Gold mining company Newmont Mining (NEM, Financial) produced inspiring results for the second quarter, driven by strong production of gold and copper along with various cost improvement initiatives. Newmont’s all-in-sustaining cost improved by 17% to $1,063 per ounce from $1,283 per ounce year-on-year basis, reflecting a 4.3% rise in gold products to 1.22 million ounces from 1.17 million ounces a year earlier. The company also managed to boost copper production by 4% during the quarter through accelerated production at its Phoenix Copper Leach operation. The cost improvement initiatives have resulted in procuring approximately $359 million in cash savings, accumulating its total year-to-date savings to $442 million.
The Colorado-based Newmont posted adjusted net income of $101 million or earnings of $0.20 per share an increase of 12.2% from adjusted net loss of $90 million or loss of $0.18 per share, beating the analyst’s expectation of $19.4 earnings per share. However, its revenue for the quarter came in at $1.8 billion, slightly below from the $2.0 billion in the year earlier period. Nevertheless, the U.S.-based gold miner has raised the production forecasts for both gold as well as copper for the full year.
The future looks bright
Newmont now expects its gold production to be in the range of 4.7 million to 5.0 million ounces for the full year, which is 2% higher than its earlier guidance. Also its copper production is estimated to range between 90,000 and 100,000 tons of copper for year 2014. Alongside, Newmont anticipates an improvement of about 3% in all-in-sustaining costs. Newmont gradually is improvising its bottom line performance through various strategic moves such as divestitures and investment in new potential projects and has strong pipeline of projects that should enhance its performance in the future.
Looking ahead, the gold mining giant is actively working to develop the Marian gold mine in Suriname, its first optimized organic project pipeline that is scheduled to start production in fiscal 2016. This strong project will certainly fuel the gold production for the company as Newmont expects the total annual production for Marian of approximately 400,000 to 500,000 ounces of gold for the first five years of operation from the mine.
This mine is also expected to improvise cost per ounce for gold production as the all-in-sustaining costs is forecasted for this production to remain between $750 and $850 per ounce. Newmont will certainly drive its profitability through this mine as the reserves at Marian are reported at 4.2 million ounces and with a proposed mine life of 11 years.
Looking well-positioned
In addition, Newmont looks relatively strong with enhanced asset portfolio as the company is busy in optimizing its core assets worldwide through divestitures and expansions that will certainly accelerate its productions and drive growth with augmented cost for these assets. Newmont, in North America has successfully closed the sale of its Midas operation that should better leverage its production.
Also, the company now expects the Yanacocha plant in South America to deliver higher production for the second half of the year as it has reached the higher grades at Yanacocha plant, which is further being supported by the positive completion of its plant stripping campaign for the plant.
Meanwhile, Newmont really looks resurrected due to strong gold production in Africa that has increased approximately 70% as compared to the last year production as the company successfully started operation at its fresh Akyem project. The Akyem project has produced a total of 113,000 ounces of gold at $396 per ounce cost, which is the lowest cost so far in its entire project portfolio.
The company expects the similar performance at its Akyem project in the second half that should help the company counterpart its dwindling revenue going forward. It has along side completed its Phoenix Copper Leach project in Africa that should boost the production for copper in the second half for Newmont.
Furthermore, the company is at the verge of completing its Turf Vent Shaft in Nevada. Its Nevada operation is expected to enhance the overall production by 10% in the second half of the year as the company is engaged in delivering various cost control and operation efficiency measures in the region. Besides, the company remains on track raising its Long Canyon project in Nevada that is expected to yield approximately 150,000 ounces of gold at competitive costs annually. This project is forecasted to begin production at the start of fiscal 2015 should drive growth and improve its sales numbers in the future.
Conclusion
Newmont looks potential stock to yield profits in the future due to the various prospective projects it has at its folds that should drive its profitability going forward. In fact the company started delivering profit as observed in the second quarter 2014 that should enable the company to gradually cover up its forward P/E of 18.78 and return handsome profit to its shareholders and investors. Newmont has total debt outstanding of $6.78 billion, which is well mixed by most measures and has operating cash flow of $1.38 billion and free cash flow of $612.25 million. The analysts have estimated CAGR of 63.40 against negative CAGR of 2.00% for the next year that indicate certain growth for company and investors must consider purchasing the stock.
