Newmont Mining's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Newmont Mining (NEM)

Q1 2012 Earnings Call

April 27, 2012 10:00 am ET

Executives

John Seaberg - Vice President of Investor Relations

Richard T. O'Brien - Chief Executive Officer, President and Executive Director

Russell D. Ball - Chief Financial Officer and Executive Vice President

Gary J. Goldberg - Chief Operating Officer and Executive Vice President

Grigore Simon - Senior Vice President of Exploration

Analysts

John D. Bridges - JP Morgan Chase & Co, Research Division

David Haughton - BMO Capital Markets Canada

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

Presentation

Operator

Good morning, and welcome to Newmont Mining First Quarter 2012 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If anyone has any objections, please disconnect at this time. 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

Thanks, operator, and good morning, everyone. Welcome to Newmont's First Quarter 2012 Earnings Conference Call. Joining us today are Richard O'Brien, President and Chief Executive Officer; Gary Goldberg; Executive Vice President and Chief Operating Officer; Russell Ball, Executive Vice President and Chief Financial Officer; and other members of our executive leadership team.

Before we begin, I'd like to refer you to our cautionary statement on Slide 2. We will be discussing forward-looking information which is subject to a number of risks as further described in our SEC filings which can be found on our website at newmont.com.

And now I'll turn the call over to Richard O'Brien.

Richard T. O'Brien

Thanks, John. For those of you on the webcast, we'll begin on Slide 3. As we announced last year during our Investor Day in New York, we continue to focus our efforts on offering shareholders a combination of competitive production growth and returns, exploration upside, balance sheet strength and a commitment to return capital back to shareholders.

Our first quarter financial and operating results supported our efforts in each of these areas, with consolidated revenue of $2.7 billion, up 9% from the prior-year quarter; operating margins, up 29% on a 22% increase in the average realized gold price of $1,684 per ounce; stable gold production of 1.3 million ounces; operating costs well within our guidance; and a 75% increase in our dividend over the prior year's quarter to $0.35 per share. We are maintaining our 2012 outlook for production, costs applicable to sales and capital spending.

Regarding our exploration upside, we continue to see the potential to add the equivalent of 90 million ounces of gold to reserves between 2011 and 2020. And in 2011, as disclosed previously, we made significant progress by adding 11.6 million ounces of gold to reserves or approximately 10% of that target.

Our balance sheet continues to strengthen. And to provide additional financial flexibility, we recently took advantage of favorable debt markets to raise $2.5 billion of senior notes, to repay borrowings and replenish the balance sheet. Russell will speak to this in a few moments.

Turning to Slide 4, as many of you know, our growth potential includes a number of new projects, including the Akyem project in Ghana where construction is now 40% complete and going very well. Our growth potential also includes our Conga project and other projects in Peru.

As most of you have heard, the Conga project's environmental impact assessment, which was previously approved by the central government of Peru in October 2010 after an extensive public engagement process, was subject to a review by independent experts during the first quarter of 2012 at the request of the central government. The results of the independent review were released last week and confirmed that the EIA met Peruvian and international standards. The report also goes on to recommend, among other considerations, that we assess the technical and economic feasibility of relocating the Perol waste dump in order to try to preserve the Azul and Chica lakes. We are currently in the process of evaluating the recommendations contained in the independent report and additional recommendations from the government to assess the future impacts on the project's economics.

Conga is a significant investment in Peru and would be, we believe, a catalyst for economic and social development in the Cajamarca region, while also protecting water quality and providing year-round water availability for downstream users.

Conga's development would be a significant source of revenue for the government of Peru, along with significant employment. We've been privileged to work in Peru for more than 20 years, and we want to continue to be part of the government's social inclusion efforts and the development of the country through responsible mining.

If conga cannot be developed, though, in a safe, socially and environmentally responsible manner while also earning our shareholders an acceptable return, then we will reallocate that capital to other development projects in our portfolio, including opportunities in Nevada, Australia, Ghana and Indonesia, and we can combine that with a possible return of additional capital to shareholders.

Now I'll turn the call over to Russell Ball to discuss our first quarter financial and operating results.

Russell D. Ball

Thanks, Richard, and good day, everyone. Slide 5 contains the financial highlights, what I consider a solid quarter with a nice positive in regard to operating costs.

Adjusted net income of $578 million, or $1.17 a share, was slightly ahead of expectations, driven largely by those lower operating costs. A reconciliation of adjusted net income to net income reported under U.S. GAAP is included as an appendix on Slide 22 and reflects a $71 million charge, net of tax benefits of $4 million, for discontinued operations from an increased accrual related to the Holt property royalty. More detail on this can be found in Note 10 on Page 11 of the 10-Q. And in addition, a write-down of $24 million in marketable securities acquired through the Fronteer acquisition in 2011, net of the miscellaneous asset sales.

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