Newmont Mining Corporation (NEM)
Q1 2010 Earnings Call Transcript
April 27, 2010 11:00 am ET
John Seaberg – IR
Richard O'Brien – President and CEO
Russell Ball – EVP and CFO
Brian Hill – EVP, Operations
Guy Lansdown – EVP, Discovery & Development
Randy Engel – EVP, Strategic Development
John Bridges – JPMorgan
Jorge Beristain – Deutsche Bank Securities
David Haughton – BMO Capital Markets
Barry Cooper – CIBC World Markets
Patrick Chidley – Barnard Jacobs Mellet
Stephen Walker – RBC Capital Markets
Previous Statements by NEM
» Newmont Mining Corporation Q4 2009 Earnings Call Transcript
» Newmont Mining Corp. Q3 2009 Earnings Call Transcript
» Newmont Mining Corporation Q2 2009 Earnings Call Transcript
Welcome and thank you for standing by. At this time, all participants are in a listen-only mode until the question-and-answer session of today’s conference. (Operator instructions) I’d like to inform all parties this call is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. John Seaberg, Vice President of Investor Relations. You may begin, sir.
Good morning and thank you for joining us on our first quarter earnings call. With me today are the members of our executive leadership team, who will be available for questions at the end of the presentation. Before we begin, I’d like to refer you to our cautionary statement on slide two, as we will be discussing forward-looking information involving a number of risks, certain of which are unique to our industry, as further described in our SEC filings, which can be found on our website at www.newmont.com. And now I will turn it over to Richard O'Brien, our President and Chief Executive Officer.
Thanks, John, and good morning, everyone. For those of you with access to our webcast presentation, I’d like to begin on slide three. With our average realized gold price up 22% to $1,106 per ounce and our average realized copper price up 97% to $3.33 per pound from the first quarter of 2009, our first quarter operating cash flow increased from $381 million to $728 million. Our revenues also rose, increasing from $1.5 billion to $2.2 billion while our adjusted net income improved from $199 million to $408 million. As these financial results clearly indicate, we continue to offer investors substantial gold and copper price leverage.
As shown on slide four, we also continue to meet our operating targets. During the first quarter of this year, we produced 1.3 million equity ounces of gold and 90 million equity pounds of copper, with cost applicable to sales of $480 per ounce of gold and $0.78 per pound of copper. For the year, we continue to expect gold cost applicable to sales of between $450 to $480 per ounce.
In 2010, we are experiencing pressures relative to our full year 2009 CIS [ph] of $417 per ounce, primarily driven by lower production volumes in Nevada, Peru, and Ghana, and as a function of higher cost underground production at Nevada and higher mill production at Yanacocha.
The lower cost production from Boddington should offset some of these operating costs, as we ramp up the full production towards the end of this year. Additionally, the remaining third of the year’s increase over last year in CIS I is a result of higher gold prices and an unfavorable Australian dollar exchange rate. Despite these operating cost pressures, we continue to expect full year performance in line with our existing outlook.
We continue to advance our development projects with encouraging results. During the first quarter, we made progress with our engineering, optimization, permitting, and community relations (inaudible) Conga, Akyem, Hope Bay, and Nevada projects. Collectively, these opportunities currently represent up to $30 million to $40 million targeted equity ounces, a potential reserve and resource development opportunities, approximately $20 million of which are currently in proven and probable reserves, which could grow with positive exploration results over time.
Our first quarter financial and operational results speak to the strength of our commitment to execution and increasing our financial returns, as well as to the dedication of our employees around the world to deliver safely on our plans and provide the highest value to our shareholders.
Moving to slide five, we remain bullish on metal prices. Robust fundamentals, including evidence of a rebounding jewelry market in India and growth in the jewelry market in China, plus sustained industry inflows and historically low Central Bank sales continue to support gold price performance during the first quarter of 2010.
On the supply side, European and Central Bank sales were near zero, while Russia brought approximately 8 tons of gold in the first quarter, as it continues its gold purchasing program. With Central Bank sales essentially non-existent and some countries actually buying gold, extra supplies not being pushed into the market causing supply to tighten even further. In addition to these factors, we believe mine supply will also remain constrained due to declining grades on a global basis.
On the demand side, many developing economies are recovering faster than the developed counterparts, especially in countries like India and China, which are key markets for gold consumption. The continued recovery of these developing nations should have a positive impact on gold demand. In addition, medium-term concerns surrounding sovereign debt rates in some regions are likely to favor gold, as investors put their trust in gold rather than currency. Overall, investment interest in gold remains very strong, as demonstrated by a record high for the amount of gold held by ETFs reached in the first quarter.