Newmont Mining Corporation NEM recently provided its updated long-term operating and financial outlook.
Newmont anticipates attributable gold production to increase from a range of 4.8−5.3 million ounces in 2016 to 5.2−5.7 million ounces in 2017, and remain stable thereafter in a range of 4.5−5 million ounces through 2020. Fresh production at Cripple Creek & Victor (CC&V), Long Canyon Phase 1, Merian and Tanami Expansion is expected to help neutralize maturing operations at Yanacocha and mine sequencing at the Batu Hijau mine. Additionally, the ramp-up of projects which have not received approvals to date, including Ahafo Mill Expansion, Subika Underground and NW Exodus will contribute between 250,000 and 400,000 ounces of gold production, beginning in 2018.
Newmont anticipates attributable copper production in the range of 120,000–160,000 tons in 2016 and 2017. However, it expects a decline in copper production to between 70,000 and 110,000 tons by 2018 owing to depletion of higher grade Phase 6 ore at Batu Hijau in 2018. The company expects production at Phoenix Copper Leach and Boddington to remain stable for the period.
Gold all-in sustaining cost (AISC) is anticipated to increase from a range of $900−$960 per ounce in 2016 to $850−$950 per ounce in 2017. Costs in 2018 are expected to be affected by mine sequencing at Boddington and Nevada, along with lower production at Batu Hijau, remaining below $1,000 per ounce over the long term.
Newmont anticipates gold costs applicable to sales (CAS) to lie in the range of $650−$700 per ounce in 2016 and stable thereafter, in a band of $650−$750 per ounce in 2017 and 2018. This cost savings will result from higher grades at Batu Hijau and the Carlin Underground mines through 2017 as well as lower production costs at Tanami and Merian through 2018. Moreover, current cost and efficiency benefits are anticipated to balance lower grades and throughput at Ahafo and maturing operations at Yanacocha. Also, the company expects further cost benefits from the projects pending approval which should ensure potential savings and lower cost ounces.
Newmont projects copper AISC to average in the band of $1.50−$1.70 per pound in 2016, resulting from higher grade ore at Batu Hijau and to improve modestly to $1.60−$1.80 per pound in 2017, and $2.40−$2.60 per pound in 2018. Copper CAS is anticipated to be between $1.20 and $1.40 per pound in 2016 and 2017 and increase to the band of $1.80−$2.00 per pound by 2018. Higher costs over the period are attributable to lower production volumes at Batu Hijau as Phase 6 ore is exhausted along with mine sequencing at Boddington through 2018.
This guidance provided by Newmont assumes metal and oil prices and exchange rates in line with the current market environment. The guidance further assumes gold price at $1,100 per ounce and copper price at $2.50 per pound along with 75 cents USD/AUD and $65 per barrel WTI. However, the company anticipates gaining from a further decline in energy prices and an improving Australian dollar exchange ratio. Newmont expects a $30 million improvement in attributable free cash flow for every $10 fall in oil prices. Also, every 5 cents of favorable change in the Australian dollar will lead to a $60 million improvement in attributable free cash flow.
Newmont also sees sustaining capital spending of between $700 and $750 million for 2016, increasing to between $800 and $900 million in 2017. Longer term sustaining capital has been forecast to remain stable in the band of $700 and $800 million. Aggregate capital spending for 2016 is expected to be between $1.2 and $1.4 billion, falling to between $900 million and $1 billion by 2017.
Shares of Newmont rose roughly 4.9% to close at $18.73 on Dec 3.
Zacks Rank
Newmont currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the gold mining space include Harmony Gold Mining Company Limited HMY, NovaGold Resources Inc. NG and Richmont Mines Inc. RIC, all carrying a Zacks Rank #2 (Buy).
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