Newmont Mining Earnings Top Estimates as Gold Costs Decline

Apr 25, 2014 10:37 am ET

(Updates with comment from analyst in fourth paragraph.)

April 25 (Bloomberg) -- Newmont Mining Corp., which is said to have held merger talks this month with Barrick Gold Corp., reported first-quarter earnings that beat analysts’ estimates as gold costs declined.

Net income fell to $100 million, or 20 cents a share, from $314 million, or 63 cents, a year earlier, Greenwood Village, Colorado-based Newmont said yesterday in a statement. Earnings excluding one-time items were 22 cents a share, beating the 19- cent average of 17 estimates compiled by Bloomberg. Sales dropped 19 percent to $1.76 billion.

Newmont’s average cost was $751 an ounce, compared with $760 a year earlier.

Cash costs were “much lower than our estimate of $769 an ounce and toward the lower end of 2014 guidance of $740 to $790 an ounce,” Brian Yu, a San Francisco-based analyst at Citigroup Inc., said in a note. “The better cost performance was primarily driven by Africa and Australia-New Zealand.”

Newmont, which has mines in the Americas, the Asia-Pacific region and Africa, is among producers seeking to bolster profit margins after gold prices in New York fell 28 percent last year, the biggest decline in 32 years. Gold averaged $1,292 an ounce in the first quarter, 21 percent less than a year earlier.

Newmont rose 3.3 percent to $26.34 at 10:15 a.m. in New York. The shares have increased 14 percent this year.

Reported Negotiations

Merger negotiations between the world’s two largest gold producers ended last week amid disagreements over which mines to include in a spinoff, two people with knowledge of the matter said April 19. Barrick and Newmont are still interested in getting a deal done and have identified annual cost savings of $1 billion, mostly in Nevada, according to the people, who asked not to be identified discussing private information. Spokesmen for both companies have declined to comment on the talks.

Newmont Chief Executive Officer Gary Goldberg said in remarks on an earnings conference call today that he couldn’t comment on rumors or speculation.

Newmont’s first-quarter gold production was 1.21 million ounces, compared with 1.17 million a year earlier. Copper production was 24,000 tons, compared with 20,000 last year.

The company said it was unable to export about 2,000 ounces of gold and 2,500 tons of copper from Indonesia because of the country’s new export regulations.

Newmont is in talks with Indonesia about resuming shipments of copper concentrate from its Batu Hijau mine after the country introduced the restrictions in January. Newmont says it’s exempt from new duties under its contract with the government.

Barrick, based in Toronto, is the world’s largest gold producer.

--With assistance from Aoyon Ashraf in Toronto.