10-QPeriod: Q2 FY2010

NEWMONT Corp /DE/ Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 28, 2010For Securities:NEMNEMCL

Summary

Newmont Mining Corporation (NEM) reported strong financial results for the second quarter and first half of 2010, driven by significantly higher gold and copper prices and increased sales volumes. Net income attributable to Newmont stockholders more than doubled year-over-year for both periods, reaching $0.78 per share ($382 million) for Q2 2010 and $1.89 per share ($928 million) for the first half of 2010. This performance was bolstered by average realized gold prices of $1,200 per ounce in Q2 and $1,152 for the first half, a substantial increase from the prior year. Copper prices also saw a notable rise, contributing to overall revenue growth of 34% for the quarter and 40% for the first half. Despite these positive top-line and bottom-line results, the company faced increased costs applicable to sales, particularly for gold, due to factors like higher royalties, adverse foreign exchange movements, and the ramp-up of the Boddington mine, which experienced lower-than-anticipated gold ore grades. Nevertheless, the company's robust gold and copper production, coupled with favorable commodity prices, paints a picture of strong operational performance and financial health for the period. Newmont also provided updated production and cost guidance for the remainder of 2010, reflecting these operational dynamics.

Financial Highlights

54 data points
Beta

Net Income

$382.00M

EPS (Diluted)

$0.77

Total Assets

$22.77B

Cash & Equivalents

$3.60B

Free Cash Flow

$753.00M

Financial Statements
Beta
Gross Profit$1.06B
R&D Expenses$57.00M
Operating Expenses$1.31B
Operating Income$382.00M
Interest Expense$69.00M
Net Income$382.00M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Basic)492.00M
Shares Outstanding (Diluted)499.00M

Key Highlights

  • 1Significantly increased net income attributable to Newmont stockholders: $0.78/share ($382M) for Q2 2010 and $1.89/share ($928M) for H1 2010, compared to $0.33/share ($162M) and $0.73/share ($351M) in the prior year.
  • 2Substantially higher average realized gold prices: $1,200/oz for Q2 and $1,152/oz for H1 2010, a significant increase from $915/oz and $911/oz in 2009.
  • 3Increased consolidated gold production to 1.6 million ounces in Q2 and 3.2 million ounces in H1 2010.
  • 4Strong growth in consolidated copper production to 148 million pounds in Q2 and 307 million pounds in H1 2010.
  • 5Total sales increased by 34% for Q2 and 40% for H1 2010, driven by higher commodity prices and sales volumes.
  • 6The Boddington mine ramp-up experienced lower gold ore grades than anticipated, leading to higher 'costs applicable to sales' per ounce for gold.
  • 7Net cash provided from continuing operations increased by 67% to $1,481 million for the first half of 2010.

Frequently Asked Questions

Newmont demonstrated significantly improved financial performance in the first half of 2010 compared to the first half of 2009. Net income attributable to Newmont stockholders rose to $928 million ($1.89 per share) from $351 million ($0.73 per share). This growth was primarily driven by substantially higher average realized prices for both gold and copper, alongside increased sales volumes for both metals.

The increase in 'costs applicable to sales' for gold was attributed to several factors. These included higher royalties and production taxes, a stronger Australian dollar which increased costs paid in local currency, lower production at some existing operations, and higher mining costs related to a geotechnical event at Gold Quarry in Nevada. Additionally, the Boddington mine's ramp-up phase experienced lower-than-anticipated gold ore grades, contributing to higher per-ounce costs.

Newmont's strategy during this period was to provide shareholders with leverage to changes in gold and copper prices by selling its production at spot market prices. Therefore, the company stated that it does not hedge its gold and copper sales. However, it did utilize foreign currency contracts and diesel contracts to manage risks associated with operating expenditures.

While Boddington's processing plant and recovery rates were performing well, the mine encountered lower gold ore grades and more copper than initially modeled during its ramp-up. Consequently, Newmont revised its 2010 gold production outlook for Boddington downward to 750,000-825,000 ounces, with 'costs applicable to sales' expected to increase to $475-$550 per ounce. For 2011, gold production is projected between 850,000-925,000 ounces at costs of $475-$525 per ounce. The company noted it was too early to determine long-term impacts of the lower grades, as only a small portion of reserves had been mined.