Newmont Mining Corporation‘s (NEM) adjusted net income rose to $635 million or $1.29 per share in the third quarter from last year’s $533 million or $1.08 per share. The result exceeded the Zacks Consensus Estimate of $1.24 per share.
Total revenue was $2.7 billion, up 6% year over year.
Newmont reported attributable gold and copper production of 1.3 million ounces and 58 million pounds, respectively, in the quarter at costs applicable to sales (CAS) of $622 per ounce, and $1.10 per pound on a co-product basis.
Region-wise Sales
North America
Nevada gold production came in at 428,000 ounces, down 6% year over year due to lower mill grade ore and throughput, partially offset by higher leach placement and recoveries. Open pit ore tons mined increased 167% as the remediation of the Gold Quarry pit slope failure was completed and also due to additional ore tons from Twin Creeks due to mine sequencing. CAS was $641 per ounce, up 15% from the prior-year quarter due to lower production, reduced by-product credits and higher royalty costs.
The company at present expects 2011 attributable gold production from Nevada to be approximately 1.7 to 1.8 million ounces at CAS of between $565 and $615 per ounce due to lower grades resulting from mine sequencing at Gold Quarry, temporary lack of access to the Chukar mine and lower tonnage and grades at Exodus.
La Herradura gold production in the quarter was 54,000 ounces, up 29% year over year due to higher leach placement at Soledad – Dipolos. CAS was $575 per ounce during the third quarter and increased 24% from the prior-year quarter due to higher mining, leaching and employee profit sharing costs, partially offset by higher production and by-product credits.
The company continues to expect 2011 attributable gold production from La Herradura to be approximately 180,000 to 200,000 ounces at CAS of between $480 and $510 per ounce.
South America
Yanacocha gold production was 169,000 ounces in the quarter, down 8% from the third quarter of 2010 due to lower leach placement at Carachugo and La Quinua as a result of mine sequencing and lower equipment availability, partially offset by higher mill grade. Ore tons mined decreased 29% due to mine sequencing at El Tapado.
CAS increased 45% to $610 per ounce due to lower production combined with higher diesel, worker’s participation and royalty costs, lower by-product credits and an unfavorable leach pad recovery estimate adjustment.
The company continues to expect 2011 attributable gold production at Yanacocha of approximately 650,000 to 670,000 ounces at CAS of between $560 and $600 per ounce.
La Zanja gold production was 19,000 ounces in the third quarter.
The company continues to expect 2011 attributable gold production at La Zanja between 50,000 and 60,000 ounces.
AsiaPacific
Boddington gold production was 166,000 ounces in the reported quarter, a decrease of 8% year over year due to lower mill grade, partially offset by higher mill throughput. Copper production increased 21% over the prior-year quarter to 17 million pounds due to higher mill throughput, partially offset by lower recovery.
CAS per ounce of gold increased 20% to $743 per ounce and per pound of copper increased 24% to $2.25 per pound. The gold costs increase was driven by lower gold production, higher royalty costs and diesel prices, partially offset by higher by-product credits and a stronger Australian dollar and a higher allocation of costs to gold.
The company continues to expect 2011 attributable gold production at Boddington of approximately 750,000 to 800,000 ounces at CAS between $650 and $690 per ounce, and 2011 attributable copper production of 70 to 80 million pounds at CAS between $1.80 and $2.20 per pound.
Batu Hijau gold production was 66,000 ounces in the quarter and copper production was 41 million pounds, decreasing 37% and 40%, 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 and the completion of mill motor replacements.
CAS increased 126% per ounce to $476 per ounce for gold and 38% per pound to $0.90 per pound for copper due to lower production and higher waste mining costs, partially offset by higher by-product credits and higher allocation of costs to gold.
The company continues to expect 2011 attributable gold production for Batu Hijau of approximately 140,000 to 160,000 ounces at CAS between $440 and $460 per ounce, while attributable copper production is expected to be approximately 120 to 140 million pounds, at CAS of between $1.10 and $1.30 per pound.
Other Australia/New Zealand gold production was 263,000 ounces, 9% lower than the year-ago quarter due to lower mill throughput at Tanami, Jundee and Kalgoorlie and lower grade at Waihi, partially offset by higher grade at Tanami and Jundee and a drawdown of inventory at Jundee.
CAS was $ $684 per ounce, up 27% year over year due to lower production and higher operating costs, which were driven by power and diesel prices and a stronger Australian dollar, net of hedging gains.
The company continues to expect 2011 attributable gold production at the Other Australia/New Zealand operations of approximately 1.0 to 1.05 million ounces at CAS of between $640 and $660 per ounce.
Africa
During the third quarter of 2011, gold production was 146,000 ounces, a decrease of 6% year over year due to lower mill grade, partially offset by higher recovery. CAS per ounce increased 19% to $501 per ounce due to lower production and higher labor, diesel and royalty costs.
The company continues to expect 2011 attributable gold production at Ahafo to be approximately 560,000 to 590,000 ounces at CAS between $470 and $500 per ounce.
Financial Position
In the third quarter of 2011, capital expenditures were $761 million versus $344 million in the prior-year quarter. Operating cash flow was $1.3 billion in the third quarter of 2011. Cash and cash equivalents were $2.1 billion as of September 30, 2011 versus $4.1 billion as of December 31, 2011.
Newmont’s board of directors approved fourth quarter 2011 gold price-linked dividend of $0.35 per share based on the company’s average realized gold price of $1,695 per ounce for the third quarter of 2011, an increase of 17% over the $0.30 dividend paid in the third quarter of 2011, and an increase of 133% over the $0.15 dividend paid in the fourth quarter of 2010.
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 anticipated 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.
The company faces stiff competition from Posco (PKX) and Arcelor Mittal (MT).
Newmont has a short-term (1 to 3 months) Zacks #2 Rank (‘Buy’) and a long-term Neutral recommendation.
