Newmont Mining Corporation ‘s (NEM) adjusted net income rose to $513 million or $1.04 per share in the first quarter from last year’s $408 million or 83 cents per share.
The result eclipsed the Zacks Consensus Estimate of 96 cents per share.
Total revenue was $2.5 billion, up 10% year over year. However, that was below the Zacks Consensus Estimate of $2.6 billion.
Newmont reported attributable gold and copper production of 1.3 million ounces and 57 million pounds, respectively, in the quarter at costs applicable to sales of $557 per ounce, and $1.11 per pound on a co-product basis.
Region-wise Sales
North America
Nevada gold production came in at 433,000 ounces and remained flat versus the year ago quarter, as higher mill production from underground ores was offset by lower leach production due to mine sequencing. Costs applicable to sales increased 7% year over year to $649 per ounce in the quarter.
La Herradura gold production increased 23% to 49,000 ounces in the first quarter due to higher leach placement at the Soledad-Dipolos pit. Costs applicable to sales also increased 13% from the year ago quarter to $390 per ounce higher mining and leaching costs, partially offset by higher production and by-product credits.
South America
Yanacocha gold production was 148,000 ounces in the quarter, 32% lower from the first quarter of 2010 due to lower leach placement, lower mill grade and transitional ore stockpiling at La Quinua. Costs applicable to sales increased 57% to $583 per ounce due to lower production and higher labor costs, partially offset by lower workers’ participation costs and higher by-product credits.
La Zanja gold production was 12,000 ounces in the first quarter.
Asia Pacific
Boddington gold production was 165,000 ounces in the reported quarter, an increase of 4% year over year. Attributable copper production was 14 million pounds and was almost flat versus the prior year quarter, due to higher throughput partially offset by lower copper grade and recovery.
Cost applicable to sales per ounce of gold increased 12% to $596 per ounce and per pound of copper increased 2% to $2.19 per pound. The increase was driven by higher mining and mill maintenance costs and a stronger Australian dollar, partially offset by higher by-product credits.
Batu Hijau gold production was 46,000 ounces in the quarter and copper production was 1.1 million ounces, decreasing 42% and 39%, respectively, from the previous year’s quarter due to lower throughput, grade and recovery as a result of processing more stockpiled material compared to higher grade Phase 5 ore.
Costs applicable to sales increased 50% per ounce to $322 per ounce for gold and 43% per pound to $0.96 per pound for copper due to lower production and higher waste mining costs, partially offset by higher by-product credits and lower royalty costs.
Other Australia/New Zealand gold production was 299,000 ounces, 8% higher than the year ago quarter due to higher grade at Tanami and Jundee and a drawdown of in-process inventory at Jundee. Costs applicable to sales were $ $560 per ounce and were essentially in line with the prior year quarter as a stronger Australian dollar was offset by higher production.
Africa
During the first quarter of 2011, gold production was 186,000 ounces, an increase of 55% year over year led by higher mill grade and recovery as a result of mine sequencing. Costs applicable to sales per ounce decreased 17% to $451 per ounce due to higher production and lower waste mining costs, partially offset by higher diesel and royalty costs.
Financial Position
In the first quarter of 2011, capital expenditures were $445 million. Operating cash flow was a record $989 million, an increase of 36% from $728 million in the first quarter of 2010. Cash and cash equivalents were more than $4 billion as of March 31, 2011.
In the quarter, the Board Directors of Newmont also approved a second quarter 2011 gold price-linked dividend of $0.20 per share, an increase of 33% over $0.15 paid out in the first quarter 2011, and an increase of 100% over the second quarter 2010 dividend. This is based on the company’s net average realized gold price of $1,382 per ounce in the first quarter 2011.
Outlook
For fiscal 2011, the company reiterated its previous expectation of attributable gold production of approximately 5.1 million to 5.3 million ounces, with attributable copper production of 190 to 220 million pounds. Costs applicable to sales are expected to be between $560 and $590 per ounce for gold. Costs applicable to sales are expected to be between $1.25 and $1.50 per pound of copper.
The company currently plans to spend $2.1 to $2.5 billion in attributable capital expenditures in 2011, or $2.7 to $3.0 billion on a consolidated basis. Approximately 40% of 2011 consolidated capital expenditures are expected to be related to major project initiatives, including further development of the Akyem project in Ghana, the Conga project in Peru, Hope Bay in Canada, and the Nevada project portfolio, while the remaining 60% is expected to be for growth and sustaining capital.
North America: For fiscal 2011, attributable gold production from Nevada is expected to be approximately 1.8 to 1.9 million ounces at costs applicable to sales of between $565 and $615 per ounce. The company also reiterated its expectation for attributable gold production from La Herradura to be approximately 180,000 to 200,000 ounces at costs applicable to sales of between $480 and $510 per ounce.
South America: At Yanacocha, the company continues to expect 2011 attributable gold production of approximately 675,000 to 725,000 ounces at costs applicable to sales of between $500 and $550 per ounce. Newmont expects 2011 attributable gold production at La Zanja between 40,000 and 50,000 ounces.
Asia Pacific: For full-year 2011, gold production at Boddington is expected to be approximately 750,000 to 800,000 ounces at costs applicable to sales of $580 to $620 per ounce, and 2011 attributable copper production of 70 to 80 million pounds at costs applicable to sales of between $1.80 and $2.20 per pound.
For fiscal 2011, gold production for Batu Hijau is expected to be approximately 110,000 to 140,000 ounces at costs applicable to sales of between $400 and $440 per ounce, while attributable copper production is expected to be approximately 120 to 140 million pounds at costs applicable to sales of between $1.10 and $1.30 per pound.
The decrease from 2010 production levels is primarily due to the processing of lower grade stockpiles as Phase 6 stripping continues. The company expects to reach ore in Phase 6 in late 2013.
The company expects 2011 attributable gold production at the Other Australia/New Zealand operations between 1.0 and 1.05 million ounces at costs applicable to sales between $700 and $770 per ounce.
Africa: For fiscal 2011, gold production for the Africa operations is expected to be approximately between 550,000 and 590,000 ounces at costs applicable to sales of $485 to $535 per ounce.
The company faces stiff competition from Barrick Gold Corporation (ABX) and AngloGold Ashanti Ltd. (AU).
Newmont has a short-term (1 to 3 months) Zacks #3 Rank (‘Hold’) and a long-term Outperform recommendation.
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