Newmont Mining Sees Gold Production Boom in Third-Quarter 2013, Cuts Capex Outlook for Full Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--Newmont Mining Corporation (NYSE:NEM) (Denver, Colorado) reported stronger profits in the third quarter of 2013, as sharply improved production, especially at its mines in Australia and New Zealand, offset weaker revenues from gold and copper price declines. Net income was reported to be $408 million, an 11.17% increase from the same period last year.

Total sales stood at $1.98 billion for the quarter, a 20.04% decrease from the same period last year. Attributable gold production increased 4% to 1.28 million ounces, while attributable copper production decreased 3% to 34 million pounds. Attributable gold sales increased 4% to 1.26 million ounces, while attributable copper sales decreased 5% to 35 million pounds. However, the stronger overall production was offset by price declines for gold and copper of 20% and 13%, respectively.

Newmont's strongest production gains were found in the Australia/New Zealand geographic segment, where higher mill throughput and ore grade at the Tanami, Waihi and Kalgoorlie mines boosted production 26% on average for the quarter. Australia's Boddington mine also saw a 7% increase in production. Stronger mill recovery boosted gold production 10% at the Ahafo mine in Africa, while the Nevada and La Herradura (Mexico) mines in North America saw production increase 2%. However, production decreased 44% at the Batu Hijau mine in Indonesia, following weaker recovery and mill throughput, and lower grade ore, and 28% at the Yanacocha mine in Peru, due to lower leach production.

Also in the quarter, Newmont benefited from the sale of its investment in Canadian Oil Sands Limited, which resulted in a pretax gain of $280 million.

Total consolidated capital expenditures were reported to be $400 million on an accrual basis for the quarter, compared with $811 million in third-quarter 2012. Expenditures attributable to Newmont on an accrual basis stood at $353 million, compared with $659 million in the same period last year. Glod and copper costs applicable to sales decreased 6% and increased 11%, respectively.

Industrial Info is tracking more than $9.5 billion in active projects involving Newmont, including the $200 million addition of a copper heap leach process at the aboveground Phoenix Gold Mine in Battle Mountain, Nevada. The project involves constructing a 20 million-square-foot plant at the open-pit gold mine for sulfuric acid heap leach pads, as well as solvent extraction and electrowinning, to produce 20 million pounds per year of copper from tailings. Praetorian Construction Management Limited (Edmonton, Alberta) is performing construction management, and Ames Construction Incorporated (Carlin, Nevada) and Schmueser & Associates Incorporated (Winnemucca, Nevada) are working as contractors.

"Nearly 70% of our $700 million in savings is the result of reducing our sustaining capital expenditures," said Laurie Brlas, the executive vice president and chief financial officer of Newmont, in a conference call. "It's important to note that these are really sustainable improvements, not just deferrals. For instance, in Nevada, Australia and New Zealand, we have upgraded our asset management and maintenance practices, and this has paid off in the form of significantly extended life and lower spending on process and mining equipment."

Newmont executives have reduced the company's estimated consolidated capital expenditures for full-year 2013 by $200 million, to between $2 billion and $2.2 billion. (The estimate is $1.7 billion to $1.9 billion on an attributable basis.) The overall estimated gold production for 2013 stands at 4.8 million to 5.1 million ounces, while that for copper was revised downward 135 million to 145 million pounds.

"We are creating value by optimizing our portfolio," said Gary Goldberg, the president and chief executive officer of Newmont, in the conference call. "We sold our interests in Canadian Oil Sands this past quarter, and we are currently engaged with interested parties to sell our Midas operation in Nevada."

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