Newmont reports 105% increase in net income despite cost pressures

Newmont's 2010 outlook for gold production remains the same although copper production will drop 20 million pounds.

RENO, NV - 

As Newmont reported a 105% increase in first-quarter net income and remains on track for ounces of gold production this year, CEO Richard O'Brien told analysts Tuesday the company is experiencing operating costs pressures "primarily driven by lower production volumes in Nevada, Peru and Ghana, and as a function of high cost underground production at Nevada and higher mill production at Yanacocha."

On a year-over-year basis, CIS increased from $431 to $480 an ounce. O'Brien reassured analysts that lower cost production from the new Boddington mine in Australia "should offset some of these operating costs as we ramp up the full production towards the end of the year."

"Despite these operating costs pressures, we continue to expect full year performance in line with our existing outlook."

Equity gold production was 1.3 million ounces during the first quarter, while copper production increased 143% to 90 million pounds, due to Phase V mining at the Batu Hijau operation in Indonesia. O'Brien advised the company continues to expect equity gold production ranging between 5.3 million and 5.5 million ounces this year.

BATU HIJAU UPDATE

However, Newmont has adjusted its 2010 outlook for equity copper production to between 330 million to 360 million pounds, down 20 million pounds from the previous outlook.  In March the company finalized the sales of 2009 divestiture shares which reduced its effective ownership position from 52.44% to 48.5%.

One final divestiture tranche remains, which is the final 7% of the PT Newmont Nusa Tenggara ownership that was offered for sale to Indonesian governments for $444 million. Once the sale closes sometime this year, Newmont's economic ownership will decline to 44.56% and divestiture will be complete, O'Brien said.

AKYEM UPDATE

Meanwhile, although a change has occurred in the Ghanaian government, O'Brien told analysts that he believes the company is protected by its Akyem investment agreement although the new government has "indicated a desire to review our investment agreement."

"So we are actually protected, if you will, against upward changes and taxes, changes in the tax structure, and upward changes in the royalty," O'Brien reassured analysts, adding that, nevertheless, "of course we will sit down and talk with them."

"I would tell you that while we are protected, we do want to be a good citizen in Ghana. So we will probably make some changes over time," he added. "But we will try to make sure that while we assure shareholders' return that if we continue to be in an environment of higher go prices, we do reflect some additional return back to Ghana."

Production at Akyem is still targeted for late 2013 to 2014.

OTHER OPERATIONS/PROJECTS

Newmont Executive Vice President, Operations, Brian Hill said Boddington gold production increased 34% to 158,000 ounces while copper production increased 40% to 14 million pounds as it ramps up toward full production at the end of this year.

Meanwhile, an earthquake which occurred near Newmont and Barrick's KCGM Super Pit joint venture operations caused the company to temporarily suspend operations for safety reasons. Hill said there were no injuries or significant damage to operations from the 5.2 magnitude quake.

Newmont Executive Vice President of Discovery and Development, Guy Lansdown, said the company has increased funding for the development of the Hope Bay District with an underground focus on the Doris north deposit in Nunavut Canada. This year's funding will be between $180 million to $200 million accelerating construction and development. Advanced projects R&D spending has been increased to between $230 million and $250 million, up from $185 to $210 million.

FINANCIALS

Newmont reported an adjusted net income of $408 million or 83-cents per share for the first-quarter 2010, a 105% increase from $199 million or 42 cents/sh for the same quarter of 2009.

CFO Russell Ball told analysts net operating cash flow was $728 million, a 91% increase over 2009.

In response to an analyst's question, O'Brien said, "I think you will see us be more responsive to increases in dividends and perhaps share buyback if we can continue to generate significant cash flow, as we have over the past three quarter really."

Nevertheless, he added, the company would rather invest our cash in "some interesting opportunities internally.

SUBSCRIBE to Mineweb.com's free daily newsletter now.

SHARE THIS ARTICLE

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

Print story      Email story      Subscribe to free newsletter

Back

 

responses to this article

Name
Subject
Comment