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How Newmont Sells Gold, Copper
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By Ed LeBlanc, senior director, Marketing and Sales
Denver, Colorado
Few people wearing gold jewelry or buying copper pipe know how these metals are produced while few Newmont employees are aware of how gold and copper are delivered, measured and priced.
That process, also known as Newmont's "sales cycle," is unique to precious metals. Bringing Newmont's gold and copper to market can take weeks or months, thousands of miles of travel and repeated sampling. The process also requires an extraordinary amount of communication and coordination between buyer and seller.
For both doré and copper concentrate, quantity and weight dictate their value. If conflicting values arise, an independent umpire is brought in to determine final content and value. All of this weighing and measuring is essential because an error of just 1 percent can make a difference of thousands of dollars. On average, Newmont performs 7,000 such samples each year across the globe.
Purchasing Process
Let's take a look at where the doré and copper concentrate travels, and how and when Newmont is compensated for what we mine:
Before leaving the mine site
In transit to refinery/smelter
At the refinery/smelter
How and When Prices are Determined
Newmont's metal prices are determined in London. Specifically, members of the London Bullion Market Association, whose five members include international banks and bullion traders, meet twice daily to set the price of gold based on supply and demand. The daily quoted price is called the London PM fix.
In an effort to avoid price fluctuations, Newmont spreads gold sales evenly throughout the year based on our production forecasts. As a result, we sell gold every business day of the year; therefore, our annual realized price of gold is very close to the annual average price of gold.
Copper prices are set daily by the London Metal Exchange, the world's premier, nonferrous metals market. Again, Newmont estimates copper production and schedules shipments and deliveries to smelters so that we can be selling copper in line with the annual average price of copper.
For 2010, Newmont sold 539 million pounds of copper and 6.296 million ounces of gold on a consolidated basis. We ended the year with a record $9.5 billion in revenue, up 24 percent from 2009.
April 18, 2011