Newmont Misses Its Q2 Guidance

Higher sales volumes and lower operating costs were the good news for Newmont Mining (NMC-T, NEM-N) during the second quarter.

The company sold 1.2 million oz. of gold at an average price of US$915 per oz. and at a production cost of just US$423 per oz. — 4% lower than the US$439 per oz. it reported a year ago.

But such wide margins weren’t enough to outdo last year’s totals for the same period, as net income came in at US$213 million or US43¢ per share, compared with US$221 million for the same quarter last year.

There was a more drastic difference in the company’s net income from continuing operations. This year’s total of US$171 million is nearly US$100 million less than last year’s total of US$270 million.

Newmont blames the decrease on lower copper prices and higher taxes.

During the quarter, the company sold 47 million lbs. of copper at an average price of US$2.17 per lb. with its production costing US58¢ per lb.

Copper production for the world’s second-largest gold producer comes from its Batu Hijau mine in Indonesia.

The company also revised its gold sales outlook slightly, to the 5.2-to 5.4-million-oz. range from its previous guidance of 5.2-5.5 million oz.

It still expects costs to be in the US$400-to US$440-per-oz. range — that forecast assumes an oil price of US$70 per barrel and an Australian dollar exchange rate of US75¢ for the rest of the year.

For the quarter, Newmont reported better than expected sales from Batu Hijau, Yanacocha in Peru, and from its Australian operations. Sales from its Nevada operations, however, declined due to lower grades.

More production in the second half will be coming from the Boddington mine in Australia. Newmont announced that July saw the mine move from construction to startup and is currently driving it towards commercial production.

Startup at the mine, however, came at the back end of the company’s guidance, meaning that gold production from the region will be slightly lower than expected, at 1.4-1.5 million oz. as opposed to the previous estimate of 1.5-1.6 million oz.

Over the first five years of production, Boddington is expected to produce roughly 1 million oz. at an average cost of US$300 per oz. The mine currently has proven and probable gold reserves of 20.1 million oz. and an estimated mine life of more than 24 years.

Newmont’s shares fell US16¢ to US$41.82 in New York on the results.