Newmont Earnings Nearly Double

They blow past estimates on surging gold prices.
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Newmont Mining

(NEM) - Get Report

said its first-quarter earnings almost doubled from a year ago, easily beating analysts estimates, as the price of gold soared.

Denver-based Newmont said its diluted net income was $209 million, or 46 cents a share, in the first quarter, including an 11 cents tax benefit, compared with $84 million, or 19 cents a share, a year ago. The Thomson Financial consensus of analysts forecasts was for first-quarter earnings of 32 cents.

Revenue rose to $1.15 billion from $945 million on gold sales of 1.8 million ounces. For the balance of 2006, Newmont said it expects to sell between 7.7 million and 7.9 million ounces of gold.

All through 2005 and up until February of this year, Newmont's results were weighed down by low production and the rising costs of energy and raw materials, which hurt its profit margins. But these were offset thanks to the soaring price of gold and cost-containment measures in the latest quarter, it said.

"Our first quarter's results reflect strong margin and earnings per share growth from a higher realized gold price of $555 per ounce and our continued focus on cost containment," said CEO Wayne Murdy in a statement. "With the current gold price in excess of $600 per ounce, we expect to deliver expanding gold margins for our shareholders."

Yet things weren't looking so good for Newmont's shares on Thursday. The stock was recently losing 4.4% to $55.87.

The stock followed a big pullback in the price of gold and of other metals on Thursday, as well as in the shares of mining companies. In recent action, the price of gold for June delivery was plummeting $21 to trade at $615 an ounce.

The Philadelphia Gold and Silver index was recently losing 4.4%, the Amex Gold Bugs index was down 5.2%, and the CBOE Gold index lost 5.6%.

The move coincided with a drop in crude oil, which was losing $1.02 at $71.15 a barrel, after hitting $74, a record high.

Newmont shares had been rallying more than 20% since early March (to $58.28 on Wednesday's close), as the price of gold went up $100 an ounce without any meaningful pullbacks.

Gold has been rising in tandem with crude oil amid tensions over Iran's nuclear ambitions. Dollar weakness, which boosts the price of dollar-denominated commodities such as gold, also played a part. Investment funds have also been major players in driving up the price of gold to levels unseen since late 1980 and in lifting many mining stocks to pierce through 52-week highs.

"We've been overbought for a while," says Tom Hartmann, a gold analyst and broker at Altavest. "It was just too frantic and frothy, and it screamed danger."

Hartmann remains bullish on gold and other metals for this year but says he wouldn't be surprised to see the yellow metal test the $600 or below before moving to new highs.