Newmont’s 3rd Quarter Results boosted by gold

Newmont Mining (NEM-N) has increased its third quarter net income by US$14.3 million compared with last year.

Boosted by higher gold prices, Newmont’s net income for the quarter stands at US$128.7 million. This translates to US29 per share.

The company sold 1.73 million oz. gold at an averaged realized price of US$404, whereas last year in the same period it sold just over 2 million oz. (16% more gold) at US$366 per oz. The reduction in gold sales was primarily due to lower sales from Nevada operations due to increased stripping and lower grades, as well as the sale of certain operations.

Wayne Murdy, Newmont’s Chairman and CEO, said that 2004 gold sales should total about 7 million oz. by year-end.

Revenue was up 32% to US$1.16 billion, but costs were higher as well. Total production costs stood at US$296 per oz., up 12% from the same period last year.

Net cash generated from activities totalled US$339 million.

Net income was adversely impacted on several fronts. There was a US$8.2 million write-down of assets in Australia and in northern Peru (at Yanacocha), a US$6 million charge for Australian site reclamation accruals, and other miscellaneous charges that totalled US$3.9 million. Higher diesel, electricity and equipment maintenance costs were a factor. Offsetting this was a US$7.3 million gain on the sale of the Bronzewing mine in Australia.

In North America 625,800 oz of gold were sold at a cash cost of US$292. Costs were higher at most operations, the worst being at Golden Giant in Canada where costs were up 76%. This was due in part to a production halt caused by an ore hoisting failure, lower mill grades and appreciation of the Canadian dollar. Cash costs rose at Golden Giant to US$418 per oz.

Australia and New Zealand operations sold 472,600 oz. gold. This was down 13%, a drop mostly attributable to the sale of two mines. Both countries currency have risen in relation to the U.S. dollar and this effected cash costs which averaged US$269 per oz.

South America saw a reduction in gold sales by 12% at Yanacocha and 91% at Kori Kollo (in Bolivia). Kori Kolla ceased mining in October of last year but still managed to produce 4,000 oz. from residual leaching in the quarter. Yanacocha sold 397,000 oz.; cash costs were US$139 per oz.

In Indonesia, Newmont’s interest in the Batu Hijua mine decreased by 3.4% on October 1 to 52.8%. The mine sold 111.3 million pounds of copper at total cash costs of US56 per lb., as well as 134,100 oz. of gold with a cash cost of US$166 per oz. The realized copper price was US$1.42 per lb. Throughput was up 7% due to crusher modifications that were completed last year.

The Minahasa mine continued to process stockpiled ore until August (mining ceased in 2001). The ore generated 20,400 oz. of gold at total cash costs of US$146 per oz. Newmont was hampered by politics that led to the detention of five employees by Indonesian police. The employees have been released however the company still has to defend itself against an accusation of causing pollution near the mine.

In Uzbekistan, the Zarafshan mine produced 8% less gold, but still produced 46,100 oz. at a cash cost of US$165 per oz.

The Ovacik mine in Turkey produced 34,700 oz. gold at a cash cost of US$174 per oz. This was about one third of the gold produced in the same period last year and costs were 36% higher. Newmont had to close the mine because the Turkish government suspended operating permits. The company is working to resolve the situation which hinges on additional environmental impact assessment work.

At the end of the quarter, cash and cash equivalents totalled US$1.4 billion; outstanding debt totalled US$1.7 billion. The company had $413.4 million in marketable securities and other short-term investments. Debt decreased by US$66 million over the period.

Newmont Capital, a unit of Newmont, manages the company’s royalty and marketable securities portfolios. Royalty and dividend income totalled US$19.1 million, up 21% over the same period last year. The increase is primarily due to higher oil and gas prices. Some transactions during the period resulted in the following: Newmont owning about 6.8% of the outstanding Canadian Oil Sands Trust units; and 10.2% of Gabriel Resources (who are working on the Rosia Montana gold project in Romania).

The company reports being on schedule with numerous developments around the world. Newmont spent US$54.1 million on exploration, research and development during the quarter.