UPDATE: Newmont 3Q Profit Up 38% Amid Higher Gold Prices

Newmont Mining Corp. (NEM) beat Wall Street expectations with a 38% jump in third-quarter profit amid higher gold prices, but the miner's rising costs disappointed the market.

The world's second-biggest gold producer after Canada's Barrick Gold Corp. (ABX) raised its outlook for 2010 cash costs to $485-$500 an ounce from $460-$480 an ounce. Its third-quarter costs rose 18% year over year to $477 an ounce in part because of a stronger Australian dollar and more expensive production at its Boddington mine in Australia.

That sent shares 2.2% lower Tuesday despite higher gold prices and a rally in other gold stocks.

Newmont's quarterly profit of $537 million, or $1.07 a share, was up from $388 million, or 79 cents a share, in last year's third quarter. Revenue jumped 27% to $2.6 billion.

Analysts polled by Thomson Reuters most recently predicted earnings of 95 cents per share on $2.38 billion in revenue.

"We are all experiencing upward cost pressures as mines age ... and average ore grades decrease," Chief Financial Officer Russell Ball said in a conference call accompanying the earnings report.

During the third quarter, Newmont's Boddington operations produced 180,000 ounces of gold and 14 million pounds of copper at a cash cost of $617 per ounce of gold and $1.81 per pound of copper.

Gold costs were "a disappointment from what most analysts had in their models," according to George Topping, senior mining analyst with Stifel Nicolaus & Co.

Forecasts for an eventual drop in gold costs to below $400 per ounce at Boddington are "looking very unlikely," Topping said, adding he projects those costs will settle at about $500-$525 an ounce.

"We continue to work toward consistent production at Boddington," Brian Hill, Newmont's executive vice president for operations, said in the conference call.

The company has seen earnings soar in recent quarters as it benefited from increased prices while it has also sought to cut costs. But in addition to the rising cost of producing gold in the third quarter, copper costs per pound jumped 46%.

Newmont reported an average realized price growth of 27% in gold and 31% in copper. Copper output rose 9.9% to 156 million pounds and gold production dipped 0.8% to about 1.69 million ounces.

In addition to raising its cost estimates, Newmont lowered its gold production forecast for the year to a range of 5.3 million to 5.4 million ounces from a prior view of 5.3 million to 5.5 million ounces.

"While it was a good quarter, you can infer that it's going to be a weaker quarter in the fourth quarter," Topping said.

-By Matt Whittaker, Dow Jones Newswires; 212-416-2139; matt.whittaker@dowjones.com

(Matt Jarzemsky contributed to this report.)

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