Gold mining giant Newmont Mining Corporation’s (NEM - Analyst Report) third-quarter 2014 adjusted earnings were 50 cents per share, an improvement from 44 cents recorded a year ago. The results topped the Zacks Consensus Estimate of 18 cents.

On a reported basis, the company posted net income from continuing operations of $210 million or 42 cents per share in the quarter, down roughly 50% from $419 million or $84 cents a year ago. 

Newmont’s revenues fell around 13.6% year over year to $1,746 million in the quarter. Nevertheless, revenues beat the Zacks Consensus Estimate of $1,739 million.

Newmont’s attributable gold and copper productions were 1.15 million ounces and 13,700 tons in the quarter respectively, down 10% and 29% year over year. Improved production in Africa following the start-up of Akyem in the fourth quarter of 2013 was more than offset by lower production in North America and Australia. Copper production decreased due to the shutdown at Batu Hijau.

Gold and copper costs applicable to sales (“CAS”) were $705 per ounce and $5.73 per pound, respectively, up 5.5% and 137.8% year over year, respectively. 

Gold and copper all-in sustaining costs (AISCs) were $995 per ounce and $6.61 per pound, respectively in the quarter. Gold AISC was down 2% whereas copper AISC was up 104% year over year, respectively.

CAS and AISC in the reported quarter include the effect of net realizable value stockpile adjustments associated with revised royalties and export duties agreed at Batu Hijau.

Newmont Mining Corporation - Earnings Surprise | FindTheBest

Regional Performance

North America

Attributable gold and copper productions in North America were 428,000 ounces and 4,900 tons, respectively, in the reported quarter. Gold production was down 18% due to planned stripping campaigns at Carlin and Twin Creeks which are expected to continue into 2015.

Copper production, however, increased 32% year over year in the third quarter. Gold and copper CAS for this region was $773 per ounce and $2.13 per pound, up 31% and 58% year over year. Gold and copper AISC were $1,030 per ounce and $2.73 per pound respectively, up 22% and 56%, in the reported quarter.

South America

Attributable gold production in South America was 136,000 ounces, down 8% year over year. Gold CAS for this region fell 17% year over year at $507 per ounce, while AISC slipped 28% year over year at $778 per ounce in the reported quarter. 

Australia/New Zealand

Attributable gold and copper productions in Australia/New Zealand were 376,000 ounces and 7,400 tons, down 20% and up 7%, year over year, respectively. Gold and copper CAS for this region was $862 per ounce and $2.47 per pound, up 1% and 11% from the year-ago quarter. Gold and copper AISC were $1,070 per ounce and $2.94 per pound, up 1% and 8%, respectively from the year-ago quarter.

Indonesia

Attributable gold and copper productions in Indonesia were 1,000 ounces and 1,400 tons, declining 75% and 84% year over year.  Gold and copper CAS for this region was $2,869 per ounce and $9.81 per pound, increasing from $846 per ounce and $2.74 per pound, respectively, in the year-ago quarter. Gold and copper AISC in the reported quarter were $3,556 per ounce and $11.17 per pound, increasing from $1,286 per ounce and $3.82 per pound, respectively, in the third quarter of 2013.

Financial Position

Newmont had cash and cash equivalents of $1,778 million as of Sep 30, 2014, up 20.5% from $1,475 million as of Sep 30, 2013. The company’s long-term debt increased roughly 11% year over year to $6,630 million. Cash from continuing operations in the reported quarter came in at $328 million.

Project Update

The Turf Vent Shaft project at Nevada is all set to commence commercial production in late 2015 and is expected to add 100,000–150,000 ounces of annual production. Out of the total capital costs of nearly $400 million for the project, $214 million has been spent to date.

For the Merian project, the government of Suriname granted the Right of Exploitation on Aug 22, 2014 and construction is on its way. The government can choose to own 25% stake in the Merian project. This project helps Newmont to expand in a new district with good potential. Gold production is expected to be in the range of average 400,000 to 500,000 ounces per year during the first five years at an AISC of $750–$850 per ounce with the first production being expected in late 2016.

Outlook

Newmont reaffirmed its expectation for attributable gold production for 2014 of 4.7–5 million ounces. The company expects CAS for gold to be $710 to $750 per ounce, down from the previous expectation of $720 to $760 per ounce. The company also expects a lower AISC of $1,020 to $1,080 per ounce. The company expects total copper production of 80,000 to 90,000 tons at CAS of $2.80 to $3.10 per pound and AISC of $3.50 to $3.80 per pound.

Total consolidated capital expenditure for 2014 is now lowered to $1,150–$1,220 million from $1,400–$1,485 million.

On Oct 7, Newmont completed the sale of its 44% stake in the Penmont joint venture for a total amount of $477 million, including cash proceeds of $450 million.

Newmont currently carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the mining industry are Pretium Resources Inc. (PVG - Snapshot Report), Lake Shore Gold Corp. (LSG) and U.S. Silica Holdings, Inc. (SLCA - Snapshot Report). While Pretium Resources holds a Zacks Rank #1 (Strong Buy), Lake Shore Gold and U.S. Silica Holdings carry a Zacks Rank #2 (Buy).

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