ANALYSIS: Corporate Case Study - Newmont sets gold standard forcommunity relations

Newmont Mining went from being one Nevada mine to the largest producer of gold in the world. Now employees and the communities near mines are top PR priority. Tanya Lewis reports.

Newmont Mining went from being one Nevada mine to the largest producer of gold in the world. Now employees and the communities near mines are top PR priority. Tanya Lewis reports.

Newmont Mining is being watched - and not just by Wall Street: Volatile political dynamics that threaten the balance of global economic power have the entire world eyeing the gold market. Newmont grew from one Nevada gold mine to becoming the world's largest producer in less than two decades.

More than 1,400 stories about the company have appeared worldwide since January 1. Doug Hock, primary spokesman and director of public affairs and communications, is a very busy man.

Gold's value is at a five-year high, as prices have increased to the $320 range. Investment demand can signal decreased confidence in the value of paper money. On May 29, Reuters reported, "(Gold) was still strong, as investors rushed into the safe-haven asset amid fears of a possible India-Pakistan war, a slumping dollar, violence in the Middle East, and worries of another attack on the US."

Market dynamics - such as who is buying gold, who is holding it, and why - have various implications for government leaders, investors, producers, buyers, and sellers. Demand and reduced industry hedging are signs that gold prices will remain stable, if not rise. And Newmont is positioned to become a beneficiary, whatever the global economic implications.

Newmont became the largest gold producer in February when it acquired rivals Normandy Mining (Australia) and Franco-Nevada Mining (Canada).

The company expects to put 7.5 million ounces of gold on the market this year from mines in the US, Peru, Indonesia, Australia, Canada, Bolivia, Mexico, Turkey, New Zealand, and Uzbekistan.

It had been criticized for decreased reserves and debt. But Normandy provided prospects for new mines, and Franco-Nevada strengthened the bottom line. Forbes reports that first-quarter revenues increased 15% to $491.6 million, and share price has risen more than 60% this year.

The acquisition took three months, involved a competing South African bidder (AngloGold), and received worldwide media attention. Hock worked around the clock to communicate developments. Hullin Mez, Abernathy MacGregor, and Hintons in Melbourne were hired to help.

"It was a bidding war, and it was intense, Hock says. "We worked in four jurisdictions and multiple time zones. We used the media to get the message to investors, and it changed depending on where we were in the process. Bankers and lawyers crafted messages, and PR continually hammered away at them. That was key for creating market awareness about what was attractive about our deal."

Bringing everything together

Integration is now an internal communications job spanning three countries.

"Integration is one of our internal strengths, Hock says. "We merged with Battle Mountain Gold in 2000, and Santa Fe Pacific Gold in 1997. This is bigger and more complex, but we're up to the challenge."

"When Newmont merged with Santa Fe, that transition went very smoothly," says Peggy Mackinnon, president of her eponymously named PR firm, which has worked with the company for about 13 years. "I don't see any reason this one won't be smooth."

Mining presents additional concerns. There are safety issues, environmental issues, community relations issues, and activists. Two years ago, in Peru, a contractor spilled a load of mercury (a by-product of the ore there) in a small village about 100 miles from Newmont's mine. Villagers brought debris inside, and became sick.

"I think they thought it had gold, he continues. "Also, some South American cultures think mercury has medicinal value. We had to move people out of their houses and put them in hotels. It was very regrettable and unfortunate."

There were no fatalities, but the accident cost $14 million, and involved a large environmental cleanup, medical assistance, and ongoing health monitoring. Locals blocked a transport road, vented in the media, and sued. Newmont hired a Ketchum affiliate in Peru, Consultades, for ground support (Ketchum still works with the company on various projects).

Critics were tough, and still use the incident against the company. "It got a lot of attention, Hock says. "We got the message out that we were taking responsibility, and explained what we were doing. We feel we took very appropriate measures."

Activists are now attempting to debase gold's value by arguing it is a "vanity commodity that is dangerous to mine and already plentiful.

There are few industrial uses for gold, but such activists disregard the economics of gold as a currency. "With a company this size in an industry like mining, there are going to be critics, Hock says. "We can't control them. We just focus on being environmentally responsible."

In fact, a corporate responsibility report will be released in 2003.

"Normandy was very good at putting these together, Hock says. "We will take some of their expertise and put together something similar for Newmont. It's a serious effort to report on performance, which can then be used as a tool to improve it."

Environmental and social impact

Mining alters geographic locales, as well as community landscapes. "We can have a very positive impact in education, training, jobs, water systems, and schools. (Developing these) is part of doing business. We never want to take the place of government. We don't mandate; we ask them what they need, says Hock.

"Globalization came with critical lessons, says Bob Butter, SVP and associate director of Ketchum's global corporate practice. "How a company performs as an integral part of any country is critical to success. Newmont is in an interesting PR position - they realize they have opportunity to set up leadership."

In Peru, Newmont provided tools and building materials for new schools, and food for hot lunch programs. In Indonesia, it established a foundation run by village leaders to initiate community projects. Newmont recently gave 453 Indonesian employees - mechanics, electricians, translators, mine operators - skills training certificates at a graduation ceremony.

The collateral support is necessary in global businesses, and community involvement helps, Hock says. "It's important to us that we build good reputations and capitalize communities where we operate."

Newmont is an 81-year-old company that moved its headquarters from Park Avenue to Denver after barely surviving a hostile takeover attempt by a corporate raider named T. Boone Pickens. At the time, the company was diversified in oil and gas. It defended itself by paying stockholders a large dividend, which put the company in debt. "So we sold off all assets except a gold mine in Nevada, Hock says. "Suddenly, it didn't make sense to be headquartered in New York. Denver was chosen because it had infrastructure, and the lifestyle was attractive for our employees."

Newmont has worked with Mackinnon since the move, and hired Hill & Knowlton for corporate and IR work. Today, Mackinnon periodically conducts analyst surveys and media training, writes speeches, and provides strategic counsel.

She has seen a lot of changes, but says the company's moral standards have remained consistent. "Newmont walks the talk, she says. "It is a very ethical company."

Employees remain a priority. The culture is reportedly close-knit and supportive - in the mines and in the offices. Two years ago, the Sierra Nevada PRSA gave Newmont an award for its internal communications efforts during union negotiations (Las Vegas PR firm Bayer Brown Bauserman assisted).

Mary Korpi, director of external affairs, has worked at Newmont for 26 years, and is a chemical engineer who has worked in the lab, the field, and the health department. "Management would look at how our individual strengths could be used in new departments, and then offer us different opportunities, she says. "It's kept me at Newmont."

NEWMONT MINING

Director of public affairs and communications: Doug Hock

Director of public affairs, Nevada: Mary Korpi

Communications representative: Louis Schack

Community relations representative Eastern Nevada: Michele Gonzalez

Community relations representative Western Nevada: Patty Herzog

An additional six communications professionals are located outside the US

PR agencies: Ketchum, Peggy Mackinnon, Sigler Communications, Hill & Knowlton.

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