Newmont Mining Earnings Miss Estimates as Costs Rise

Newmont Earnings Miss Estimates as Costs Rise More Than Expected
The Newmont Mining Corp. gold quarry mine stands on the Carlin Trend west of Elko, Nevada. Photographer: David Paul Morris/Bloomberg

Newmont Mining Corp., the largest U.S. gold producer, reported third-quarter profit that missed analysts’ estimates after costs increased more than expected.

Net income dropped 26 percent to $367 million, or 74 cents a share, from $493 million, or 98 cents, a year earlier, Greenwood Village, Colorado-based Newmont said yesterday in a statement. Basic earnings per share excluding costs related to restructuring and other one-time items were 86 cents, trailing the 89-cent average of 17 estimates compiled by Bloomberg. Sales fell 9.6 percent to $2.48 billion.

Newmont said costs applicable to sales were $693 per ounce of gold and $2.38 a pound of copper, compared with $622 and $1.10 a year earlier. Anita Soni, a Toronto-based analyst at Credit Suisse Group AG, predicted costs of $657 an ounce of gold and copper costs of $2.14 per pound.

Newmont, led by Chief Executive Officer Richard O’Brien, is among gold producers seeking to curb rising costs. The average cost per ounce of gold for large producers increased 18 percent in 2011, according to data compiled by Bloomberg Industries.

The shares dropped 8.4 percent to $48.74 at the close in New York, the most since March 2009.

Newmont, which has mines in the Americas, the Asia-Pacific region and Africa, reported on Oct. 16 production of 1.24 million ounces of gold and 35 million pounds of copper in the third quarter. That compares with 1.31 million ounces and 58 million pounds a year earlier.

Low End

The company said yesterday it expects attributable production will be at the low end of its forecasts of 5 million to 5.1 million ounces of gold and 145 million to 165 million pounds of copper in 2012.

Gold costs per ounce will be at the high end of a narrower range of $650 to $675, and copper costs are expected to be $2.20 to $2.35 a pound, Newmont said, compared with a July 26 forecast of $1.80 to $2.20. The company said its attributable capital expenditure this year is still expected to be $2.7 billion to $3 billion.

“The cost inflation here is quite significant,” Pawel Rajszel, a Toronto-based analyst at Veritas Investment Research, said yesterday in a phone interview. “And you’ve got dwindling production and that seems to be continuing.” Rajszel recommends selling Newmont shares.

Gold, which has risen for 11 straight years, averaged $1,655.86 on the Comex in New York in the three months ended Sept. 30, 2.9 percent lower than a year earlier.

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

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