Newmont reports fourth-quarter loss

The world’s second-largest gold producer, Newmont Mining (NMC-T, NEM-N) posted a net loss of US$1.9 billion (-$4.17 per share) for the year ended Dec. 31, compared with net income of US$791 million (US$1.76 per share) in 2006.

In the fourth quarter, the Denver-based company reported a net loss of US$289 million, or 63 per share, compared with a profit of US$223 million, or 50 per share, a year earlier.

The losses were largely due to a write-down on exploration including a US$1.1 billion non-cash exploration goodwill impairment, which was partly the result of changing valuation models and accounting rule changes.

Excluding the write-downs (which included a US$39 million write-down of marketable securities), Newmont’s normalized operating income would have been about US$228 million, or 50 a share, based on the US$597 million sale of its royalty portfolio and other asset gains.

At mid-day, shares of Newmont on the New York Stock Exchange were trading up 14 at US$51.29, on a trading volume of 5.52 million.

Last year was an active one for the company as it picked up Miramar Mining and spun out the old Franco-Nevada Mining assets.

“It was a year of transition, momentum and re-investment, while substantially meeting our guidance and delivering a strong 4th quarter,” says Omar Jabara, a Newmont spokesman.

“This was accomplished through a number of decisive actions and strategic initiatives to refocus on our core gold business in order to position the company to take advantage of a rising gold price.”

One challenge the company faced in the fourth quarter was falling gold sales from its Nevada operations. Equity gold sales fell to 667,000 oz. in the fourth quarter from 887,000 oz. in the year-earlier period. That drop was largely due to lower mill grades at Carlin and Twin Creeks, limited mining activities at Midas (operations were suspended in June), and limited production from Lone Tree.

Costs applicable to sales per oz. rose 6% to US$384 per oz., up from US$363 per oz. in the year-earlier period.

Fewer tons mined at Gold Quarry and increased waste stripping at Phoenix sent the amount of ore mined from the open pit down 20% to 10.4 million tons in the fourth quarter.

Costs also increased at Newmont’s Yanacocha operations in Peru due to higher labor and diesel costs, in addition to higher worker bonuses and royalties. Costs applicable to sales increased in the fourth quarter to US$315 per oz from US$244 per oz in the year-ago quarter.

At Newmont’s Batu Hijau operation in Indonesia, equity gold and copper sales fell in the fourth quarter to 54,000 oz. gold and 34 million lb. copper, down from 89,000 oz. gold and 78 million lbs copper in the year-earlier quarter.

Lower gold and copper production were partly due to a 20% fall in throughput as a result of unplanned mill downtime and lower gold and copper recoveries because of a higher ratio of acid-soluble copper content.

In Ghana, the amount of gold sold dropped 32% in the fourth quarter to 85,000 oz from 125,000 oz in the year-ago quarter. This was the result of a 25% decrease in mill throughput due to unplanned downtime in December and the processing of 12% lower mill ore grades.

Capital expenditures reached US$511 million in the fourth quarter with the construction of a power plant and mine development in Nevada (US$135 million); building the gold mill and leach pad expansions at Yanacocha (US$72 million); building the Boddington project and other mine development in Australia and New Zealand (US$229 million); and mine development at Ahafo in Ghana (US$35 million).

Revenue in the fourth quarter slid to US$1.41 billion, down from US$1.42 billion in the fourth quarter of 2006. For the year, however, revenue rose to US$5.5 billion, up from US$4.8 billion in 2006.