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Newmont's FY13 Output Meets, Falls on Guidance

Zacks Equity Research

Gold mining giant Newmont Mining Corporation (NEM) reported its preliminary production results for 2013 that met the higher end of its guidance. However, its shares fell as much as 12% in the trading session following the announcement due to somewhat downbeat guidance for 2014 that came below analysts’ expectations. The stock also took a hit after RBC Capital lowered its rating on the company to “Underperform” from “Sector Perform”.

Newmont’s attributable gold production for fourth-quarter 2013 amounted to 1.448 million ounces compared with 1.251 million ounces registered in fourth-quarter 2012. Attributable copper production for fourth-quarter 2013 was 38 million pounds compared with 35 million pounds in fourth-quarter 2012.

For full-year 2013, attributable gold production was 5.1 million ounces which stood at the top end of the guidance range of 4.8 to 5.1 million ounces. This was comparable with 5 million ounces that the company reported in 2012.

Attributable copper production for 2013 was 144 million pounds (within the guidance range of 135–145 million ounces) compared with 143 million pounds in the year ago. Throughout the year, Newmont divested more than $600 million of non-core assets.

Newmont announced that it will apply a gold price of $1,300 per ounce, down from $1,400 a year ago, for all asset impairment testing as well as for calculating gold reserves.

For 2014, Newmont expects consolidated gold production to be in the range of 5 million and 5.3 million ounces and copper production to be between 160,000 to 175,000 tons.

Newmont expects its all-in sustaining costs for 2014 to be between $1,075 and $1,175 per gold ounce and $2.75 to $2.95 per copper pound. It also expects a roughly 20% reduction in overhead expenses. The company expects to invest about $1.3 to $1.4 billion in consolidated capital in 2014, of which roughly 90% is allocated to sustaining capital.

Newmont, which is one of the prominent gold mining companies along with Barrick Gold Corporation (ABX) and Goldcorp Inc. (GG), currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the gold mining industry is Lake Shore Gold Corp. (LSG) holding a Zacks Rank #2 (Buy).

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