Newmont Second Quarter 2010 Adjusted Net Income(1) Increases 79% to $377 million ($0.77 per share); Increases Quarterly Dividend by 50%

Published on Wednesday, 28 July 2010 06:11 Written by TradersHuddle Staff

This release should be read in conjunction with Newmont's Second Quarter 2010 Form 10-Q filed with the Securities and Exchange Commission on July 28, 2010 (available at www.newmont.com).

DENVER, July 28 /PRNewswire-FirstCall/ -- Newmont Mining Corporation (NYSE: NEM) ("Newmont" or the "Company") today announced second quarter adjusted net income(1) of $377 million ($0.77 per share) compared to $211 million ($0.43 per share) in the prior year quarter. Net income attributable to Newmont stockholders was $382 million ($0.78 per share) compared to $162 million ($0.33 per share) in the second quarter of 2009.    

In addition, Newmont announced that its Board of Directors approved an increase in the Company's regular quarterly dividend from $0.10 per share of common stock to $0.15 per share of common stock, payable on September 29, 2010 to holders of record at the close of business on September 8, 2010.  

Second Quarter 2010 Highlights:

• Equity gold and copper production of 1.3 million ounces and 80 million pounds, respectively;
• Average realized gold and copper price of $1,200 per ounce and $2.33 per pound, respectively;
• Costs applicable to sales for gold and copper of $492 per ounce on a co-product basis ($362 on a by-product basis(2)) and $0.77 per pound, respectively;
• Net cash provided from continuing operations of $753 million, up 49% from the second quarter of 2009;
• Adjusted net income(1) of $377 million ($0.77 per share), up 79% from the second quarter of 2009; and
• Essentially maintaining 2010 outlook for production, operating costs and capital expenditures.

"Today's announcement of a 50% increase of our regular quarterly dividend reflects the confidence we have in our ability to fully fund our project pipeline and exploration programs, keep the door open to value-creating acquisition opportunities and return capital to shareholders, which we feel positions us uniquely in the gold equity market and versus the ETF," said Richard O'Brien, President and Chief Executive Officer.  "Our portfolio continues to deliver despite operating costs being higher than expected during our ramp-up at Boddington, where we are experiencing lower gold grades than modeled.  As a result, we are maintaining our previously announced 2010 outlook for equity gold production of 5.3 to 5.5 million ounces at a slightly narrower range of costs applicable to sales of between $460 and $480 per ounce on a co-product basis."

The Company anticipates improving operating costs during the remainder of the year, with higher ore grades and lower stripping at Batu Hijau, as well as higher processing plant availability now that regularly scheduled second quarter mill maintenance at a key processing facility in Nevada is complete.  

Our costs applicable to sales per ounce for the remainder of the year are expected to change by approximately $3 for every $10 change in the oil price and by approximately $3 for every $0.10 change in the A$ exchange rate, net of existing hedges. In the event that adverse foreign exchange movements, higher gold royalties and increasing energy prices continue throughout the remainder of the year, the Company's costs applicable to sales could be near or exceed the top end of our current outlook range.  

Regional Operations

In the second quarter of 2010, the Company reported equity gold production of 1.3 million ounces at costs applicable to sales of $492 per ounce on a co-product basis.  Costs applicable to sales per gold ounce increased 16% in the second quarter of 2010 from 2009 due to higher costs in Nevada, at Yanacocha in Peru and at Batu Hijau in Indonesia, as well as higher-cost production from Boddington, as further described below.  

North America

Nevada – Nevada produced 420,000 equity ounces of gold at costs applicable to sales of $601 per ounce during the second quarter.  Second quarter 2010 production was slightly higher than the year ago quarter due to higher underground production at Midas and Leeville, partially offset by lower mill throughput at Carlin and Twin Creeks and lower leach tons placed. Costs applicable to sales per ounce increased 9% in the second quarter of 2010 from 2009 due to additional surface mining costs related to the 2009 geotechnical event at Gold Quarry.

The Company continues to expect 2010 equity gold production from Nevada of approximately 1.6 to 1.725 million ounces at costs applicable to sales of between $590 and $630 per ounce.

La Herradura – Equity gold production at La Herradura in Mexico during the second quarter was 43,000 ounces at costs applicable to sales of $431 per ounce.  Production increased 43% in the second quarter of 2010 from 2009 due to the commencement of production from the Soledad and Dipolos pits in January 2010. Costs applicable to sales per ounce increased 8% in the second quarter of 2010 from 2009 due to higher mining costs associated with two new pits.

The Company continues to expect La Herradura equity gold production of 140,000 to 150,000 ounces in 2010 with costs applicable to sales of between $400 and $430 per ounce.  

South America

Yanacocha – Equity gold production during the second quarter at Yanacocha in Peru was 181,000 ounces at costs applicable to sales of $389 per ounce.  Production decreased 32% in the second quarter of 2010 from 2009 due to lower leach tons placed related to mine sequencing combined with lower mill ore grade. Costs applicable to sales per ounce increased 20% in the second quarter of 2010 from 2009 due to lower production, higher waste mining and maintenance costs, partially offset by higher by-product credits.

The Company continues to expect 2010 equity gold production at Yanacocha of between 750,000 and 810,000 ounces at costs applicable to sales near the high end of the outlook range of $360 and $400 per ounce, due primarily to higher royalties and workers participation costs as a result of higher realized gold prices.

Asia Pacific

Boddington –Boddington continues to ramp-up to full production and produced 184,000 ounces of gold and 15 million pounds of copper during the second quarter at costs applicable to sales of $582 per ounce ($503 per ounce on a by-product basis(3)) and $1.55 per pound.  Compared with the first quarter of 2010, gold and copper production increased by 16% and 13%, respectively.  

The processing plant continues to perform in line with expectations with recoveries exceeding Feasibility Study expectations, and the high pressure grinding rolls and wet plant performing better than anticipated.  However, production has been lower than expected as the Company has mined approximately 12% less contained gold, partially offset by 23% more contained copper, than originally modeled. As a result of lower gold production, higher direct mining costs and a stronger Australian dollar, gold production for 2010 is now expected between 750,000 and 825,000 ounces at costs applicable to sales of $475 to $550 per ounce (compared with an original outlook of 800,000 to 875,000 ounces at costs applicable to sales of $375 to $395 per ounce).  A stronger Australian dollar accounts for approximately 25% of the expected increase in operating costs, with increased mining costs accounting for approximately 50% and lower volume and other factors accounting for the remainder. Copper production outlook for 2010 remains unchanged at between 65 and 75 million pounds, at costs applicable to sales now of between $1.55 and $1.75 per pound (compared with an original outlook of between $1.30 and $1.45 per pound).  

For 2011, the Company expects gold production at Boddington of between 850,000 and 925,000 ounces at costs applicable to sales of between $475 and $525 per ounce as the operation begins its first year of steady-state production.  It is still too early in the ramp-up process to conclusively determine any longer-term impacts of the lower gold ore grades experienced to date (with less than 2% of total reserves mined thus far).  

Batu Hijau – Equity gold and copper production during the second quarter at Batu Hijau in Indonesia were 82,000 ounces and 65 million pounds, respectively, at costs applicable to sales of $294 per ounce and $0.66 per pound, respectively.  Equity gold and copper production increased 49% and 27% in the second quarter of 2010 from 2009, respectively, due to higher grade ore from Phase 5, partially offset by lower recovery. Costs applicable to sales increased 28% and 14% for gold and copper, respectively, in the second quarter of 2010 from 2009 due to higher waste mining and milling costs.  Production during the second quarter was adversely affected by unusually heavy rainfall.

The Company continues to expect 2010 equity gold and copper production at Batu Hijau of between 365,000 and 400,000 ounces, and between 265 and 290 million pounds, respectively.  The Company continues to expect 2010 costs applicable to sales of between $265 and $285 per ounce and $0.75 and $0.85 per pound, respectively.  

Other Australia/New Zealand - Equity gold production at our other Australia/New Zealand operations during the second quarter was 256,000 ounces at costs applicable to sales of $549 per ounce.  Equity gold production decreased 3% in the second quarter of 2010 from 2009 due to lower grade as a result of ore dilution and lower mill throughput as a result of maintenance at Tanami and lower ore grade at Jundee, partially offset by higher ore grade at Kalgoorlie and higher mill throughput at Waihi.  Costs applicable to sales increased 10% in the second quarter of 2010 from 2009, primarily due to the stronger Australian dollar and lower production.

The Company continues to expect 2010 equity gold production at the Company's other Australia/New Zealand operations of between 1.06 and 1.16 million ounces at costs applicable to sales near the high end of our original outlook range of $530 to $570 per ounce.

Africa

Ahafo –Gold production during the second quarter at Ahafo in Ghana was 132,000 ounces at costs applicable to sales of $416 per ounce.  Gold production was consistent with the prior year quarter with lower ore grade and recovery offset by higher mill throughput.  Costs applicable to sales decreased 3% in the second quarter of 2010 from 2009 due to lower milling costs resulting from softer ore processed, partially offset by higher diesel costs.

Due to higher than projected production in the first half of 2010, the Company now expects 2010 gold production at Ahafo of between 500,000 and 530,000 ounces (up from between 460,000 and 500,000 ounces) at costs applicable to sales between $475 and $515 per ounce (lower than our original outlook of between $515 to $555 per ounce), based on higher grades than projected.

Capital Update

Consolidated capital expenditures were $319 million during the second quarter, down from $580 million in the second quarter of 2009 as the Boddington capital spending was substantially completed at the end of 2009.  The Company is maintaining its 2010 consolidated capital expenditure outlook of between $1.4 and $1.6 billion, with approximately 30% to be invested in each of the North America and Asia Pacific regions, and the remaining 40% at other locations.  Approximately 40% of 2010 consolidated capital expenditures are expected to be related to major project initiatives, including further development of the Akyem project in Ghana, the Conga project in Peru, Hope Bay in Canada, and the Nevada project portfolio, while the remaining 60% is expected to be for maintenance and sustaining expenditures.

2010 Outlook – Q2 Update(4)

Our current outlook for 2010 production, CAS and capital expenditures is as follows:  

(Changes to previous outlook are shaded in following tables).

The Company has increased its exploration forecast by approximately $30 million due to successful drilling at the Leeville/Turf operation in Nevada.  In addition, the Company now expects full-year General & Administrative expenses to be at or above the high end of our original outlook range of $160 to $170 million based on higher overall labor costs.  It is also anticipated that Advanced Projects and R&D spending will be at the high end of our original outlook of $230 to $250 million due to higher spending on the Hope Bay project. Financial and other overhead outlook is as follows:

(1) See reconciliation from by-product costs applicable to sales to GAAP costs applicable to sales at end of release.

(2) See reconciliation from by-product costs applicable to sales to GAAP costs applicable to sales at end of release.

(3) Outlook referenced in the table at end of release.

(4) Outlook referenced in the table above and elsewhere in this release are based upon management's good faith estimates as of July 28, 2010 and are considered "forward-looking statements."   References to outlook guidance are based on current mine plans, assumptions and current geotechnical, metallurgical, hydrological and other physical conditions and are subject to risk and uncertainty as discussed in the "Cautionary Statement" at end of release.