Newmont leads by example

The last few weeks have been upbeat for Newmont Mining (TSX: NMC; NYSE: NEM). The has brought two of its projects into commercial production on schedule and budget: Akyem in Ghana and Phoenix Copper in Nevada. And Newmont revealed in its third-quarter financial results that it had increased profits and production, reduced costs, and trimmed 2013 capital spending by another US$200 million.

Newmont posted a US$429-million profit from continuing operations in the third quarter on sales revenue of US$12.98 billion, versus US$400 million and US$2.48 billion in the year-ago period.

David Haughton of BMO Capital Markets commented in a research note that Newmont’s project delivery and cost-control measures “have been ahead of BMO Research’s expectations for 2013, and the trend appears to set the company up for continued improvements through 2014.”

Describing Akyem as a “core asset that will deliver profitable gold production at competitive costs,” Newmont says that the large open-pit mine in eastern Ghana, 180 km northwest of Accra, will produce 350,000 to 450,000 oz. gold a year at costs applicable to sales in the range of US$500 to US$650 per oz., and all-in sustaining costs of between US$750 and US$850 per oz. during the first five years of its estimated 16-year mine life. Attributable production in 2013 would reach between 50,000 and 100,000 oz. gold. 

The Phoenix copper leach project — an expansion of the Phoenix mine south of Battle Mountain — will recover material previously considered waste via leaching and processing at a solvent extraction–electrowinning facility. In its first five years of operation, the Phoenix leach project should average 20 million lb. copper at costs applicable to sales of US$1.75 to US$2 per lb., the company says. Management also forecasts that its attributable production would total 4 million to 5 million lb. copper, and expects the operation would run two decades. The project was developed at a US$175-million cost.

On the financial front, Newmont reported that higher production from Nevada, Australia and New Zealand offset a 20% decline in gold prices and a 13% drop in copper prices during the third quarter. Overall gold production for the quarter was up 4% year-on-year at 1.28 million oz., while copper production rose 3% from the year-earlier quarter to 34 million lb.

The company expects attributable gold production this year between 4.8 million and 5.1 million oz. Attributable copper production should reach between 135 million and 145 million lb.

Consolidated spending in the first nine months of 2013 was down 13%, or US$700 million year-on-year, and management slashed its capital expenditure outlook for the year by another US$200 million in the quarter, bringing the yearly total to US$400 million.

All-in sustaining costs in the third quarter were down 16% from a year earlier at US$993 per oz., and the company ended the quarter with cash and equivalents of US$1.5 billion.