Newmont posts US$50 million Q2 profit

Vancouver – Stronger gold prices more than offset higher operating costs, propelling Newmont Mining (NEM-N) to second quarter net income of US$50 million, or 11 per share, up 35% from the US$37 million in Q2-2004.

The Denver-based gold giant booked bullion sales of 2.01 million oz. in the latest quarter and realized $421 per oz. for its output, about 44,000 oz. shy of the second quarter 2004 figure. Costs, applicable to sales, came in at US$244 per oz., almost US$20 higher than the previous year’s corresponding quarter.

Revenues for the quarter were just over US$1 billion, up marginally from the US$982 million from in Q2-2004.

The company’s Golden Grove zinc-copper mine in Australia, recently sold for US$205 million, impacted second quarter income with a US$29.6 million impairment charge. Additionally, the company took an US$8 million hit for litigation related costs in Minahasa, Indonesia.

North American operations performed well in Q2 with gold production up over 4%, however costs rose almost 12% due to fuel price and labour cost increases, and an escalating Canadian dollar.

South American output (primarily Yanacocha in Peru) soared 17% in the second quarter, compared to Q2-2004, while production costs were trimmed by 2.5%.

Australia-New Zealand operations underperformed over the second quarter with gold production dropping about 5%, coupled with a 10% rise in costs to US$332 per oz. Production shortfalls and mining of lower grade zones impacted operations in addition to higher materials and labour costs.

Newmont’s Indonesian division (Batu Hijau) saw copper and gold sales drop 19% and 11% respectively in the second quarter. A number of recent small pit wall slides impaired access to ore from the deeper section of the pit, causing revisions in the mine plan and design. Operating costs were resultantly increased by the events.

Touching on the company’s outlook for the remainder of 2005, Newmont Chairman and CEO Wayne Murdy stated, “We expect stronger operating performance in the second half as we access higher grade ore, increase production rates at Batu Hijau and Yanacocha, and begin production at the Leeville mine.”

The company’s Leeville underground mine in Nevada is expected to commence gold production in late-2005, followed by output from the Phoenix project in early-2006. Ahafo, in Ghana, is expected to come on-stream by late-2006. The company also recently decided to proceed with development of its 85%-owned Akyem project, also in Ghana, expected to enter production in late-2008 at annual output of about 400,000 oz. of gold.

With an eye to replace mined out reserves, Newmont spent US$39 million in exploration over the second quarter, up from US$29 million in the prior year, primarily focused on Ghana, Peru and Nevada.

The company is on track for 2005 gold production of 8.4 million oz. at estimated costs of US$235 per oz.