Vancouver – The world’s largest gold miner ended 2001 on a strong note and expects 2002 to be even better.
“In the fourth quarter, we pursued our pending acquisitions of Normandy Mining and Franco-Nevada Mining,” says Chief Executive Officer Wayne Murdy. “Notwithstanding the demands of that process, our employees remained focused on our 2001 goals. These efforts enabled Newmont to report a profit for the year, before certain non-cash items, thereby exceeding our mid-year estimated forecast for break-even results.”
Revenue for the quarter amounted to US$445 million, 15% lower than in the year-earlier period. The decrease is a reflection of a 20% drop in gold production. The company poured 1.4 million oz. during the period.
Total cash costs rose to US$182 per oz. gold, up from US$164 per oz. a year earlier, while total production costs increased to US$235 from US$221 per oz. The company realized an average gold price of US$279 per oz. in the quarter, up from the US$274 in the final three months of 2000.
Between 2000 and 2001, Newmont experienced a 73% improvement. The company earned US$13.7 million (US7 per share), before merger and non-cash costs, in 2001. Lower exploration expenses, an income tax benefit, and US$33 million in equity income from the Batu Hijau copper-gold mine in Indonesia offset a 5% dip in gold sales and a 4% fall in the average realized gold price, which was US$271 per oz.
After accounting for a US$60.5-million charge for restructuring and merger costs associated with the takeover of Battle Mountain Gold and US$41 million in asset writedowns, Newmont realized a net loss of US$30.8 million (US16 per share) for 2001. The writedowns are related to the depletion and closure of the Minahasa gold mine in Indonesia.
Revenue dropped 8% in 2001 to US$1.7 billion as North American operations sold 3.2 million equity ounces of gold at a total cash cost of US$217 per oz., compared with 3.7 million equity ounces at US$197 per oz. in 2000. Overseas operations saw production increase to 2.2 million equity ounces at US$128 per oz., from the 2 million oz. cranked out in 2000 when total cash costs came in at US$117 per oz. Lower North American production was attributed to a decrease in tonnage at the Nevada operations, lower ore grades at mines in Nevada, Canada and Peru, and correspondingly lower mill recovery rates.
The Yanacocha mine in Peru continued to be the star performer for the major, contributing 983,000 equity ounces, a 9% increase over 2000. Total cash costs remain favourable at US$115 per oz.
“Our objective in 2002 at Yanacocha is to advance our understanding of the geologic settings and material types of the mineralized sulphide systems with a focus on locating higher-grade copper-gold targets,” says Murdy. “We continue to pursue the long-term potential that we see in the copper-gold and gold mineralization and are pleased with the performance of this mineral district.”
The Batu Hijau operation provided US$9.8 million and US$33 million in equity income in the fourth quarter and in the full year, respectively. Total copper sales totalled US$447.3 million, with an average realized copper price per pound of US70, or US12 less than in 2000. For the full year, copper sales increased by 22% to 320,000 tons, 180,000 tons to Newmont, at a cash cost of US36 per lb. Equity gold production jumped by 65% to 295,100 oz.
“Batu Hijau is one of the largest and lowest-cost copper mines in the world,” says Murdy. “In 2001, it continued to demonstrate superb operating proficiency that surpassed our production and cash costs targets. The increases in copper and gold sold were the result of higher ore grades, an 18% increase in tons mined, and a 15 per cent rise in mill throughput [compared with 2000].”
At the end of 2001, Newmont reported proven and probable reserves of 59.6 million oz. gold, down from 66.3 million oz. at the end of 2000. North American equity reserves came in at 31.4 million oz., compared with 35.2 million oz. a year earlier. At Yanacocha, gold reserves totalled 34.2 million oz., of which 17.6 millon oz. went to Newmont. Total company-wide reserves for copper were 3 million tons. Batu Hijau had 4.9 million tons, 2.75 million tons to Newmont, at the end of 2001, roughly equivalent to reserves at the end of 2000.
The Denver-based company is coming off a successful US$2.1-billion offer to acquire Normandy Mining. After a 4-month takeover battle, is is poised to become the world’s largest gold miner.
“We are working diligently toward closing the Normandy and Franco-Nevada transactions, which will almost double the market capitalization of Newmont,” says Murdy.
In 2002, the major expects to produce 5.2 million oz. gold.
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