Newmont Takes $1.77 Billion Writedown After Gold Declines

(Corrects closing price information in fifth paragraph of story published July 26.)

July 26 (Bloomberg) -- Newmont Mining Corp., the second-largest gold producer, reported a surprise loss after taking a $1.77 billion writedown on the value of two Australian mines and stockpiles following a slump in bullion prices.

The second-quarter net loss was $2.02 billion, or $4.06 a share, compared with net income of $279 million, or 56 cents, a year earlier, the Greenwood Village, Colorado-based miner said today in a statement.

Gold-mining companies have announced at least $15 billion of writedowns in the past two months after the precious metal’s steepest quarterly drop in more than nine decades in London. Newmont took impairment charges on its Boddington and Tanami mines in Australia, and wrote down the value of stockpiles and ore on leach pads, the company said.

Goldcorp Inc. said yesterday it took a writedown on the value of assets of $1.96 billion, while Barrick Gold Corp., the biggest producer by sales, said June 28 it expects to write down the value of a project on the border of Chile and Argentina by as much as $5.5 billion and is reviewing other assets for further charges. Newcrest Mining Ltd. said June 7 it may take a charge of as much as A$6 billion ($5.6 billion).

Newmont rose 1.5 percent to $30.38 at the close in New York. The shares have dropped 35 percent this year.

Earnings Miss

Excluding $1.5 billion of the impairments and other one-time items, the loss was 10 cents a share, compared with the average of 17 estimates compiled by Bloomberg for a profit of 42 cents.

Earnings were affected by higher costs at Boddington and the Batu Hijau mine in Indonesia, Adam Graf, a New York-based analyst at Cowen Securities LLC, said in a note today.

Newmont’s second-quarter sales fell 11 percent to $1.99 billion, missing the $2.09 billion average of seven estimates.

Newmont, led by Chief Executive Officer Gary Goldberg, is among miners trying to cut costs and curb spending after gold prices plunged. The company, which has mines in the Americas, the Asia-Pacific region and Africa, said it reduced spending by $362 million this year, from the first half of 2012, to lower costs.

“We are also on track to reduce our corporate work force by more than one third,” Goldberg said in the statement.

About 80 jobs, including some vacant positions, from a workforce of 1,870 will be cut by the end of September at the Boddington mine in Western Australia, the company said today in a separate statement.

Gold Costs

Newmont’s average gold cost applicable to sales was $885 an ounce including stockpile writedowns, or $724 excluding the adjustments. That compares with costs of $681 a year earlier and the $741 average of six estimates compiled by Bloomberg. Copper costs including the stockpile writedowns were $8.53 a pound, compared with $2.35 a year earlier.

Newmont’s average realized gold price of $1,386 per ounce and $2.66 a pound for copper were lower than expected, Brian Yu, a San Francisco-based analyst at Citigroup Inc., said in a note.

Gold, which rose for 12 consecutive years, slipped into a bear market in April and has dropped 20 percent this year in New York. The average price during the second quarter was $1,417 an ounce, 12 percent less than a year earlier.

Gold futures in New York fell 0.6 percent to settle at $1321.90 an ounce. The metal has dropped 31 percent from a record $1,923.70 in September 2011.

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