposits in the world. The buy is a "strategic forward-looking acquisition to establish a new core mining district in a triple-A-rated country," he said.

Because the Arctic coast in Nunavut is largely unexplored, there is huge potential for further investment and mining in the area, he said.

It's too early to say whether Miramar's plans for development of the Hope Bay site - including construction this winter and some mining to begin before the end of 2008 - will be accelerated, Mr. Jabara said. After the takeover has closed "we'll look at those plans and see how they fit into our objectives," he said.

Over all, Newmont is buying Miramar because it is bullish on gold, Mr. Jabara said. "We believe the price of gold is going to continue to rise, and [that will] make the prospects for this area more attractive."

About two weeks ago Miramar received approval for the Hope Bay project from the Nunavut Water Board, a key hurdle before construction can begin. Still, there are several more approval processes that have to be completed.

If the plans comes to fruition, the Hope Bay project would eventually include several underground and open-pit mines on a site that extends inland from the Arctic Ocean, east of Bathurst Inlet.

"The true potential of the project can best be realized with the additional expertise and resources of a global gold company like Newmont," Richard O'Brien, president and chief executive officer of Newmont, said in a statement.

Mark Smith, an analyst who follows Miramar at Dundee Securities, said the price Newmont is offering appears fair. While "it's possible there could be another bid, I think it's highly unlikely."

Since Newmont already has a stake in Miramar, the target company's board has signed on, he said. Also, Newmont has access to data on the Hope Bay site, so it would be difficult for another player to jump into the fray. "Newmont's already in the driver's seat."

Miramar would also have to pay a break fee of about $41.5-million if the deal with Newmont fell through in the face of a higher offer.

The bid for Miramar marks the third significant deal for a Nunavut property in the past year. In February, Toronto's Agnico-Eagle Mines Ltd. bid $710-million for Cumberland Resources Ltd. and its prized asset, the Meadowbank gold project. Less than a week later, Australian zinc producer Zinifex Ltd. made a $360-million play for Canada's Wolfden Resources Inc. in a deal to secure Wolfden's High Lake and Izok projects.

Newmont's bid comes less than two weeks after the company shocked delegates at the Denver Gold Forum when it warned that its costs would likely be higher than expected and it may not be able to replace the reserves it will deplete through mining this year.

Shortly after taking over the top job at Newmont in July, Mr. O'Brien indicated that the firm would begin considering smaller acquisitions.

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