Newmont back in the black

Vancouver – The world’s new No. 1 gold miner ended 2001 on a strong note and expects 2002 to be even better.

Newmont Mining (NEM-N) posted a profit of US$20.2 million, or US$0.10 per share in the fourth quarter ended Dec. 31, 2001, compared with a loss of US$33.5 million, or US$0.17 per share reported in the corresponding period of 2000. Before special items and merger costs, Newmont earned US$31.7 million or US$0.16 per share.

“In the fourth quarter, we actively pursued our pending acquisitions of Normandy Mining Limited and Franco-Nevada Mining Corporation Limited,” says the company’s Chief Executive Officer, Wayne Murdy. “Notwithstanding the demands of that process, our employees remained focused on our 2001 goals. These efforts enabled Newmont to report a profit for the year, before certain non-cash items, thereby exceeding our mid-year estimated forecast for breakeven results.”

Revenues for the quarter tallied US$445 million, 15% lower than the 2000 quarter. Driving the decline was 20% lower gold production, coming in at 1.4 million oz. Total cash cost to produce an oz. of gold hit US$182, up from the US$164 per oz recorded in the same period of 2000. Total production costs were US$235 per oz for the fourth quarter, compared with US$221 in the 2000 fourth quarter. The company realized an average gold price of US$279 per oz. in the quarter, up from the US$274per oz. received in 2000.

For 2001, Newmont posted a 73% year-over-year improvement earning US$13.7 million, or US$0.07 per share, before merger and non-cash costs. Lower exploration expenses, an income tax benefit and US$33 million in equity income from the Batu Hijau copper-gold mine in Indonesia offset 5% lower gold sales and a 4% lower average realized gold price of US$271 per oz., compared to 2000.

After accounting for a US$60.5 million charge for corporate restructuring and merger costs associated with the merger with Battle Mountain Gold and US$41 million in asset write-downs, Newmont realized a net loss of US$30.8 million or US$0.16 per share for 2001. The write-downs are primarily related to a slightly shorter mine life at the company’s Minahasa gold operation in Indonesia, which ended mining in Oct., 2001.

Revenues dropped 8% in 2001 to US$1.7 billion. North American operations sold 3.2 million equity oz of gold at a total cash cost of US$217 per oz., compared to 3.7 million equity oz. at US$197 per oz in 2000. Overseas operations saw production increase to 2.2 million equity oz. at US$128 per oz, from the 2 million oz. cranked out in 2000 when total cash cost came in at US$117 per oz. Lower North American production was attributed to less tonnage mined in Nevada, lower ore grades in Nevada, Canada and Peru and corresponding lower overall mill recovery rates in Nevada.

The Yanacocha mine in Peru continued to be the star performer for the major, contributing 983,000 equity oz., a 9% increase over 2000. Total cash costs remain a favourable US$115 per oz.

“Our objective in 2002 at Yanacocha is to advance our understanding of the geologic settings and material types of the mineralized sulphide systems with a focus to locate higher grade copper-gold targets,” says Murdy. “We are continuing to pursue the long-term potential that we see in the copper- gold and gold mineralization and are pleased with the performance of this world class mineral district.”

The Batu Hijau operation provided US$9.8 million and US$33 million in equity income in the fourth quarter and full year 2001, respectively. Total copper sales tallied US$447.3 million with an average realized copper price per pound of US$0.70, US$0.12 less than in 2000. For the full year, copper sales increased by 22% to 639.9 million lbs., 360.0 million lbs. to Newmont, at a cash cost of US$0.36 per lb. Equity gold production jumped by 65% to 295,100 oz.

“Batu Hijau is one of the largest and lowest cost copper mines in the world,” added Murdy. “In 2001, it continued to demonstrate superb operating proficiency that surpassed our production and cash costs targets. The increases in copper and gold sold were the result of higher ore grades, an 18% increase in tons mined and 15 percent higher mill throughput from the year 2000.”

At the end of 2001, Newmont reported equity proven and probable reserves of 59.6 million oz. of gold, down from 66.3 million oz. at year-end 2000. North American equity reserves came in at 31.4 million oz. compared with 35.2 million oz. a year ago. At Yanacocha, gold reserves totalled 34.2 million oz., 17.6 million oz. to Newmont. Total company-wide reserves for copper were 6 billion equity lbs. Batu Hijau had 9.8 billion lbs, 5.5 billion lbs to Newmont at the end of 2001, roughly equivalent to year-end 2000 reserves.

The Denver-based company is coming off a successful US$2.1 billion offer to acquire Normandy Mining and after a four-month takeover battle, will become the world’s largest gold miner.

“We are working diligently towards closing the Normandy and Franco-Nevada transactions, which will almost double the market capitalization of Newmont and provide the opportunity for further district rationalization and consolidation,” adds Murdy.

Newmont remains on schedule for the closing of the acquisitions in February.

“We believe that Newmont will become the new gold standard for investors around the world,” says Murdy. “We are focusing our integration efforts to immediately begin capturing anticipated synergies of US$70 million to US$80 million in the first full year.”

For 2002, the major expects to produce 5.2 million oz of gold.