(NEM) Newmont Mining Plans Mine Extension

Gold miner Newmont Mining Corp. (NEM) announced its plans to build another underground mine.  The company plans to start exploration activities at its Waihi site in New Zealand. The proposed mine could extend gold and silver mining under the town until 2020.

Newmont also announced a second program, known as the Martha exploration project, which would be within the existing Martha mining license area and the pit rim, and would need a variation to the existing mining license.

A week ago the company also announced its intention to sell its coal assets in Queensland, Australia. The company is in discussions with several potential buyers.

None of the possible acquirers has been named, nor has a sales figure been disclosed. Newmont also stated that no deadline has been set for the sale.

Recently, Newmont released its financial results for the second quarter of 2011. The company’s adjusted net income rose to $445 million or 90 cents per share in the second quarter from last year’s $377 million or 77 cents per share. The result was below the Zacks Consensus Estimate of $1.00 per share.

Total revenue was $2.4 billion, up 11% year over year, but below the Zacks Consensus Estimate of $2.5 billion.

Newmont reported attributable gold and copper production of 1.2 million ounces and 44 million pounds, respectively, in the quarter at costs applicable to sales (CAS) of $583 per ounce, and $1.34 per pound on a co-product basis.

In the second quarter of 2011, capital expenditures were $618 million versus $319 million in the prior-year quarter. Operating cash flow was $412 million versus $753 million in the second quarter of 2010. Cash and cash equivalents were $1.9 billion as of June 30, 2011 versus $4.1 billion as of March 31, 2011.

In the quarter, the Board of Directors of Newmont also approved a third-quarter 2011 gold price-linked dividend of $0.30 per share, an increase of 50% over $0.20 paid in the second quarter of 2011, and an increase of 100% over the third-quarter 2010 dividend. This is based on the company’s net average realized gold price of $1,501 per ounce in the second quarter of 2011.

For fiscal 2011, the company reiterated its previous expectation of attributable gold production of approximately 5.1 million to 5.3 million ounces, with attributable copper production of 190 to 220 million pounds. Costs applicable to sales are expected between $560 and $590 per ounce of gold. Costs applicable to sales are anticipated between $1.25 and $1.50 per pound of copper.

The company currently plans to spend $2.1 to $2.5 billion in attributable capital expenditures in 2011, or $2.7 to $3.0 billion on a consolidated basis. Approximately 40% of 2011 consolidated capital expenditures are expected to be related to major project initiatives, including further development of the Akyem project in Ghana, the Conga project in Peru, Hope Bay in Canada, and the Nevada project portfolio, while the remaining 60% is expected to be for growth and sustaining capital.

The company faces stiff competition from Barrick Gold Corporation (ABX) and AngloGold Ashanti Ltd. (AU).

We maintain our Neutral recommendation on Newmont. Currently, the company holds a Zacks #1 Rank (Hold).

BARRICK GOLD CP (ABX): Free Stock Analysis Report

ANGLOGOLD LTD (AU): Free Stock Analysis Report

NEWMONT MINING (NEM): Free Stock Analysis Report

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