Denver-based Newmont Mining Corp. (NYSE: NEM – $33.71) reported slightly lower first-quarter net income after operations in Australia and South America were hit by poor weather. The world’s oldest and second-biggest gold producer by market value reported adjusted net income of $133 million or $0.25 per share compared to $0.34 last year and three cents better than estimates. Revenue rose 13% to $1.7 billion, primarily due to increased volumes and slightly higher pricing. Average realized price for gold improved $29 to $1,221 per ounce for the quarter and the average realized price for copper improved $0.65 to $2.68 per pound. NEM was able to increase net operating cash flow from continuing operations to $379 million during the first quarter. The company reduced net debt to $1.7 billion, ending the quarter with $2.9 billion cash on hand and an industry-leading, investment-grade credit profile.
Attributable gold production increased 9% to 1.23 million ounces as new production from Merian and Long Canyon more than offset geotechnical issues at Carlin. Copper production from Phoenix and Boddington was unchanged at 13,000 tonnes for the quarter. The company made some announcements to its portfolio:
- Approved the Subika Underground and Ahafo Mill Expansion projects in Africa
- Announced an agreement to secure rights to develop a prospective new gold district in the Yukon with Goldstrike Resources
- And is on track for commercial production at the Tanami Expansion Project in Australia mid-2017
Newmont’s outlook reflects steady gold production and ongoing investment in its current assets and best mining growth projects. Moreover, the company’s mines are largely in political stable regions, and do not appear to undertake undue operational risks. I am looking for NEM to report full-year earnings of $1.10, assuming no major changes in gold and copper prices, and possibly $1.25 next year. A new enhanced gold-linked dividend policy – effective this quarter – should allow for higher returns to shareholders as gold prices increase. A five percent allocation in Newmont Mining can be maintained in an aggressive account.