Newmont Mining Q3 2010 Earnings Call Transcript

Newmont Mining (NEM)

Q3 2010 Earnings Call

November 02, 2010 11:30 am ET

Executives

Richard O'Brien - Chief Executive Officer, President and Executive Director

John Seaberg - IR

Cindy Williams - Investor Relations Manager

Brian Hill - Executive Vice President of Operations

Russell Ball - Chief Financial Officer and Executive Vice President

Analysts

John Bridges - JP Morgan Chase & Co

Wilfredo Ortiz

David Christie - Scotia Capital Inc.

George Topping - Stifel, Nicolaus & Co., Inc.

David Haughton - BMO Capital Markets Canada

Presentation

Operator

Compare to:
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Thank you for standing by. [Operator Instructions] I'd now like to turn the call over to John Seaberg, Vice President of Investor Relations for Newmont Mining Corporation. Sir, you may begin.

John Seaberg

Thank you, operator. Good morning, and thanks for joining us on our third quarter earnings call. With me today are 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 2 as we will be discussing forward-looking information which is subject to a number of risks, certain of which are unique to our business as further described in our SEC filings, which can be found on our website at newmont.com. And now, I will turn the call over to Richard O'Brien, our President and Chief Executive Officer.

Richard O'Brien

Thanks, John. For those of you with access to our webcast presentation, we'll start on Slide 3.

If you've been following Newmont recently, the themes of execution, cash flow, flexibility, margin expansion and leadership will sound very familiar to you. That's by design as we believe consistent delivery creates sustainable value.

Our consistent focus on production and cost management applied across our portfolio of assets gives us the ability to deliver the most cash flow leverage per share of any gold company in the world. That cash flow in turn gives us the flexibility to fund exploration, by far, the cheapest source of new reserve growth and to fund our considerable project development pipeline with an expectation of favorable real returns. And our free cash flow generation provides us the confidence to return capital to shareholders as evidenced by our 50% increase in our dividend announced in the last quarter and sustained this quarter.

While we continue to focus on optimizing the results from each of our existing operations, we're also transitioning our Boddington project through ramp-up and into steady-state operations. During the third quarter, we strengthened our senior management team at Boddington to support this transition. And we are now forming a special project team to optimize and de-bottleneck the mine and process plant as we complete that transition into ongoing operations.

An initial component of this optimization process has been the installation of a sixth MP-1000 secondary crusher, which will be commissioned this month. As a 20-year-plus asset with compelling exploration potential, our expectations for Boddington continue to be high. Alongside optimizing our existing operations and transitioning Boddington to full capacity, we're also simultaneously preparing for our next significant project development campaign, which includes Conga and Peru, Akyem in Ghana, Hope Bay in the Canadian Arctic and several near mine development opportunities in the Carlin Trend in Nevada.

Moving to Slide 4, you'll see a snapshot of our global production in the third quarter. Newmont produced 1.4 million equity ounces of gold at an average realized price of $1,221 per ounce and cost applicable to sales of $477 per ounce. Our North American region contributed 35% of our total quarterly equity gold production. South America contributed 13%, and Africa contributed 11%. Our Asia-Pacific region contributed the remaining 41% of our quarterly gold production and all of our 83 million pounds of equity copper production.

Within our APAC region, our newest mine, Boddington, produced 180,000 ounces of gold and 14 million pounds of copper in the quarter. With the first three quarters of the year behind us, we've narrowed our overall outlook for 2010 equity gold and copper production to 5.3 million to 5.4 million ounces for the year. We've also reduced our 2010 capital spending outlook by about $100 million to $1.3 billion to $1.5 billion.

And as we suggested in our July earnings call, higher gold prices and unfavorable exchange ratios have led to higher costs in the third quarter. We've expanded our outlook for gold cost applicable to sales to a range of $485 to $500 per ounce for 2010, still below the gold industry average and highly influenced by higher gold and a higher Australian dollar rate. You can find more details on our 2010 outlook in the appendix to this presentation.

I'd like to now turn the presentation over to our Chief Financial Officer, Russell Ball, to fill you in with more details on our financial performance.

Russell Ball

Thanks, Richard. Slide 5 summarizes our third quarter performance compared to the prior-year quarter. We recognized record revenue of $2.6 billion on higher equity gold and copper production and average net realized prices of $1,221 an ounce and $3.67 a pound, respectively. Looking at the screens earlier this morning, we were trading at $1,356 and $3.80, so significantly higher than the averages realized for the third quarter.

With significantly higher operating margins, we reported adjusted net income for the third quarter of $1.08 a share, an increase of 37% from the year-ago quarter and some $0.10 to $0.12 above consensus. Reported net income was slightly higher than the adjusted net income due to a small net gain on an asset disposition which we backed out.

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