Newmont Announces Second Quarter 2013 Results

Newmont Announces Second Quarter 2013 Results


Consolidated spending1down $362 million or 10% vs. first half of 2012; 2013 capital expenditure guidance lowered by $200 million in total

This release should be read in conjunction with Newmont's Second Quarter 2013 Form 10-Q filed with the Securities and Exchange Commission on July 25, 2013 (available atwww.newmont.com).

DENVER--(BUSINESS WIRE)-- Newmont Mining Corporation (NYS: NEM) ("Newmont" or the "Company") today reported quarterly revenues of $2.0 billion and cash flow from continuing operations of $293 million, or $0.59 per basic share. A non-cash impairment charge, primarily related to the impact of lower gold and copper prices on long-term assets at Boddington and Tanami, as well as stockpiles and ore on leach pads, resulted in a net loss attributable to stockholders of $2.0 billion, or $4.06 per basic share.

"I am pleased with our progress to improve our costs and operating efficiencies across our portfolio, which has resulted in a $362 million reduction in year-to-date spending compared to the first half of 2012," said Gary Goldberg, President and Chief Executive Officer. "We are also on track to reduce our corporate work force by more than one-third, with similar efforts underway at our regional offices. At our operations, we performed in line with our plans. Excluding non-cash asset write-downs, we remain on track with our original outlook for gold and copper production, costs applicable to sales and all-in sustaining costs," Goldberg added.

Second Quarter Financial Highlights2

  • Revenues of $2.0 billion;
  • Attributable gold and copper production of 1.167 million ounces and 34 million pounds, down 1% and 11%, respectively, from the prior year quarter; attributable gold and copper sales of 1.213 million ounces and 37 million pounds, up 6% and 23%, respectively, from the prior year quarter;
  • Consolidated spending1 down $362 million year-to-date compared to the first half of 2012;
  • All-in sustaining costs3 of $1,136 per ounce, excluding stockpile write-downs or $1,548 per ounce, reflecting stockpile write-downs;
  • Gold and copper costs applicable to sales ("CAS")4 of $724 per ounce and $2.53 per pound, excluding stockpile write-downs, or $885 per ounce and $8.53 per pound reflecting stockpile write-downs;
  • Average realized gold and copper prices of $1,386 per ounce and $2.66 per pound, respectively;
  • Cash flow from continuing operations of $293 million or $732 million year-to-date;
  • Dividends paid of $174 million;
  • Maintaining full year 2013 attributable gold and copper production outlook5 of 4.8 - 5.1 million ounces and 150 - 170 million pounds, respectively;
  • Maintaining annual gold CAS outlook of $675 to $750 per ounce, excluding stockpile write-downs, or adjusted to $750 to $825 per ounce, including stockpile write-downs; and
  • As previously announced, Newmont's Board of Directors approved a third quarter gold price-linked dividend of $0.25 per share6 based upon the average London P.M. Gold Fix for the second quarter.

Impairments

As a result of lower gold and copper prices and in accordance with US GAAP, second quarter net income was adjusted by $1.8 billion, net of taxes and minority interest, for impairments and revaluation. Of that amount, $272 million, net of tax and minority interest, is related to impairments of stockpiles and ore on leach pads. The remaining $1.5 billion, net of tax, is related to impairments of property, plant and mine development and other long-term assets at Boddington and Tanami in Australia. These charges do not impact the Company's cash flow and are considered one-time charges.

Operations

North America

Nevada - Attributable gold production in Nevada was 383,000 ounces, an increase of 1% from the prior year quarter due to new production from Emigrant as well as higher grade and throughput at Phoenix essentially offset by lower tons and grade at Midas, lower grade and recovery at Mill 5, and lower grade at Mill 6. CAS was $691 per ounce during the second quarter, a decrease of 4% due to higher ounces sold. All-in sustaining costs at Nevada were $975 for the quarter.

The Company continues to expect 2013 attributable gold production of between 1.7 million and 1.8 million ounces at CAS of $600 to $650 per ounce.

La Herradura - Attributable gold production at La Herradura in Mexico was 54,000 ounces at CAS of $784 per ounce during the second quarter. Gold production decreased 8% from the prior year quarter due to lower leach recoveries. CAS per ounce increased 38% due to higher waste mining and lower production. All-in sustaining costs at La Herradura were $1,815 per ounce for the quarter.

Due to a pending land dispute between Fresnillo PLC ("Fresnillo") and certain members of a community in the state of Sonora, Mexico, Fresnillo is now projecting up to 50,000 fewer ounces of production than forecasted from the Soledad and Dipolos mines for 2013, which translates to approximately 22,000 fewer ounces attributable to Newmont. Consequently, the Company now expects 2013 attributable gold production of between 200,000 and 250,000 ounces at CAS of $650 to $700 per ounce.

South America

Yanacocha - Attributable gold production at Yanacocha in Peru was 150,000 ounces at CAS of $662 per ounce during the second quarter. Gold production decreased 25% from the prior year quarter due to lower mill and leach production associated with the completion of mining at El Tapado in July of 2012. CAS per ounce increased 42% due to a leach pad write-down of $163 per ounce as a result of lower gold prices and lower silver by-product credits. All-in sustaining costs were $966 per ounce for the second quarter. Excluding the impact of the stockpile write-downs, all-in sustaining costs were $803 per ounce for the quarter.

The Company continues to expect 2013 attributable gold production of between 475,000 and 525,000 ounces. The Company now expects CAS of $650 to $700 per ounce including stockpile write-downs. Excluding these write-downs, the Company continues to expect CAS of $600 to $650 per ounce.

La Zanja - Attributable gold production during the second quarter at La Zanja in Peru was 17,000 ounces.

The Company continues to expect 2013 attributable gold production of between 40,000 and 50,000 ounces.

Australia/New Zealand

Boddington - Attributable gold and copper production during the second quarter at Boddington in Australia was 171,000 ounces and 16 million pounds, respectively, at CAS of $1,307 per ounce and $3.25 per pound, respectively. Gold and copper production decreased 5% and 11%, respectively, due to lower mill throughput partially offset by higher gold mill grade. Gold CAS increased 38% per ounce due to a stockpile write-down of $363 per ounce as a result of lower gold prices. Copper CAS increased 16% per pound due to a stockpile write-down of $0.85 per pound as a result of lower copper prices. All-in sustaining costs at Boddington were $1,534 per ounce for the quarter. Excluding the impact of the stockpile write-down, all-in sustaining costs were $1,088 per ounce for the quarter.

The Company continues to expect 2013 attributable gold and copper production of between 700,000 and 750,000 ounces and 70 and 80 million pounds, respectively. The Company now expects gold and copper CAS of $1,050 to $1,150 per ounce, and $2.75 to $2.95 per pound, including stockpile write-downs. Excluding these write-downs, the Company continues to expect CAS of $850 to $950 per ounce and $2.45 to $2.65 per pound.

Other Australia/New Zealand - Attributable gold production7 during the second quarter was 247,000 ounces at CAS of $1,124 per ounce. Gold production increased 17% from the prior year quarter due to higher mill throughput at Waihi as a result of a mill shutdown in the prior year quarter and higher mill throughput and ore grade from underground sources at Tanami partially offset by lower grade at Jundee and Kalgoorlie. CAS per ounce increased 28% due to a stockpile write-down of $200 per ounce as a result of lower gold prices, the remaining increase in cost is due to higher mining costs at Jundee. All-in sustaining costs were $1,417 per ounce for the quarter. Excluding the impact of the stockpile write-downs, all-in sustaining costs were $1,217 per ounce for the quarter.

The Company continues to expect 2013 attributable gold production of between 925,000 and 975,000 ounces. The Company now expects CAS of $1,000 to $1,100 per ounce including stockpile write-downs. Excluding these write-downs, the Company continues to expect CAS of $950 to $1,050 per ounce.

Indonesia

Batu Hijau - Attributable gold and copper production during the second quarter at Batu Hijau in Indonesia was 6,000 ounces and 18 million pounds, respectively, at CAS of $5,299 per ounce and $11.23 per pound, respectively. Gold and copper production decreased 25% and 10%, respectively, due to processing lower grade stockpile ore and lower mill throughput. CAS increased 462% per ounce and 410% per pound due to stockpile write-downs of $4,083 per ounce and $8.63 per pound as a result of lower gold and copper prices, respectively, and lower production.

The Company continues to expect 2013 attributable gold and copper production of between 20,000 and 30,000 ounces and 75 and 90 million pounds. Excluding write-downs, the Company continues to expect CAS of $900 to $1,000 per ounce and $2.20 to $2.40 per pound.

Africa

Ahafo - Attributable gold production during the second quarter at Ahafo in Ghana was 139,000 ounces at CAS of $596 per ounce. Gold production increased 5% from the prior year quarter due to higher mill throughput and recovery, a drawdown of in-process inventory partially offset by lower grade. CAS per ounce increased 2% from the prior year quarter due to higher labor costs and higher power costs partially offset by higher production and lower diesel costs associated with shorter haul distance. All-in sustaining costs at Ahafo were $944 per ounce for the quarter.

The Company continues to expect 2013 attributable gold production at Ahafo of between 525,000 and 575,000 ounces at CAS of $550 to $600 per ounce.

Capital Update

Capital expenditures in North America during the first half of 2013 were primarily related to the construction of the Phoenix Copper Leach project, the development of the Turf Vent Shaft project, surface and underground mine development in both Nevada and Mexico and infrastructure improvements in Nevada. Capital expenditures in South America were primarily related to the Conga and Merian projects, surface mine and leach pad development and equipment purchases. The majority of capital expenditures in Australia and New Zealand were for underground mine development, tailings facility construction, mining equipment purchases and infrastructure improvements. Capital expenditures in Batu Hijau were primarily for equipment and equipment component purchases. Capital expenditures in Africa were primarily related to Akyem development and the Subika expansion project, equipment purchases and surface mine development at Ahafo. The Company further reduced its 2013 consolidated capital expenditures by another $100 million during the quarter in addition to the $100 million reduced earlier this year, and now expects consolidated capital expenditure outlook to be $2,200 to $2,400 ($1,900 to $2,100 attributable to Newmont).

Approximately 40% of our 2013 capital expenditures will be allocated as development capital for Akyem, Phoenix Copper Leach, Turf Vent Shaft, Yanacocha Bio Leach, Conga, Merian, Ahafo Mill Expansion, and other expansion projects in Nevada and at La Herradura. The remaining 60% is expected to be spent on sustaining capital. Additional capital investment is also possible at the Merian project in Suriname pending the outcome of further dialogue with the government and project economic evaluation.

2013 Outlook8

 

Attributable
Production

 

Consolidated
CAS inclusive
of stockpile
write-downs

 

Consolidated
CAS exclusive
of stockpile
write-downs

 

Consolidated
Capital
Expenditures

 

Attributable
Capital
Expenditures

Region (Kozs, Mlbs) ($/oz, $/lb)b ($/oz, $/lb)b ($M)c ($M)c
Nevada a1,700 - 1,800$600 - $650$600 - $650$525 - $575$525 - $575
La Herradura 200 - 250 $650 - $700 $650 - $700 $125 - $175 $125 - $175
North America 1,900 - 2,000 $600 - $650 $600 - $650 $675 - $725 $675 - $725
Yanacocha475 - 525$650 - $700$600 - $650$225 - $275$100 - $150
La Zanja40 - 50----
Conga - - - 

$200 - $250

 

$100 - $125

South America 550 - 600 $650 - $700 $600 - $650 

$425 - $525

 

$200 - $275

Boddington700 - 750$1,050 - $1,150$850 - $950$100 - $150$100 - $150
Other Australia/NZ 925 - 975 $1,000 - $1,100 $950 - $1,050 $175 - $225 $175 - $225
Australia/New Zealand 1,625 - 1,725 $1,000 - $1,100 $900 - $1,000 $300 - $350 $300 - $350
Batu Hijau, Indonesiad 20 - 30 $2,100 - $2,300 $900 - $1,000 $75 - $125 $25 - $75
Ahafo525 - 575$550 - $600$550 - $600$350 - $400$350 - $400
Akyem 50 - 100 $450 - $500 $450 - $500 $225 - $275 $225 - $275
Africa 625 - 675 $525 - $575 $525 - $575 $600 - $650 $600 - $650
Corporate/Other - - - $20 - $30 $20 - $30
Total Gold 4,800 - 5,100 $750 - $825 $675 - $750 $2,200 - $2,400 $1,900 - $2,100
Boddington70 - 80$2.75 - $2.95$2.45 - $2.65--
Batu Hijau75 - 90$4.70 - $5.10$2.20 - $2.40--
Total Copper 150 - 170 $4.05 - $4.40 $2.25 - $2.50    
aNevada CAS includes by-product credits from an estimated 30-40 million pounds of copper production at Phoenix, net of treatment and refining charges.

b2013 Attributable CAS Outlook is $750 - $825 per ounce inclusive of stockpile write-downs or $675-$750 per ounce exclusive of stockpile write-downs. CAS Outlook is inclusive of hedge gains and losses.

cExcludes capitalized interest of approximately $142 million, consolidated and attributable.

dAssumes Batu Hijau economic interest of 44.56% for 2013, subject to final divestiture obligations.

 

2013 Expense Outlook

    

Description

 

Consolidated
Expenses ($M)

 

Attributable
Expenses ($M)

General & Administrative $180 - $230 $180 - $230

DD&A excluding stockpile write-downs

$1,050 - $1,100

$900 - $950

DD&A including stockpile write-downs

$1,250 - $1,300$1,000 - $1,050
Exploration Expense$250 - $300$225 - $275
Advanced Projects & R&D$300 - $350$250 - $300
Other Expense$250 - $300$200 - $250
Sustaining Capital$1,300 - $1,400$1,100 - $1,200
Interest Expense$225 - $275$200 - $250
Tax Rate5% - 10%5% - 10%

All-in sustaining cost excluding stockpile write-downs ($/ounce)a,b

$1,100 - $1,200

$1,100 - $1,200

All-in sustaining cost including stockpile write-downs ($/ounce)a,b

 $1,200 - $1,300 $1,200 - $1,300

 

 

 

aAll-in sustaining cost ("AISC") is a non-GAAP metric defined by the World Gold Council ("WGC") as the sum of costs applicable to sales, remediation costs (include operating accretion and amortization of asset retirement costs), G&A, exploration expense, advanced projects and R&D, other expense, net of one-time adjustments and sustaining capital, less copper sales. See pages 15-17 for a description of this metric. Note that in accordance with the changes to the AISC definition adopted by the WGC in June 2013 the Company has updated its metric to include remediation costs, which were not included in the AISC outlook previously presented by the Company.

 

bAll-in sustaining cost per ounce is calculated by dividing all-in sustaining cost by the midpoint of estimated sales, less non-consolidated interests in La Zanja and Duketon and development ounces.

 

________________________________

1Non-GAAP measure. See reconciliation at the end of this release to costs applicable to sales which was $2,697M and $2,019M for the six months ended June 30, 2013 and 2012, respectively.

2Amounts reported are on a consolidated basis, unless otherwise indicated.

3Non-GAAP measure. See reconciliation at the end of this release to costs applicable to sales which was $1,653M and $1,002 for the three months ended June 30, 2013 and 2012, respectively.

4CAS excludes Amortization and Reclamation and remediation. See reconciliation at the end of this release.

5Outlook reported in this release constitutes forward looking statements. See footnote 8 and cautionary statement at the end of this release.

6Payable on September 27, 2013 to shareholders of record as of September 5, 2013.

7Includes 14,000 and 5,000 attributable ounces in the second quarter 2013 and 2012, respectively, from our interest in Duketon.

82013 Outlook and 2013 Expense Outlook referenced in this release are based upon management's good faith estimates as of July 25, 2013 and are considered "forward-looking statements." References to outlook guidance are based on current mine plans, assumptions including, without limitation, metal prices, oil, prices, Australian dollar exchange rate, current geotechnical, metallurgical, hydrological and other physical conditions, which are subject to risk and uncertainty as discussed in the "Cautionary Statement" on page 15 and in the section entitled "Risk Factors" in the Company's Form 10-K.

 

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NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited, in millions except per share)
 
 Three Months Ended Six Months Ended
June 30,June 30,
2013 20122013 2012
 
Sales$1,993$2,229$4,170$4,912
 
Costs and expenses
Costs applicable to sales (1)1,6531,0022,6972,019
Amortization415248682479
Reclamation and remediation18163632
Exploration76106135194
Advanced projects, research and development468298184
General and administrative5457110111
Write -downs2,261-2,262-
Other expense, net 77  126  176  246 
 4,600  1,637  6,196  3,265 
Other income (expense)
Other income, net50367669
Interest expense, net (70) (71) (135) (123)
 (20) (35) (59) (54)
Income (loss) before income and mining tax and other items(2,627)557(2,085)1,593
Income and mining tax benefit (expense)325(175)144(518)
Equity income (loss) of affiliates (3) (11) (7) (30)
Income (loss) from continuing operations(2,305)371(1,948