Gold miner Newmont Mining Corp. (NEM) announced that its mine in the northern Peruvian Andes was not damaged by the 7.0 earthquake that hit a remote Amazon region of Peru.
Located high in the Andes Mountains of Peru, Yanacocha is the largest gold producer in Latin America. Attributable gold production at Yanacocha in Peru was 175,000 ounces at costs applicable to sales of $545 per ounce during the second quarter of 2011.
Gold production decreased 3% in the second quarter of 2011 from 2010 due to lower leach placement, at Yanacocha, 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. Costs applicable to sales increased 40% in the second quarter of 2011 from 2010 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 costs applicable to sales between $500 and $550 per ounce.
The company released its second-quarter results for 2011 in July, thereby increasing its adjusted net income 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.
Total revenue was $2.4 billion, up 11% year over year, but 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.
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 a rise 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.
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).
We currently have a short-term Zacks #3 (Hold rating) on the stock.
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