Newmont Tops Profit Estimates With More Output at Lower Cost

  • Sales climb a larger-than-expected 3% as production increases
  • U.S. miner lowers full-year cost forecast to $880-$940 range

Newmont Mining Corp. reported first-quarter earnings that beat analysts’ estimates as the biggest U.S. gold miner produced more gold at lower costs than expected. Shares gained.

Earnings excluding one-time items were 34 cents a share, exceeding the 18-cent average of 16 estimates compiled by Bloomberg. Sales climbed 3 percent to $2.03 billion, more than the $1.87 billion average estimate, Greenwood Village, Colorado-based Newmont said Wednesday in a statement.

While gold futures have skyrocketed this year, average prices in the first quarter were still lower than a year earlier. Net income dropped to $52 million from $183 million a year earlier. The world’s largest gold producer after Barrick Gold Corp. has responded to the gold rout by working to lower costs and increase production by building new mines and expanding existing operations.

First-quarter gold output was 1.23 million ounces, compared with the 1.21 million average of five estimates. The company had average all-in sustaining costs of $828 an ounce of gold in the first quarter, compared with $898 in 2015 and the $947 average expected for the quarter in three estimates compiled by Bloomberg.

Newmont lowered its full-year cost forecast to a range of $880 to $940 an ounce, from previous guidance of $900 to $960.

Gold futures fell 2.7 percent from a year earlier to average $1,185.10 an ounce in the first quarter. The price climbed 17 percent within the period, the biggest quarterly increase since 1986.

The results were released after the close of regular trading on Wednesday in New York.
On Thursday, the company’s shares advanced 3.2 percent to $31.42 at 9:48 a.m. in New York, extending a year-to-date gain to 75 percent. The 30-member Philadelphia Stock Exchange Gold and Silver Index has surged 82 percent this year.

The company said it expects interest expenses to be $260 million to $280 million in 2016 and it will continue to repay project debt and look for ways to pay down other corporate debt this year “targeting the highest rates and nearest-term maturities first.”

Cutting Debt

The company completed a $500 million debt tender offering in the first quarter.

In February, Chief Executive Officer Gary Goldberg said the company’s net debt was about 1.4 times earnings before interest, taxes, depreciation and amortization, and he plans to lower the ratio to 1 over the next two to three years.

The miner, which has operations in the Americas, the Asia-Pacific region and Africa, said in February that it expects 2016 expenditures on the Merian gold project in Suriname to be $170 million to $210 million.

In Wednesday’s statement, Newmont said Merian is nearly 80 percent complete and on track to reach commercial production in the second half of 2016. The expansion of Cripple Creek & Victor in Colorado also remains on schedule with production weighted toward the second half of the year. Two other projects, Long Canyon (Phase 1) in the U.S. and Australia’s Tanami, will add to production in 2017.

Newmont said in a filing Wednesday it’s conducting an investigation related to “certain business activities” outside the U.S. that includes a review of compliance with the requirements of the U.S. Foreign Corrupt Practices Act. Newmont didn’t provide further details.

(The company scheduled a conference call to discuss the results on Thursday at 10 a.m. New York time. U.S. and Canadian callers can dial +1-800-857-6428, and international callers +1-517-623-4916. The passcode is Newmont.)

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