Newmont net earnings drop 27% in 2005 (March 06, 2006)

Vancouver — Strong bullion prices helped offset some higher mine operating costs for Newmont Mining (NMC-T, NEM-N) in 2005, resulting in annual net earnings of US$322 million, or 72 per share, on revenues of US$4.4 billion. However, the gold giant’s performance was down over 27% from the previous year, when the company’s net income was US$443 million, or US$1.00 per share.

Consolidated gold sales for the year were 8.6 million oz. at an average realized price of US$441 per oz., with costs (attributable to sales) of US$236 per oz.

For the fourth straight year, the company replaced depleted reserves, adding 9.4 million oz. to boost proven and probable gold reserves to a record 93.2 million attributable oz., based on US$400 per oz. gold. Exploration and a high metal price added significantly to reserves in Ghana, which increased 17% (2.7 million oz.) to 18.7 million oz., and at Conga in Peru, where attributable reserves grew by 1.6 million oz. to 6.1 million oz. Subsequent to year-end, Newmont added a further 3.6 million oz. to reserves through the acquisition of the remaining 15% of the Akyem project in Ghana and the purchase of an additional 22.2% of the Boddington project in Australia.

Gold sold from Nevada operations dropped about 5% in 2005 from the previous year, to about 2.29 million attributable oz. Costs attributable to sales rose 18% to US$333 per oz. due to lower volumes, increased labour costs, and higher diesel and consumable costs.

Minera Yanacocha performed well over the year, with the Peruvian mine churning out 3.33 million oz. in 2005 — up almost 10% from the previous year’s 3.04 million oz. Newmont’s 51.35% interest in Yanacocha delivered 1.71 million attributable oz. to last year’s output. Sales costs remained almost even at US$147 per oz., up marginally from US$142 per oz. in 2004. Fourth quarter production was very strong, up 25% from the corresponding quarter of 2004.

Annual bullion sales from Australia and New Zealand operations were off 15% from 2004 at 1.6 million oz., while costs rose 13% to US$317 per oz.

Gold production from Batu Hijau in Indonesia remained almost constant from 2004 into 2005, up just under 1% to 721,000 oz. (381,000 equity oz. attributable to Newmont) at sales costs of US$152 per oz. A decrease in the amount of ore processed in 2005 was offset by a boost in gold grade. However, copper output was down 16% due to the drop in tonnage milled and leaner ore grades.

Combined gold production from other operations, Golden Giant (Canada), La Herradura (Mexico), Kori Kollo (Bolivia) and Zarafshan (Uzbekistan), was off almost 30% in 2005 at 448,000 attributable oz. while costs remained essentially even at US$229 per oz.

Development focus has been on the Leeville and Phoenix mines in Nevada and on Ahafo in Ghana, with all three projects scheduled to produce gold in 2006. Construction of a 200-MW power plant in Nevada has begun, with an estimated completion date of mid-2008. Newmont boosted its 2005 exploration spending to US$147 million, up 37% from 2004.

The company took a US$30-million hit against earnings in 2005, due to Buyat Bay litigation and settlements relating to alleged environmental incidents at its past-producing Minahasa mine in Indonesia.

Despite the drop in net earnings, Newmont maintains a strong balance sheet with cash and equivalents of almost US$1.1 billion, plus additional marketable securities and short-term investments of over US$800 million.

Newmont also says it will develop the large Boddington gold deposit in Western Australia at a cost of about US$1 billion. The Denver-based company recently purchased Newcrest Mining’s (NCMGY-O, NCM-A) 22.2% interest for A$225 million (US$167 million), boosting its ownership to 66.7%. AngloGold Ashanti (AU-N) holds the remaining 33.3%.

Initial production from the Boddington open pit is slated for late 2008. Average annual gold output at the operation, which will also produce copper concentrate, is anticipated at almost 1 million oz. over a mine life of at least 15 years.