Newmont Sees Lower Production

Mining company Newmont Mining Corporation ( NEM - Analyst Report ) reported preliminary third quarter 2012 attributable gold and copper production of 1.24 million ounces and 35 million pounds, respectively compared with gold and copper production of 1.3 million ounces and 58 million pounds respectively reported in the third quarter of 2011.

Lower mill availability and recoveries at Boddington, and lower ore tons and grade mined at Tanami in Australia were the primary reasons cited by the company for lower production.

Newmont reported attributable gold and copper sales of 1.21 million ounces and 38 million pounds, respectively, for the quarter. The company also announced that it expects to incur a $27 million charge related to Hope Bay care and maintenance, and another charge of $50 million for restructuring severance and other related costs for the quarter.

Newmont released its second quarter 2012 financial results in July 2012. The company’s second quarter-2012 adjusted earnings of 59 cents a share significantly lagged last year’s earnings of 90 cents, and missed the Zacks Consensus Estimate of 94 cents by a huge margin.

Reported profits plunged 47% to $279 million, or 56 cents per share, in the quarter, from $523 million or $1.06 per share in the prior-year quarter. Revenues went down 6% year over year to $2.2 billion and trailed the Zacks Consensus Estimate of $2.4 billion.

Newmont’s attributable gold and copper production declined 3% and 10%, respectively, from last year to 1.18 million ounces and 38 million pounds in the quarter. On a year-over-year basis, attributable gold and copper sales also dropped 6% and 35%, respectively, to 1.14 million ounces and 29 million pounds.

Based in Colorado, Newmont is one of the world's largest producers of gold with several active mines in Nevada, Peru, Australia/New Zealand, Indonesia and Ghana. It competes with the likes of AngloGold Ashanti Ltd. ( AU - Snapshot Report ) , Barrick Gold Corporation ( ABX - Analyst Report ) and Gold Fields Ltd. ( GFI - Snapshot Report ) .

Newmont is well-positioned to gain from the rising price of gold. But the company’s direct mining costs are increasing due to declining grades, increased royalties and other costs.

The stock retains a Zacks #3 Rank, indicating a short-term (1 to 3 months) Hold rating. We currently have a long-term (more than 6 months) Underperform recommendation on the shares of Newmont.