Newmont profit up 35%

Vancouver — Stronger gold prices more than offset higher operating costs, propelling Newmont Mining (NEM-N) to second quarter net income of US$50 million, or US11 per share, up 35% from the US$37 million in the second quarter of 2004.

The Denver-based gold giant booked bullion sales of 2.01 million oz. in the latest quarter and realized US$421 per oz. for its output, about 44,000 oz. shy of the second-quarter 2004 figure. Costs, applicable to sales, came in at US$244 per oz., almost US$20 higher than the previous year’s corresponding quarter.

Revenues for the quarter were just over US$1 billion, up marginally from the year-ago US$982 million.

The company’s Golden Grove zinc-copper mine in Australia, recently sold for US$205 million, hitting second quarter income with a US$29.6 million impairment charge. Additionally, the company took an US$8-million hit for litigation-related costs in Minahasa, Indonesia.

North American operations performed well, with second quarter gold production up over 4%. However costs rose almost 12% due to higher fuel and labour costs, as well as an escalating Canadian dollar.

South American output (primarily Yanacocha in Peru) soared 17% in the second quarter, compared with a year earlier, while production costs were trimmed by 2.5%.

Operations in Australia and New Zealand underperformed during the second quarter, with gold production dropping 5% and costs rising 10% to US$332 per oz. Production shortfalls and mining of lower-grade zones impacted operations, as did higher materials and labour costs.

Newmont’s Indonesian Batu Hijau division saw copper and gold sales drop 19% and 11%, respectively, in the second quarter. Several recent, small pit-wall slides impaired access to ore from the deeper section of the pit, necessitating revisions in the mine plan and design. Operating costs rose as a result.

Commenting on the company’s outlook for the rest of 2005, Newmont Chairman and CEO Wayne Murdy stated, “We expect stronger operating performance in the second half as we access higher-grade ore, increase production rates at Batu Hijau and Yanacocha, and begin production at the Leeville mine.”

The company’s Leeville underground mine in Nevada is expected to begin gold production in late-2005, followed by output from the Phoenix project in early-2006.

The Ahafo mine in Ghana is expected to come on-stream by late-2006. The company also recently decided to develop its 85%-owned Akyem project, also in Ghana, which is expected to enter production in late-2008 at annual output of about 400,000 oz. gold.

In an effort to replace mined-out reserves, Newmont spent US$39 million on exploration in the second quarter, up from US$29 million in the prior year, with efforts primarily focused on Ghana, Peru and Nevada.

For all of 2005, Newmont is on track to produce 8.4 million oz. gold at a cost of US$235 per oz.