UPDATE 2-Newmont eyes cost controls as CEO swap looms

Thu Feb 21, 2013 8:24pm EST

* Adjusted earnings beat Street estimate

* Incoming CEO to focus on cost control

* Company to proceed with only most promising new projects

By Julie Gordon

TORONTO, Feb 21 (Reuters) - Newmont Mining Corp, the No. 1 U.S. gold producer, said on Thursday that a more disciplined approach to spending and cost cuts is its top priority as leadership of the company shifts to Gary Goldberg, who takes over as chief executive on March 1.

Newmont also reported a smaller-than-expected 4 percent drop in adjusted fourth-quarter profit on lower metal production and higher operating costs, which it vowed to bring under control.

Goldberg - whose promotion from chief operating officer to replace current CEO Richard O'Brien was announced in December - pledged to focus on reducing production costs at the global mining company and said Newmont would only proceed with the most promising opportunities in its portfolio.

The Denver-based miner has struggled in recent quarters with declining production, rising operating and development costs, and violent protests against its $5 billion Conga gold project in Peru.

Newmont is planning some $2.1 billion to $2.3 billion in capital spending in 2013, with about 40 percent of that on development projects and the remaining 60 percent earmarked as sustaining capital.

The company, which temporarily shelved the controversial Conga development last year, will spend about $150 million on the project in 2013 and expects to make a firm decision on the future of the gold mine this year.

For now, Newmont is focused on finishing construction at the Akyem mine in Ghana, with first production expected later this year.

The company is also advancing stripping work on Phase 6 at its Batu Hijau mine in Indonesia, where it will continue to process stockpiled ore until material from the new phase can be used as feed for the mill.

Shares of gold miners were battered in 2012, after deals made in 2010 and 2011 failed to live up to expectations as capital costs soared and bullion prices stagnated.

But top producers, led by Canada's Barrick Gold Corp , are showing the first signs of emerging from the funk, having admitted their lavish spending was ill-advised and pledged to throttle back costs to maximize shareholder returns.

Newmont increased its quarterly dividend by 21 percent to 42.5 cents per common share in the first quarter of 2013. The company's dividend is linked to the bullion price.

BIG BEAT

Adjusted to remove one-time items, earnings dropped to $552 million, or $1.11 a share, in the quarter ended Dec. 31. That compared with $577 million, or $1.17 cents, a year earlier.

Analysts, on average, had expected earnings of 97 cents a share, according to Thomson Reuters I/B/E/S.

"It was a big EPS beat, but it looks like it was a fairly low-quality beat," said Garrett Nelson, an analyst with BB&T Capital Markets. "It was driven by higher 'other income' and an unusually low tax rate."

Nelson noted that operating results were in line with his estimates.

Net income was $673 million in the quarter, compared with a loss of $1.02 billion in the year-ago period, when it booked a $1.6 billion non-cash impairment charge on its Hope Bay project in Nunavut, a northern Canadian territory.

Newmont has struck a deal to sell the Arctic project to a privately held Canadian company.

The company previously announced gold production of some 1.25 million ounces in the fourth quarter, compared with 1.3 million ounces in the fourth quarter of 2011. Copper output fell to 35 million pounds, down from 45 million pounds a year ago.

Full-year gold production fell to 5 million ounces, down from 5.2 million ounces in 2011. Newmont said it plans to produce some 4.8 million to 5.1 million ounces in 2013.