Gold mining giant Newmont Mining Corporation (NEM) reported second-quarter 2013 adjusted (barring one-time items including non-cash asset impairment charges) loss of 10 cents a share, in contrast to last year’s earnings of 59 cents. The results also missed the Zacks Consensus Estimate of earnings of 41 cents.
On a reported basis, the company posted a staggering net loss (attributable to Newmont stockholders) from continuing operation of $2.1 billion or $4.21 per share in the quarter as compared to a net income of $279 million or 56 cents per share a year ago.
The sharp loss was a result of a $1.5 billion impairment charge related to the long-term assets at two of Newmont’s Australian mines, Boddington and Tanami mine, and stockpile and leach pad write-downs resulting from decline in gold and copper prices as well as increasing operating costs.
The losses were also due to lower production from Yanacocha and Batu Hijau, and lower realized gold and copper prices. Newmont’s revenues fell nearly 10.6% year over year to $1,993 million in the quarter, missing the Zacks Consensus Estimate of $2,073 million.
Newmont’s attributable gold and copper production was 1.167 million ounces and 34 million pounds in the quarter, down 1% and 11% year on year, respectively. Attributable gold and copper sales were 1.213 million ounces and 37 million pounds in the quarter, up 6% and 23% from the year-ago quarter, respectively.
Including stockpile write downs, gold and copper costs applicable to sales (CAS) were $885 per ounce and $8.53 per pound. Excluding the same, gold and copper CAS were $724 per ounce and $2.53 per pound, respectively. Average realized gold and copper prices were $1,386 per ounce and $2.66 per pound, respectively, in the quarter. All-in sustaining cost was $1,136 per ounce, excluding stockpile write downs.
Regional Performance
North America
Gold production at the Nevada mine increased 1% year over year to 383,000 ounces in the reported quarter, attributable to higher grade and throughput at Phoenix and new production from Emigrant. However, the positives were partially offset by lower tons and grade at Midas, lower grade and recovery at Mill 5, and lower grade at Mill 6. Production at La Herradura decreased 8% year over year to 54,000 ounces, due to lower leach recoveries.
South America
Gold production at Yanacocha in Peru plunged 25% year over year to 150,000 ounces on account of lower mill grade and lower leach ore production associated with the completion of mining at El Tapado in Jul 2012. Gold production at La Zanja was roughly 17,000 ounces.
Australia/New Zealand
Gold and copper production at the Boddington mine in Australia decreased 5% and 11% year over year to 171,000 ounces and 16 million pounds, respectively, in the reported quarter. The declines were due to lower mill throughput, partially offset by higher gold mill grade.
Other Australia/New Zealand
Gold production at the mines in Other Australia/New Zealand zone increased 17% year over year to 247,000 ounces in the reported quarter, driven by higher mill throughput at Waihi and higher mill throughput and ore grade at Tanami, partially offset by lower grade at Jundee and Kalgoorlie.
Indonesia
At the Batu Hijau mine in Indonesia, both gold and copper production decreased 25% and 10% year over year to 6,000 ounces and 18 million pounds, respectively. The declines in the reported quarter were on account of processing lower grade stockpile ore and lower mill throughput.
Africa
Attributable gold production at Newmont’s Ahafo mine in Ghana rose 5% from last year to 139,000 ounces as a result of higher mill throughput and recovery, and a drawdown of in-process inventory, partially offset by lower grade.
Financial Position
Newmont had cash and cash equivalents of $1,248 million as of Jun 30, 2013, versus $1,897 million as of Jun 30, 2012. The company’s long-term debt increased roughly 10.5% year over year to $6,726 million. Consolidated spending for the first half of 2013 was down 10.3% (or by $362 million) year over year to $3,120.
Dividend
Newmont’s Board announced third quarter gold-price-linked dividend of 25 cents per share that is based on the average London P.M. Gold Fix and down 10 cents compared with the prior quarter.
Outlook
Newmont expects gold production to be roughly 4.8 million to 5.1 million in 2013 and copper production to be in the range of 150 million to 170 million pounds at annual gold CAS of $675 to $750 per ounce, excluding stockpile write-downs.
Newmont reduced its 2013 consolidated capital expenditure and attributable guidance by another $100 million in addition to the $100 million reduced in the first quarter to $2.2-$2.4 billion and to $1.9-$2.1 billion, respectively. Newmont continues to expect its 2013 all-in sustaining cost to be between $1,100 and $1,200 per ounce on both consolidated and attributable basis, excluding stockpile write-downs.
Newmont expects 2013 attributable gold production in Nevada to be in the range of roughly 1.7 million to 1.8 million ounces at CAS of around $600 to $650 per ounce. The company has reduced its 2013 attributable gold production expectation at La Herradura to be within 200,000 and 250,000 ounces from the previous outlook of 225,000 and 275,000 ounces at CAS of around $650 and $700 per ounce.
Newmont continues to expect its 2013 attributable gold production at Yanacocha to be in the range of 475,000 to 525,000 ounces at CAS of around $600 to $650 per ounce, excluding stockpile write-downs. The company maintained its 2013 attributable gold production outlook at La Zanja to be in the range of 40,000 to 50,000 ounces
Newmont continues to expect 2013 attributable gold production at Boddington to be in the range of 700,000 to 750,000 ounces at CAS of around $850 to $950 per ounce, excluding stockpile write downs. Attributable copper production expectation of 70 million to 80 million pounds remains same as the previous quarter with CAS ranging between $2.45 and $2.65 per pound, excluding stockpile write downs.
Newmont’s 2013 attributable gold production at Other Australia/New Zealand mines is estimated in the range of 925,000 to 975,000 ounces at CAS of around $950 to $1,050 per ounce, excluding stockpile write downs.
Newmont expects 2013 attributable gold and copper production at Batu Hijau mine to be in the range of 20,000 to 30,000 ounces and 75 to 90 million pounds at CAS of around $900 and $1,000 per ounce and $2.20 to $2.40 per pound, respectively, excluding stockpile write downs. The company forecasts 2013 attributable gold production at Ahafo mine in to be in the range of roughly 525,000 to 575,000 ounces at CAS of around $550 to $600 per ounce.
Newmont currently carry a short-term Zacks Rank #5 (Strong Sell).
Another prominent player in the gold-mining industry, Goldcorp Inc. (GG), posted its second-quarter 2013 results on Jul 25. The company’s adjusted earnings (excluding one-time items) of 14 cents a share missed the Zacks Consensus Estimate of 28 cents and was well below 41 cents a share earned in the year-ago quarter. On a reported basis, the company logged a net loss of $1.93 billion compared to net earnings of $268 million in the prior-year quarter.
Other companies in the mining industry with favorable Zacks Rank are Pretium Resources Inc. (PVG) and NovaGold Resources Inc. (NG). Both of them carry a Zacks Rank #2 (Buy).
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