Newmont has profitable Q1, updates Batu Hijau’s status

VANCOUVER — Newmont Mining (NYSE: NEM) has tabled a first quarter highlighted by adjusted earnings of US34¢ per share and free cash flow of US$227 million.

First-quarter earnings came in at US$182 million on US$2 billion in revenue, compared to a US$229-million profit on US$2 billion in the year-ago quarter.

Newmont reported first-quarter production of 1.23 million oz. gold and 38,000 tonnes copper, at all-in sustaining costs of US$828 per oz. gold and US$1.33 per lb. copper.

The company kept its annual gold guidance of between 4.3 million and 4.8 million oz., while dropping all-in sustaining costs estimates 2% to between US$880 and US$940 per oz. gold.

Employee pouring gold in Nevada. Credit: Newmont Mining.

In the broader market, gold mining  equities have surged in the new year as bullion prices have risen to a US$1,270 per oz. gold in late April.

“We improved our performance and our prospects by lowering costs at our operations, bringing proceeds from non-core asset sales to nearly $2 billion, and strengthening our balance sheet and earnings. We have the best credit rating in the gold sector,” president and CEO Gary Goldberg said during a conference call.

“In the near-term, we anticipate that a relatively strong U.S. dollar and subdued global economic growth will continue to constrain metal prices. That said, we’ve seen improvements in the first quarter, and the strongest upward trend since 1980. Electronically traded fund holdings reversed significant declines we’ve seen since 2011, and we expect prices to rise on improved fundamentals over the medium-term,” he added.

The processing plant under construction at Newmont Mining’s Merian gold project in Suriname. Credit: Newmont Mining.

Newmont reported it is on budget and schedule at new gold mining projects.

The company reached commercial production ahead of schedule on a new valley-leach facility at the Cripple Creek & Victor mine in Colorado, which it acquired from AngloGold Ashanti (NYSE: AU) for US$820 million in mid-2015.

Development at the Merian project in Suriname is nearing the finish line, while the Long Canyon mine in Nevada is 65% complete. Both operations could hit commercial production within a year, and add up to 750,000 oz. in annual gold production.

Goldberg briefed listeners on negotiations to sell Newmont’s Batu Hijau copper mine on the island of Sumbawa in Indonesia. The company is working with Japan’s Sumitomo to sell a jointly held 56% stake in the asset. Reports have indicated a private Indonesian group is in the running as a buyer.

The Long Canyon gold project in in Elko County, Nevada. Credit: Rick Wilking.

“Our discussions with certain parties interested in acquiring our stake continue, but financing and deal terms have not yet been finalized,” Goldberg said. “Nothing has really changed. We’ll continue to work the terms, and that’s really the only catalyst I can point to, aside from the financing coming together.”

Newmont also disclosed that it would review its compliance with U.S. corruption and bribery laws. The company is working with the U.S. Securities and Exchange Commission and U.S. Department of Justice to conduct an investigation.

Newmont did not reveal where in the world the incident may have taken place, and company representatives were not available for comment at press time.

BMO Capital Markets analyst Andrew Kaip noted that Newmont beat consensus earnings estimates of US19¢ per share. BMO Research expects the company will produce 5 million oz. gold this year at all-in sustaining costs of U$901 per oz. gold. Kaip also added that Newmont returned to positive free cash flow after being in the red in late 2015.

Newmont has traded within a 52-week range of US$15.39 to US$32.58 per share, and to start the year surged 74%, or US$13.24, en route to a US$31.23-per-share close at press time. The company has 530.5 million shares outstanding for a $17.5-billion market capitalization.