Gold producing company Newmont Mining Corporation (NEM) recorded a net income of 79 cents per share in the third quarter, beating the Zacks Consensus Estimate of 60 cents. Year on year, earnings grew by a robust 88% on strong gold and copper prices as well as lower costs.

Revenues for the quarter climbed 50% to over $2 billion, driven by a 29% rise in gold sales to $1.6 billion and about a fivefold increase in copper revenues to $396 million. Newmont sold 1.7 billion ounces of gold in the quarter, up 15% year over year. The company sold 141 million pound of copper compared with 44 million pound in the same period of the previous year.

On a regional basis, gold sales were slightly above expectations as higher-than-expected sales at Yanacocha in Peru, Batu Hijau in Indonesia and Australia were partially offset by lower sales in Nevada. However, costs applicable to sales per ounce were lower than expected in Nevada, Australia, Peru and Indonesia, partially offset by higher costs at Ahafo in Ghana and at La Herradura in Mexico. For full year 2009, the company anticipates total gold sales of 5.2 to 5.4 million ounces, at $400 to $440 per ounce. During the third quarter, gold sales at Nevada were 505,000 ounces at costs applicable to sales of $541 per ounce.

Gold sales at Yanacocha in Peru were 285,000 ounces at costs applicable to sales of $294 per ounce. The company increased its 2009 gold sales outlook to 1.0 million – 1.05 million ounces from 0.975 million − 1.02 million ounces estimated earlier at Yanacocha. The company also increased its 2009 outlook for costs applicable to sales to $300 − $320 per ounce from the previous guidance of $290 − $310 per ounce, primarily due to higher royalties and workers’ participation costs.

Gold sales during the third quarter in Australia/New Zealand were 289,000 ounces at costs applicable to sales of $526 per ounce. Newmont lowered its sales guidance expectation to 1.4 and 1.5 million ounces from its previous expectation of 1.5 to 1.6 million ounces in Australia/New Zealand, primarily related to lower expected gold sales at Boddington on the back of a delay in start-up. Costs of sales are expected at $500 to $520 per ounce, up from the initial guidance of $460 to $500 per ounce.

Gold and copper sales at Batu Hijau in Indonesia were 93,000 ounces and 64 million pounds, respectively, at costs applicable to sales of $178 per ounce and 50 cents per pound, respectively. Gold and copper sales from this mine are expected at 225,000 ounce to 250,000 ounce and 210 million pounds to 230 million pounds, respectively, in 2009.

Due to an assumed higher gold price than copper, the company lowered its expected costs applicable to sales for gold to be $200 to $220 per ounces from $280 to $320. Gold sales at Ahafo in Ghana were 136,000 ounce at costs applicable to sales of $446 per ounce. At Ahafo, Newmont maintained its gold sales guidance of 500,000 ounces to 525,000 ounces and costs applicable to sales between $425 and $450 per ounce in 2009. For the full year 2009,

Newmont expects gold sales to be about 5.2 million ounces, at the lower end of the previously estimated range due to the extended start-up of Boddington mine. For 2009, Newmont expects gold sales of 1.9 and 2.0 million ounces at Nevada, up from the initial guidance of 1.8 to 2.0 million ounces. The company has narrowed its outlook for 2009 costs applicable to sales to between $400 and $425 per ounce for gold from $535 to $575 per ounce.

For 2010, Newmont expects gold production to improve 5% to 10%, primarily as a result of higher production from Boddington in Australia and Batu Hijau in Indonesia, partially offset by lower production in Nevada and Yanacocha in Peru. The company also expects 2010 costs applicable to sales to be modestly higher by about 5%, partially as a function of higher expected energy costs and adverse changes in exchange rates.

We maintain our Neutral recommendation on the stock.
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