Newmont profits rise along with production costs

Vancouver – Un-hedged producer Newmont Mining (NEM-N, NMC-T) realized a gold price of US$555 per oz. on sales of 1.83 million oz. in the first quarter of 2006, pushing net income to US$213 million on revenue of US$1.14 billion for the period. With gold prices now exceeding US$600 per oz., the Denver-based company hopes to deliver even better results for the balance of this year.

For comparison purposes, Newmont reported net income of US$85 million on revenue of US$945 million in the first quarter of 2005, with slightly higher gold sales of 1.97 million oz.

Production costs rose in the latest quarter to US$275 per oz. from US$237 per oz. a year earlier. The company’s Nevada operations produced 535,000 oz., down from 588,600 oz. in the first quarter of 2005, owing to lower grades at the Midas and Deep Post underground mines. Cash production costs were higher at US$395 per oz. from US$309 per oz. a year earlier, because of reduced production and higher costs for labor, diesel, cyanide and servicing of underground contracts and accounting changes for deferred stripping.

The Yanacocha mine in Peru continued to be a solid performer, with gold production of 769,900 oz., compared with 772,900 oz. a year earlier. The company’s equity share of production was 395,300 oz. in the latest quarter. Production costs rose slightly to US$161 per oz. from US$143 per oz. in the first quarter of 2005.

Newmont’s operations in Australia and New Zealand produced 333,500 equity oz. in the latest quarter, down from 439,000 oz. a year earlier, because of lower grades at the Kalgoorlie, Jundee and Martha mines, combined with lower throughput at the Tanami and Pajingo mines. Production costs climbed to US$384 per oz. from US$303 per oz. a year earlier.

Copper sales fell 19% to 80.7 million pounds (42.7 million equity pounds) at the Batu Hijau mine in Indonesia, while gold remained stable at 72,800 oz. (38,500 equity oz.). Production costs also held relatively steady, at US$208 per oz. gold in the latest quarter.

Various other mines collectively contributed 122,200 equity oz. in the latest quarter, including 34,100 oz. from the Golden Giant mine and 13,300 oz. from the Holloway mines. Both Canadian operations have reached the ends of their productive lives.

Newmont expects to produce 7.7 to 7.9 million oz. gold this year (6.1-6.25 million equity oz.) from its global portfolio of mines, at production costs of about US$280 to US$295 per oz. Copper production is estimated about 470-475 million pounds (250-255 million equity pounds) at costs averaging about US$0.60 to US$0.65 per pound.