--Newmont sees cash burn through 2013 as growth spending,
increased dividend weigh
--Newmont's gold price-linked dividend increased payments by 62%
so far in 2012
--Gold mining industry has struggled to manage rising costs,
project delays
(Adds detail on Newmont's spending cuts, gold-price impact in
the eighth paragraph)
By Matt Day
Newmont Mining Corp. (NEM) expects to spend more than it takes
in through 2013, as the top U.S. gold mining company by production
works to expand production and gives more cash to shareholders
through its gold price-linked dividend, executives said Friday.
The Colorado-based company expects to report negative free cash
flow, or the amount of cash the company generates after expenses,
debt service, capital expenditures and dividends, through next
year, Chief Financial Officer Russell Ball said on a conference
call to discuss the company's third-quarter results.
Under the company's growth plan, outlined in 2011, "we knew that
2012 and 2013 were going to require significant" capital spending,
Mr. Ball said. "We have to manage this capital-intensive business
for the long term. As we look out beyond 2013, we see significant
free cash flow generation."
Many gold companies have been slammed by escalating costs and
delayed projects, as an industrywide labor and equipment shortage,
rising fuel costs, and increasingly ambitious projects required
more money. Some, including Barrick Gold Corp. (ABX), the largest
gold-mining company by production, have shelved projects and cut
spending.
Investors have been frustrated by gold company share-price
performance, which in recent years has generally lagged gains in
the price of the metal.
Newmont, like other giants in the industry, has touted a renewed
focus on disciplined spending and profitable growth. But Chief
Executive Officer Richard O'Brien on Friday defended the company's
efforts to expand production, saying that in the mining industry,
cost savings efforts could come back to haunt companies that fail
to invest to replace the gold they take out of the ground.
The company is ramping up production in Nevada in the U.S.,
Ghana, and elsewhere. Newmont is also continuing to build
infrastructure around its long-stalled Conga copper-and-gold mining
project in Peru. .
Still, Mr. Ball said that accounting for current and planned
spending cuts and a higher-than-budgeted gold price, Newmont's free
cash flow was running roughly $1 billion above its original
projections.
Newmont paid shareholders $521 million in dividends so far in
2012, up 62% from the same period in 2011. The company linked its
dividend to the price of gold, leading to higher payouts as prices
rose this year from 2011 levels. Executives on Friday reiterated
their commitment to the dividend.
Newmont on Thursday reported its third-quarter earnings fell
26%, missing analysts' expectations, as gold and copper production
fell and costs rose. The company reported a profit of $367 million,
or 74 cents a share. Excluding one-time charges, per-share earnings
were 85 cents.
Analysts polled by Thomson Reuters had expected earnings of 91
cents a share.
Write to Matt Day at matt.day@dowjones.com
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