Newmont delivers slightly under expectations

Higher sales volumes and lower operating costs were the good news for Newmont Mining (NMC-T, NEM-N) during the second quarter.

The company sold 1.2 million oz. of gold at an average price of US$915 per oz and at a production cost of just US$423 per oz. – 4% lower than the US$439 it cost the company reported a year ago.

But such wide margins weren’t enough to out-do last years totals for the same period, as net income came in at US$213 million or 43¢ per share, compared to US$221 million for the prior year’s quarter.

And that difference between is magnified further when looking at net income from continuing operations. This year’s total of US$171 million is nearly US$100 million less than last year’s total of $270 million.

Newmont blames the decrease on lower copper prices and higher taxes.

For the quarter the company sold 47 million lbs of copper at an average price of US$2.17 per lb. with its production costing 58¢ per lb of copper.

Copper production for the world’s second largest gold producer comes from its Batu Hijau mine in Indonesia.

The company also revised its gold sales outlook downward, if only slightly, to the 5.2 to 5.4 million oz, range from its previous guidance of 5.2 million to 5.5 million oz.

It still expects cost to be in the US$400 to US$440 per oz. range – that forecast assumes an oil price of $70 per barrel and an Australian dollar exchange rate of 0.75 for the rest of the year.

For the quarter Newmont reported better than expected sales from Yanacocha in Peru, Batu Hijau and from its Australian operations — lower sales, however, were seen from its Nevada operations due to lower grades.

More production in the second half will be coming from the Boddington mine in Australia. Newmont announced that July saw the mine move from construction to start-up and is currently driving it towards commercial production.

Start-up at the mine, however, came at the back-end of the company’s guidance meaning that gold production from the region will be slightly lower than expected, in the 1.4 to 1.5 million oz. range as opposed to the 1.5 to 1.6 million oz. range that was previously estimated.

Over the First five years of production Boddington is expected to producer roughly 1 million oz. at an average cost of US$300 per oz. The mine currently has proven and probable gold reserves of 20.1 million ounce and an estimated mine life in excess of 24 years.

In New York on July 23, Newmont’s shares were off 16¢ to $41.82.