Newmont's Indonesia Strike Ends - Analyst Blog


Workers at Newmont Mining Corp. 's ( NEM ) Indonesian unit ended their strike at the Batu Hijau copper and gold mine. The 400 workers reached an agreement with unions on a dispute over shifts.

As per the company, workers have settled their differences regarding the calculation of overtime compensation. With the win-win solution, operation of the Batu Hijau mine in Sumbawa Island has returned to normal.

However, the country's longest-running mining dispute still continues at Freeport-McMoRan Copper & Gold 's ( FCX ) Grasberg mine in Indonesia. Miners at Grasberg, the world's second-biggest copper mine, have been on strike since mid-September 2011, leading Freeport to declare a force majeure on concentrate shipments last month. This decision releases Freeport from some of its contractual obligations, such as supplying buyers metal produced at Grasberg.

Recently, Newmont released its third-quarter 2011 results. The company's adjusted net income rose to $635 million or $1.29 per share in the third quarter from last year's $533 million or $1.08 per share. The result exceeded the Zacks Consensus Estimate of $1.24 per share.

Total revenue was $2.7 billion, up 6% year over year. Newmont reported attributable gold and copper production of 1.3 million ounces and 58 million pounds, respectively, in the quarter at costs applicable to sales ( CAS ) of $622 per ounce, and $1.10 per pound on a co-product basis.

For fiscal 2011, the company reiterated its previous expectation of attributable gold production of approximately 5.1 million to 5.3 million ounces, with attributable copper production of 190 to 220 million pounds. Costs applicable to sales are expected to be between $560 and $590 per ounce for gold. Costs applicable to sales are anticipated to be between $1.25 and $1.50 per pound of copper.

The company currently plans to spend $2.1 to $2.5 billion in attributable capital expenditures in 2011, or $2.7 to $3.0 billion on a consolidated basis.

Approximately 40% of 2011 consolidated capital expenditures are expected to be related to major project initiatives, including further development of the Akyem project in Ghana, the Conga project in Peru, Hope Bay in Canada, and the Nevada project portfolio, while the remaining 60% is expected to be for growth and sustaining capital.

The company faces stiff competition from Posco ( PKX ) and Arcelor Mittal ( MT ).

Newmont has a short-term (1 to 3 months) Zacks #2 Rank (Buy) and a long-term Neutral recommendation.

FREEPT MC COP-B ( FCX ): Free Stock Analysis Report
ARCELOR MITTAL ( MT ): Free Stock Analysis Report

NEWMONT MINING ( NEM ): Free Stock Analysis Report
POSCO-ADR ( PKX ): 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: CAS , FCX , MT , NEM , PKX

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