Newmont warns on lower production

Denver-based Newmont Mining (NEM-N), one of the world’s largest gold miners, has indicated that lower production and higher cash costs would take a bite out of its second-quarter earnings.

The company says, however, that it is still on target to meet its goals for the year.

Newmont’s gold sales during the quarter were lower than anticipated at 1.22 million oz., resulting in higher total cash costs of US$194 per oz. This compares with year-ago sales of 1.28 million oz. and cash costs of US$173 per oz.

Production fell because of a change in the production schedule at the Yanacocha mine in Peru. The change resulted in lower recovery rates as fewer tons were placed in leach.

Production was also hit by reduced throughput, due to the annual roaster maintenance shutdown at the Nevada operations.

“The second quarter will be our lowest production quarter of the year,” says a prepared statement from Wayne Murdy, Newmont’s CEO. “This operating performance will adversely impact our financial results for the second quarter. However, our Batu Hijau copper-gold mine in Indonesia will report strong operating and financial results despite the weak copper price environment.”

The company says it expects to produce and sell 5.4 million oz. gold at a total cash cost of about US$180 per oz.

Murdy expects strong cash flows for the full year on the strength of improved operating results in the second half.

“We expect higher production with the continuing ramp-up at the high grade, low-cost Deep Post underground mine in Nevada and higher production rates at Yanacocha,” he says. “At current gold prices, profits in the second half are anticipated to offset first-half losses, before non-recurring items.”

The company’s second-quarter and six-month financial results are due for release Aug. 2.

Newmont shares were US23 higher at US$19.98 in late afternoon trading on the New York Stock Exchange.