Newmont Misses Sales Estimate - Analyst Blog

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ABX , AU , CAS , GFI , NEM

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