Newmont Cuts Costs at Conga - Analyst Blog
March 15 2012 - 12:57PM
Zacks
Gold miner Newmont Mining Corporation (NEM)
announced that it will be cutting costs at its Conga gold and
copper project in Peru. The company has halted the project since
November 2011 due to protests by the farmers and local Government
officials. The protestors are of the idea that the mine will
replace the existing alpine lakes with artificial reservoirs,
thereby causing pollution.
The investment in the project is estimated to be $4.8 billion
and its halt was costing the company around $2 million each day.
Further, Newmont took adequate measures to slash costs and
announced the termination of contract with 6000 people. The company
is considering revising the project’s costs.
Newmont is waiting for the government’s environmental impact
study of the project, scheduled in the first week of April 2012,
after which Newmont expects to restart the project. Though the
company has completed all the legal requirements, Newmont has
undertaken this additional process.
In February 2012, Newmont reported earnings of $1.17 per share
in the fourth quarter of 2011 compared with $1.16 per share in the
prior-year quarter and missed the Zacks Consensus Estimate of $1.25
per share.
Total revenue was $2.77 billion, up 9% year over year from
$2.548 billion. It missed the Zacks Consensus Estimate of $2.78
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 of $602 per ounce, and $1.58
per pound on a co-product basis.
For fiscal 2012, the company expects attributable gold
production of approximately 5.0 million to 5.2 million ounces and
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.
Currently, the company retains a Zacks #3 Rank, which translates
into a short-term (1 to 3 months) Hold rating and we have
recommended the shares of the company as “Neutral” for the
long-term (more than 6 months). Newmont competes with
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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