Newmont Profit Trails Estimates After Mining Costs Increase

Newmont Mining Corp. (NEM), the biggest U.S. gold producer, reported first-quarter earnings that missed analysts’ estimates after gold prices declined and costs were higher than expected.

Net income fell to $315 million, or 63 cents a share, from $490 million, or 97 cents, a year earlier, Greenwood Village, Colorado-based Newmont said yesterday in a statement. Earnings excluding one-time items were 71 cents a share, trailing the 76- cent average of 16 estimates compiled by Bloomberg. Sales fell to $2.18 billion from $2.68 billion, lagging behind the $2.29 billion average of seven estimates.

Newmont fell 5.8 percent to $31.99 at 10 a.m. in New York.

Chief Executive Officer Gary Goldberg is trying to curb gold-mine operating costs that surged 40 percent between 2010 and last year amid rising prices for raw materials, equipment and labor. While the gold industry tries to tackle cost inflation, the commodity has slipped into a bear market. Newmont also saw an 11 percent decline in gold output in the quarter.

Newmont, which operates mines in countries including the U.S., Indonesia and Australia, said April 24 its gold-linked quarterly dividend dropped to 35 cents a share from 42.5 cents.

The company’s so-called average consolidated costs applicable to sales in the quarter were $758 an ounce of gold, compared with $620 a year earlier. The average of three analysts’ estimates compiled by Bloomberg was for $740 an ounce. So-called all-in sustaining costs, a new metric introduced by gold producers, were $1,115 per ounce on an attributable basis, 6.6 percent higher than a year earlier, Newmont said.

Forecast Cut

The company on April 17 reported preliminary first-quarter output of 1.17 million ounces of gold and 38 million pounds of copper. It said at the time it was reviewing options to improve cash flow and preserve financial flexibility “in light of the prevailing volatile metal price environment.”

Newmont cut its forecast for 2013 capital expenditures by $100 million to a range of $2 billion to $2.2 billion.

The company reiterated forecasts for 2013 output of 4.8 million to 5.1 million ounces of gold and 150 million to 170 million pounds of copper.

The company expects to start production later this year at its Akyem mine in Ghana, Goldberg said in the statement.

Gold, which has risen for 12 consecutive years, fell into a bear market April 12 after falling more than 20 percent from a record closing price of $1,891.90 an ounce in August 2011. The metal reached a two-year intraday low of $1,321.50 on April 16, a day after plunging the most in three decades.

The metal averaged $1,631.89 in the first quarter, 3.7 percent less than a year earlier.

(Newmont scheduled a conference call for 10 a.m. New York time today. U.S. callers should dial 1-888-566-1822, international callers 1-312-470-7116. Pass code: Newmont.)

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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