Newmont Mining Corporation (NEM) reported
adjusted basic earnings of $1.17 per share in the fourth quarter of
2011 compared to the prior year quarter of $1.16 per share.
Including the charges of Hope Bay asset impairment, the company
reported basic loss of $2.08 per share compared to $1.65 in the
fourth quarter of 2010. The fourth quarter of 2010 also included
the asset impairment charges of Hope Bay.
Revenues
Total revenue was $2.765 billion, up 9% year over year from
$2.548 billion. Total revenue missed the Zacks Consensus Estimate
of $2.781 billion.
Newmont reported attributable gold and copper production of 1.3
million ounces and 47 million pounds, respectively, in the quarter
at costs applicable to sales (CAS) of $602 per ounce, and $1.58 per
pound on a co-product basis.
Fiscal 2011 Performance
In 2011, the adjusted net income amounted to $2.2 billion or
$4.39 basic per share compared to an income of $1.9 billion or
$3.85 basic per share in 2010.
The net income in 2011 excluded $1.6 billion or $3.24 per share
from the non cash write-down Hope Bay Project in Canada. Including
these charges, the net income in 2011 was $0.5 billion or $1.02 per
share versus $2.3 billion or $4.69 basic per common share.
Total revenue was $10.358 billion, up 9% year over year from
$9.540 billion. Total revenue missed the Zacks Consensus Estimate
of $10.520 million.
Region-Wise Sales
North America
Nevadagold production came in at 523,000 ounces, improving year
over year due to resumption of mining at Gold Quarry, higher grade
and recovery at Mill 5 and a higher throughput at Juniper Mill. CAS
was $519 per ounce, down from the prior-year quarter of $520 per
ounce, due to lower operating costs.
La Herradura gold production in the quarter was 56,000 ounces,
up 14% year over year due to higher leach placements. CAS was $609
per ounce during the fourth quarter and increased 40% from the
prior-year quarter due to higher employee profit sharing costs
partially offset by higher production and by-product credits of
silver.
The company continues to expect 2012 attributable gold
production from North America to be approximately 190,000 to
200,000 ounces at CAS of between $570 and $630 per ounce.
South America
Yanacocha gold production was 172,000 ounces in the quarter, up
1.2% from the fourth quarter of 2010. CAS decreased 9.3% to $511
per ounce due to lower operating costs and higher by-product
credits of silver.
La Zanja gold production was 15,000 ounces in the fourth quarter
compared to 16,000 ounces in the fourth quarter of 2010.
The company continues to expect 2011 attributable gold
production at South America of approximately 750,000 to 750,000
ounces at CAS of between $480 and $530 per ounce.
Asia Pacific
Boddington gold production was 205,000 ounces in the reported
quarter, a marginal decrease from year over year. Copper
production increased 47% over the prior-year quarter to 22 million
pounds due to higher mill throughput, partially offset by lower
recovery.
CAS per ounce of gold increased 20% to $749 per ounce and per
pound of copper decreased 11.9% to $1.84 per pound. The gold cost
increase was driven by higher mining cost and milling cost as well
as higher royalty costs. Copper costs decreased due to higher
production.
The company continues to expect 2012 attributable gold
production at Boddington of approximately 750,000 to 800,000 ounces
at CAS between $800 and $850 per ounce, and 2012 attributable
copper production of 70 to 80 million pounds at CAS between $2.00
and $2.25 per pound.
Batu Hijau gold production was 16,000 ounces in the quarter and
copper production was 25 million pounds, substantially decreasing
from the previous year's quarter due to lower mill throughput,
grade and recovery as a result of processing more stockpiled
ore.
CAS increased 786% per ounce to $754 per ounce for gold and 85%
per pound to $1.50 per pound for copper higher labor cost and lower
grade and recovery due to more stockpiled material.
The company continues to expect 2012 attributable gold
production for Batu Hijau of approximately 45,000 to 55,000 ounces
at CAS between $800 and $850 per ounce, while attributable copper
production is expected to be approximately 80 to 90 million pounds,
at CAS of between $1.80 and $2.20 per pound.
Other Australia/New Zealand gold production was 224,000 ounces,
15.6% lower than the year-ago quarter due to lower mill throughput
at Tanami and Jundee and lower grade at Waihi, partially offset by
higher grade at Kalgoorlie and Jundee. CAS was $807 per ounce, up
45.6% year over year due to lower production and higher mining
costs at Tanami and Waihi.
The company continues to expect 2012 attributable gold
production at the Other Australia/New Zealand operations of
approximately 980,000 to 1.1 million ounces at CAS of between $810
and $860 per ounce.
Africa
During the fourth quarter of 2011, gold production was 88,000
ounces, a decrease of 55.6% year over year due to lower mill grade
and increased in-process inventory in December 2011. CAS per ounce
increased 20% to $520 per ounce due to higher mining and milling
costs.
The company continues to expect 2012 attributable gold
production at Africa to be approximately 570,000 to 600,000 ounces
at CAS between $500 and $550 per ounce.
Financial Position
In 2011, capital expenditures were $2.8 billion versus $1.4
billion in the prior-year quarter. Operating cash flow was $3.6
billion in the fourth quarter of 2011. Cash and cash equivalents
were $1.8 billion as of December 31, 2011 versus $4.1 billion as of
December 31, 2010.
Newmont's board of directors approved fourth quarter 2011 gold
price-linked dividend of $0.35 per share based on the company's
average realized gold price of $1,670 per ounce for the fourth
quarter of 2011, an increase of 133% over the $0.15 dividend paid
in the fourth quarter of 2010.
Outlook
For fiscal 2012, the company expects attributable gold
production of approximately 5.0 million to 5.2 million ounces, with
attributable copper production of 150 to 170 million pounds. Costs
applicable to sales are expected to be between $625 and $675 per
ounce for gold. Costs applicable to copper sales are expected
to be between $1.80 and $2.20 per pound of copper.
The company currently plans to spend $3.0 to $3.3 billion in
attributable capital expenditures in 2012, or $4.0 to $4.3 billion
on a consolidated basis. Approximately 60% of 2012 consolidated
capital expenditures are expected to be related to major project
initiatives, including further development of the Akyem project in
Ghana, Tanami Shaft, the Conga project in Peru, while the remaining
40% is expected to be for growth and sustaining capital.
Our Take
Demand for gold is improving. Investment is rising due to
escalating demand for gold exchange-traded funds or ETFs. Demand
for gold is expected to remain high due to global instability and
U.S. trade/budget deficits. Being an entirely un-hedged gold
producer, Newmont reaps immediate benefits from these trends.
However, Newmont’s direct mining costs are increasing due to
declining grades, increased royalties, equipment maintenance, waste
removal, pit dewatering, and labor and fuel costs. The company’s
non-mining costs are also increasing due to legal expenses for
environmental degradation lawsuits and government claims.
Based in Colorado, Newmont Mining Corporation is one of the
world's largest producers of gold with several active mines in
Nevada, Peru, Australia/New Zealand, Indonesia and Ghana. Newmont
is the only gold company included in the S&P 500 Index and
Fortune 500. It was the first gold company included in the Dow
Jones’ world Sustainability Index.
Currently the shares of Newmont retain a Zacks #3 Rank
(short-term “Hold” recommendation). It competes with the likes of
AngloGold Ashanti Ltd. (AU), Barrick Gold
Corporation (ABX) and Gold Fields Ltd.
(GFI).
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
GOLD FIELDS-ADR (GFI): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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