* Q2 adj profit 90 cts/shr v Street view 99 cts/shr
* Revenue up 11 pct to $2.4 bln
* CEO sees gold at $1,750/oz next year
* Stock drops 2.5 percent
(Adds CEO comments on gold price, Peru; stock down)
By Steve James
NEW YORK, July 29 Newmont Mining Corp's (NEM.N)
second-quarter profit missed Wall Street expectations as higher
costs and lower production offset a soaring gold price that hit
a record high on Friday.
The company's stock fell over 3 percent but rallied later
when Chief Executive Officer Richard O'Brien said he expected
gold to be at $1,750 per ounce next year and to boost Newmont's
profits. In afternoon trading on the New York Stock Exchange
the shares were down 2.5 percent at $56.24
On a day when gold hit a record $1,632.12 per ounce,
O'Brien was asked on cable TV's CNBC to forecast where the
price was headed. "My headline: I think we're heading to $1,750
in gold next year."
He said that by containing costs, "I think you'll continue
to see margins grow.
"Despite some inflationary pressures, higher gold prices
are really adding to our bottom line...and I think we'll
continue to see that," O'Brien said.
Earlier, on a conference call with Wall Street analysts, he
said Newmont maintained its outlook for capital expenditures
and costs this year.
"Although capital spending through the first half of 2011
has been lower than expected across the portfolio, we do expect
to accelerate capital spending in the second half of the year,"
Newmont said its capital expenditure for this year was in
the range of $2.1 billion to $2.5 billion, much of it for new
mining projects in Ghana, Peru, Canada and Nevada.
O'Brien also told analysts he was anticipating discussions
with Peruvian officials over President-elect Ollanta Humala's
idea to tax the windfall profits of mining firms.
"I hope that President Humala will be a president who
values the contribution of business in general and mining in
He said Newmont has "a pretty good sense" of what Humala
has in mind "and we've incorporated that into our economics."
"I won't tell you what our assumption is, but we have made
some assumptions," said O'Brien.
Newmont and partner Buenaventura (BVN.N) agreed this week
to invest up to $4.8 billion into the Conga gold and copper
mine in Peru.
In a press release, Newmont said second-quarter earnings
from continuing operations were $523 million, or $1.06 per
share, compared with $382 million, or 78 cents per share, a
Adjusted for items, earnings were 90 cents per share, and
on that basis, fell short of analysts' average estimate of 99
cents per share, according to Thomson Reuters I/B/E/S.
Sales rose 11 percent to $2.4 billion, said the
Denver-based company, which operates mines in North and South
America, Africa, Australia and Indonesia. Its average realized
price for gold rose 25 percent in the second quarter to $1,501
per ounce over the 2010 quarter.
But results were hurt by a drop in gold and copper
production and higher mining costs, Newmont said, Gold
production of 1.2 million ounces was down 5 percent and the 44
million pounds of copper mined was 45 percent lower.
Gold costs applicable to sales (CAS) rose to $583 per ounce
from $485 and copper CAS soared to $1.34 from 77 cents, the
company said, citing several factors, including higher diesel
prices, currency exchanges, royalties and labor costs.
In Nevada, gold costs rose 9 percent to $636 per ounce as
production decreased 15 percent, Newmont said.
At Yanacocha, Peru, gold production decreased 3 percent but
costs rose 40 percent to $545 per ounce, due to higher waste
mining, higher diesel prices and labor and royalty costs.
At Boddington, the largest gold mine in Australia, gold
production increased 11 percent, but costs were up 10 percent
because of higher conveyor maintenance costs, royalties and
power, higher diesel prices and a stronger Australian dollar.
At Batu Hijau, Indonesia, gold production decreased 70
percent and copper was off 56 percent in the second quarter due
in part to lower grade ores being mined.
Newmont maintained its 2011 outlook for total gold
production of 5.1 million to 5.3 million ounces at CAS of
between $560 and $590 per ounce. Its copper production target
is 190 million to 220 million pounds at CAS of between $1.25
and $1.50 per pound.
(Reporting by Steve James; Editing by Lisa Von Ahn, Derek
Caney, Dave Zimmerman and Gunna Dickson)