Wednesday, February 23, 2011

Newmont Mining Corp. (NYSE: NEM): Q4 Earnings Preview 2010

Newmont Mining Corp. (NYSE: NEM) is scheduled to release its fourth-quarter financial results before the market open on Thursday, February 24, 2011. Analysts, on average, expect the company to report earnings of $1.13 per share on revenue of $2.57 billion. In the year ago quarter, the company reported earnings of $1.14 per share on revenue of $2.52 billion.

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties.The company produces gold from mines in Nevada and California, and, outside of the United States, from operations in Peru, Indonesia, Mexico and Uzbekistan. New mines coming online in the next few years in Peru and Ghana should add to sales in the coming years. The company expects to more than double its African gold production to 1.2 million ounces by 2015,

In the preceding third quarter, the Greenwood Village, Colorado-based company's net income was $537 million, or $1.07 a share, compared with a profit of $388 million, or 79 cents a share, in the comparable quarter last year. On an adjusted basis, the company earned $1.06 per share. Revenue increased 27% to  $2.6 billion from $2.05 billion. Analysts, on average, expected the company to report earnings of 95 cents a share on revenue of $2.34 billion.

Gold prices have risen for 10 straight years in New York. Concern about rising inflation and currency debasement drove prices up 30 percent last year, reaching a record $1,432.50 an ounce on December 7 on the Comex. The yellow metal has been helped along this year by a number of unstable events that have driven investors into gold, typically a safe-haven during times of economic uncertainty. With the second round of qualitative easing in the U.S. the devaluation of the U.S. dollar has also boosted interest in gold, as it becomes cheaper for foreign investment. Most recently, the civil unrest in Egypt has boosted prices as investors look for safe havens for their money in fear that the political crisis could expand to other countries in the Middle East. 

Newmont Mining Corp. cites yet one more reason why gold may continue its growth in 2011. High retail demand from emerging economies like China where a newfound love of luxury has accompanied new levels of affluence should tighten global supply. China's gold imports grew nearly 500% in 2010.

Recently, the company announced fourth quarter gold and copper production of 1.4 million ounces and 74 million pounds, respectively. Quarterly Gold and copper sales were 1.3 million ounces and 57 million pounds, respectively. Average realized gold and copper price were $1,368 per ounce and $4.52 per pound, respectively. Gold operating margin increased from $566 per ounce in 2009 to $737 per ounce in 2010 (an increase of 30% for the year), highlighting increasingly attractive gold price leverage in a rising metal price environment. Estimated consolidated costs applicable to sales for gold and copper were $513 per ounce and $0.95 per pound, respectively.

Recently, Newmont Mining Corp. agreed to acquire Fronteer Gold Inc. by way of a Plan of Arrangement. The acquisition of Fronteer Gold will contribute significantly to its anticipated growth profile in North America. Fronteer Gold owns a 100% interest in the development-stage Long Canyon project, which is located approximately one hundred miles from Newmont's existing infrastructure in Nevada. The proximity of Long Canyon to Newmont's Nevada operations provides the potential for significant development and operating synergies. Fronteer Gold also owns a 100% interest in the Northumberland project and a joint venture interest with Newmont in the Sandman project in Nevada, among other assets. Fronteer Gold has total attributable Measured and Indicated gold resources of 4.2 million ounces and Inferred resources of 1.7 million ounces at Long Canyon, Northumberland and Sandman.

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