Newmont sees strong earnings in Q2

Vancouver — Shares of Newmont Mining (NMC-T, NEM-N) slipped almost 5% the same day it announced earnings of US$161 million (36 per share) in its latest second quarter, up 83% from last year’s corresponding quarter. The latest earnings were slightly off the US$209 million booked in this year’s first quarter, but that figure included a US$48-million positive tax adjustment.

Strong second-quarter bullion prices buoyed performance in spite of gold output slipping 6% at 1.87 million oz. (1.38 million attributable oz.) in the latest quarter, compared with the second quarter of last year. Costs applicable to sales were at US$298 per oz. gold, while realized average sale prices came in at US$605 per oz. for the quarter. Rising energy, labour and consumable costs all negatively affected the gold giant’s worldwide operations and offset a significant portion of the metal’s gains.

Dropping ore grades saw second-quarter Nevada gold sales slip 10% from last year while costs applicable to those sales rose 43%. Production from the Lone Tree operation continued to decline; the mine is entering its wind-down phase, with closure planned for late this year. Processing of ore from the company’s Phoenix mine ramped up during the quarter with full production of 300,000 to 350,000 oz. per year anticipated by the third quarter. The Leeville underground mine is also progressing through its ramp-up phase and is expected to reach its annual production rate of 400,000 to 450,000 oz. gold by the end of 2007.

Gold output from Yanacocha operations in northern Peru, owned 51.35% by Newmont, rose almost 9% in the latest quarter over the corresponding period of 2005 to produce 785,000 oz. Costs rose 18.5% to US$185 per oz.

Australian and New Zealand gold sales dropped 19% in the latest quarter due to a combination of lower ore grades and throughput at the region’s operations with a 17% increase in operating costs.

Despite a 24% increase in ore mined, copper and gold sales from Batu Hijau in Indonesia slumped 24% in the second quarter of 2006 from 2005; a drop in ore grades resulting from mine-phase sequencing at the open-pit operation was responsible.

Newmont’s Zarafshan operation in Uzbekistan experienced an 8% drop in second-quarter gold sales resulting from leach-pad flow issues. The joint venture was recently dealt a blow with a government ruling to collect about US$48 million in taxes (see story on Page 1). The company is appealing the ruling and examining all possible options to recover its invested capital to date, including selling the mine.

The Kori Kollo mine in Bolivia saw second-quarter gold sales rise almost threefold from last year due to a boost in ore placed on the leach pad and a new pit that came on-stream in late 2005.

Commercial output from the company’s Ahafo mine in Ghana has started, with ore processing having begun in June and the initial gold pour, in mid-July.

Subsequent to the end of the second quarter, the company booked US$280 million in the sale of its Black Gold oilsands project in northern Alberta.

Following announcement of its second-quarter results in late July, shares of Newmont closed at US$50.53 on New York Stock Exchange trading. The stock has a 52-week range of US$37.43-US$62.60.