Gold mining giant, Newmont Mining Corporation NEM registered third-quarter 2015 adjusted earnings of 23 cents per share that plunged 54% from 50 cents earned in the year-ago quarter. However, earnings were well ahead of the Zacks Consensus Estimate of 19 cents.

On a reported basis, the company posted net income from continuing operations of $202 million or 38 cents per share, down roughly 4% from net earnings of $210 million or 42 cents per share recorded a year ago. Results were mainly affected by lower metal prices.
 

Newmont's revenues improved roughly 16% year over year to $2,033 million in the reported quarter, backed by higher production and sales volumes at the Batu Hijau, Boddington and Tanami mines that offset lower metal prices. Revenues also topped the Zacks Consensus Estimate of $1,947 million.

In the third quarter, average realized gold price was $1,104 per ounce and average realized copper price was $1.95 per pound, representing year-over-year declines of 13% and 28%, respectively.

Newmont's attributable gold production increased 16% year over year to 1.34 million ounces, with higher production witnessed at Batu Hijau, Tanami and Boddington. Production also benefited from the addition of Cripple Creek & Victor (CC&V). Copper production was 48,000 tons in the quarter, up over three-and-a-half-fold on a year-over-year basis, owing to higher grade ore at Batu Hijau.

Costs applicable to sales (CAS) were $608 per ounce for gold and $1.15 per pound for copper, representing year-over-year declines of around 14% and 80%, respectively. All-in sustaining costs (AISC) of $835 per ounce for gold and $1.54 per pound for copper were down roughly 16% and 77%, year over year, respectively.

Regional Performance

North America

Attributable gold production in North America in the third quarter was 434,000 ounces, down 1% year over year. Consolidated copper production was flat year over year, at 5,000 tons.

Gold and copper CAS for this region was $750 per ounce, down 3%, and $1.95 per pound, down 8%, respectively. In the reported quarter, gold and copper AISC was $995 per ounce, down 7%, and $2.43 per pound, down 11%, respectively.

South America

Attributable gold production in South America was 141,000 ounces, up 4% year over year. Gold CAS for this region increased 21% year over year to $615 per ounce, while AISC advanced 17% year over year to $907 per ounce in the reported quarter.

 Asia Pacific

Attributable gold and copper production in the Asia Pacific region was 572,000 ounces and 43,000 tons, up 52% and 438%, year over year, respectively. Gold and copper CAS for this region was $533 per ounce, down 42%, and $1.08 per pound, down 84%, respectively. Gold and copper AISC was $661 per ounce and $1.46 per pound, down 42% and 81%, respectively, from the year-ago quarter.

Africa

The region produced 193,000 ounces of gold in the reported quarter, down 9% year over year. Gold CAS and AISC were $527 per ounce and $723 per ounce, respectively, up 21% and 32%, year over year.

Financial Position

Newmont had cash and cash equivalents of $2,964 million as of Sep 30, 2015, up around 67% from $1,778 million as of Sep 30, 2014. The company's long-term debt decreased roughly 8% year over year to $6,085 million.

During the quarter, Newmont paid $200 million for its current term loan and $130 million as project debt in Ghana and Indonesia. Newmont remains on track to pay off further debt in 2015. The company intends to repay up to a total of $750 million by the end of 2015 from its cash flow and existing cash balances.

Project Update

The CC&V buyout was successfully completed in early August. Newmont anticipates CC&V to reduce the company’s overall cost structure. It expects gold production from CC&V to average between 350,000 and 400,000 ounces in 2016 and 2017. Total development capital costs estimated for the completion of the mine’s expansion is around $200 million, with $50−$60 million to be spent in 2015.  

The Turf Vent Shaft project at Nevada is all set to commence commercial production in the fourth quarter of 2015. It is expected to add 100,000–150,000 ounces of annual production to the Leeville mine. Out of the total capital costs in the range of $300–$350 million for the project, around $60–$70 million will be spent in 2015.

The Merian project is moving on scheduled time and below budget, with average gold production expected in the range of 400,000–500,000 ounces on a 100% basis during the first five years. Respective CAS and AISC are estimated to be in the range of $575–$675 per ounce and $650–$750 per ounce. This project allows Newmont to expand into a new district with good potential. Capital cost for this region is anticipated to be in the band of $290–$330 million in 2015 and $170–$210 million in 2016. This project’s first production is expected in the second half of 2016.

Long Canyon Phase 1 is expected to start commercial production in the first half of 2017. Production is expected to be in the range of 100,000–150,000 ounces per year over an eight-year mine life. Estimated average CAS is expected between $400 and $500 per ounce, and AISC between $500 and $600 per ounce over the life of the mine, in the first quartile for gold production. Capital cost for this region is anticipated to be in the band of roughly $250–$300 million for 2015 and 2016, with minimal spending in 2017.

The Tanami Expansion involves the construction of a second decline in the mine and building additional capacity to support higher production and future expansion. The expansion is expected to increase gold production and AISC in the range of 425,000–475,000 ounces per year and $700–$750 per ounce (for the first five years of the expansion), and increase mine life by three years. Capital costs for the project are estimated in the band of $100−$120 million, with half of the capital to be spent in 2016 and the remaining to be distributed in 2015 and 2017.

Ahafo Mill Expansion represents additional upside, but was excluded from the 2015 outlook.

Outlook

Newmont lowered its CAS and AISC outlook by 2% and 4% for 2015, respectively, due to lower costs in the Asia Pacific and Africa regions, and including the impact of the acquisition of CC&V. Costs in the Asia Pacific region are expected to be lower than previous estimates owing to improved cost and efficiency, along with lower oil prices and Australian dollar exchange rates. The company sees improved costs in the Africa region for 2015 due to higher power and diesel prices.

Newmont reiterated the attributable gold production guidance for 2015 in a range of 4.7 million to 5.1 million ounces. This is because higher production at Boddington and Akyem is anticipated to offset lower production at CC&V stemming from slower mill ramp-up.

Attributable copper production guidance for 2015 remains unaltered.

Newmont anticipates lower capital spending at all regions for 2015 owing to higher cost savings and delayed capital spending.

The company will provide a long-term outlook later in Dec 2015.

Zacks Rank

Newmont currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the gold mining space include NovaGold Resources Inc. NG, Asanko Gold Inc. AKG and Barrick Gold Corporation ABX. While NovaGold sports a Zacks Rank #1 (Strong Buy), both Asanko Gold and Barrick Gold carry a Zacks Rank #2 (Buy).

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