Newmont Mining Corporation's (NEM) adjusted net income rose to $445 million or 90 cents per share in the second quarter from last year’s $377 million or 77 cents per share. The result was below the Zacks Consensus Estimate of $1.00 per share.
Revenues
Total revenue was $2.4 billion, up 11% year over year, below the Zacks Consensus Estimate of $2.5 billion.
Newmont reported attributable gold and copper production of 1.2 million ounces and 44 million pounds, respectively, in the quarter at costs applicable to sales (CAS) of $583 per ounce, and $1.34 per pound on a co-product basis.
Region-wise Sales
North America
Nevadagold production came in at 357,000 ounces, down 15% year over year due to mining and processing lower grade ore, partially offset by higher mill throughput and leach placement and the commencement of underground mining at Exodus. Open pit ore tons mined increased 47% as the remediation of the Gold Quarry pit slope failure was completed. CAS was $636 per ounce, up 9% from the prior-year quarter due to lower production and higher diesel prices, partially offset by higher by-product credits.
The Company continues to expect 2011 attributable gold production from Nevada of approximately 1.8 to 1.9 million ounces at CAS of between $565 and $615 per ounce.
South America
Yanacocha gold production was 175,000 ounces in the quarter, down 3% from the second quarter of 2010 due to lower leach placement at Yanacocha and La Quinua as a result of mine sequencing and lower equipment availability, partially offset by higher mill grade throughput and recovery. Ore tons mined decreased 39% due to mine sequencing at El Tapado. CAS increased 40% to $545 per ounce due to lower production combined with higher waste mining, higher diesel prices and labor and royalty costs, partially offset by higher by-product credits and lower workers' participation costs.
The Company continues to expect 2011 attributable gold production at Yanacocha of approximately 675,000 to 725,000 ounces at CAS of between $500 and $550 per ounce.
La Zanja gold production was 18,000 ounces in the second quarter.
The Company continues to expect 2011 attributable gold production at La Zanja between 40,000 and 50,000 ounces.
AsiaPacific
Boddington gold production was 205,000 ounces in the reported quarter, an increase of 11% year over year due to higher throughput. Copper production increased 7% over the prior-year quarter due to higher throughput, partially offset by lower recovery. CAS per ounce of gold increased 10% to $641 per ounce and per pound of copper increased 25% to $1.94 per pound. The increase was driven by higher conveyor maintenance costs, royalty and power costs, higher diesel prices and a stronger Australian dollar, (net of hedging gains), partially offset by higher production and by-product credits.
The Company continues to expect 2011 attributable gold production at Boddington of approximately 750,000 to 800,000 ounces at CAS between $580 and $620 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 26,000 ounces in the quarter and copper production was 28 million pounds, decreasing 70% and 56%, 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. CAS increased 67% per ounce to $490 per ounce for gold and 86% per pound to $1.23 per pound for copper due to lower production and higher waste mining costs, partially offset by higher by-product credits.
The Company continues to expect 2011 attributable gold production for Batu Hijau of approximately 110,000 to 140,000 ounces at CAS between $400 and $440 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 244,000 ounces, 5% lower than the year-ago quarter due to lower throughput at Tanami and Jundee and a build-up of in-process inventory at Jundee, partially offset by higher throughput at Kalgoorlie and Waihi. CAS was $ $638 per ounce, up 20% 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 $700 and $770 per ounce.
Africa
During the second quarter of 2011, gold production was 146,000 ounces, an increase of 11% year over year led by higher mill ore grade and recovery as a result of mine sequencing. CAS per ounce increased 7% to $446 per ounce due to higher diesel prices and higher power, labor and royalty costs, partially offset by higher production.
The Company continues to expect 2011 attributable gold production at Ahafo of approximately 550,000 to 590,000 ounces at CAS between $485 and $535 per ounce.
Financial Position
In the second quarter of 2011, capital expenditures were $618 million versus $319 million in the prior-year quarter. Operating cash flow was $412 million versus $753 million in the second quarter of 2010. Cash and cash equivalents was $1.9 billion as of June 30, 2011 versus $4.1 billion as of March 31, 2011.
In the quarter, the Board of Directors of Newmont also approved a third-quarter 2011 gold price-linked dividend of $0.30 per share, an increase of 50% over $0.20 paid in the second quarter of 2011, and an increase of 100% over the third-quarter 2010 dividend. This is based on the company's net average realized gold price of $1,501 per ounce in the second quarter of 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 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 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 Neutral recommendation.
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