Newmont stock jumps as output rises and costs fall

VANCOUVER (miningweekly.com) – US gold major Newmont Mining's operations across its portfolio outperformed for the three months ended June, pushing the company's NYSE-listed stock up by 8% on Tuesday.

The Denver, Colorado-based miner has comfortably beaten analysts' earnings forecasts of $0.26 a share, posting an adjusted net profit of $0.46 a share – a 59% improvement from the $0.29 a share reported in the comparable period of 2016.

Revenue during the period was up 12% year-on-year at $1.88-billion, also comfortably above analyst estimates, calling for $1.77-billion in revenues for the period.

Attributable gold output increased 13% to 1.4-million ounces for the quarter, as new production from Merian (Suriname) and Long Canyon (Nevada) more than offset lower grades at Tanami (Australia’s Northern Territory) and Yanacocha (Peru).

Gold all-in sustaining costs (AISC) improved 3% in the quarter to $884/oz, compared with $913/oz in the prior-year quarter, mainly owing to lower sustaining capital and higher sales volumes.

Attributable copper output from Phoenix (Nevada) and Boddington (Western Australia) increased 15% to 15 000 t, taking advantage of a $0.46/lb increase in realised copper prices at $2.46/lb in the second quarter.

Capital expenditures decreased 35% from the comparable quarter a year earlier, to $183-million, as growth projects, including Merian and Long Canyon, moved into commercial production. The improved production profile was partially offset by increased spending on capital projects in Africa.

Free cash flow was $39-million lower at $346-million for the quarter, owing to improved volumes and lower capital expenditures, though this was offset by working capital changes.

Newmont ended the quarter with $3.1-billion cash on hand, boasting a leverage ratio of 0.6x net debt to adjusted earnings before interest, taxes, depreciation and amortisation, and one of the best credit ratings in the mining sector.

Moreover, the company reduced its net debt to $1.5-billion and, in July, it deleveraged and simplified the balance sheet with the full repayment of $575-million convertible senior notes. Since 2013, when Newmont started streamlining its balance sheet, it has reduced gross debt by more than 30% and its net debt by about 70%.

During the second quarter, the company’s dividend tripled from a year earlier to $0.075 a share.

GUIDANCE UPDATE
Newmont lifted its 2017 production guidance, calling for between 5-million and 5.4-million ounces of gold on the back of implementing its ‘full potential’ programme, which is especially focused on improvements in North America and Africa.

Compared with 2016, full-year production at Merian and Long Canyon more than offset declines at Twin Creeks and Yanacocha. Newmont’s production guidance for 2018 and longer-term guidance is unchanged at between 4.7-million and 5.2-million ounces, with production from the Ahafo expansions and new production at Twin Underground offsetting declines at maturing assets.

Expansion at Yanacocha represents an upside to both the production and cost guidance.

Newmont expects its full-year AISC to range between $900/oz and $950/oz.

Boddington and Phoenix are expected to produce between 40 000 t and 60 000 t/y of copper, with AISC of between $1.85/lb and $2.15/lb.

Newmont said it would spend less capital for the remainder of 2017, totalling about $890-million and $990-million, including the remaining capital for the Northwest Exodus and Tanami expansion projects, as well as the initial capital for the Subika underground project and the Ahafo mill expansion and Twin Underground.

Newmont's stock closed on Tuesday up $2.34 a share at $36.24 each, with the buoyant trend continuing in after-market trade.