DENVER-
Newmont Mining Corp., one of the world’s largest gold producers, said Thursday its first-quarter profit fell 67 percent despite higher prices, in part because of increased startup costs at a Nevada mine.
Wayne Murdy, chairman and chief executive officer, also cited waste removal costs and adverse exchange rates related to Newmont’s operations in Australia.
“We are addressing the operating cost challenges. And while the first quarter was clearly disappointing from an earnings standpoint, we feel confident that the second half of the year will see strong improvements in this area,” Murdy told analysts during a conference call.
Newmont’s stock dropped 2.4 percent on the news.
Goldman Sachs analyst Oscar Cabrera said the results were disappointing, noting that costs at Nevada and Australia operations were higher than anticipated.
“We believe 1Q 2007 casts a dark shadow on the remainder of 2007 given continued strength in Australia’s commodity-based economy and unresolved power issues in Ghana,” he wrote in a research note. “However, the company’s guidance remained unchanged and capital development projects reported progress.”
For the quarter ended March 31, Newmont reported net income of $68 million, or 15 cents a share, compared with net income of $209 million, or 47 cents a share, in the first quarter of 2006.
The most recent results included an after-tax gain of $17 million related to the exchange of securities. The 2006 quarter included an after-tax gain of $50 million stemming from revised tax estimates and discontinued operations.
Revenue rose to $1.26 billion from $1.13 billion in the previous quarter.
Analysts surveyed by Thomson Financial had forecast 24 cents a share in earnings.
In the quarter, Newmont reported 1.3 million in equity gold sales at an average realized gold price of $653 an ounce. That compared with 1.4 million in equity gold sales at an average realized price of $556 an ounce in the 2006 first quarter.
Costs applicable to sales rose to $421 per ounce in the most recent quarter compared with $275 per ounce in the first quarter of 2006.
Capital expenses in the first quarter totaled $362 million, which included construction of a Nevada power plant, a gold mill and other improvements at a northern Peruvian mine and steps to address power shortages in Ghana.
Equity gold sales in Nevada rose 15 percent in a year-over-year comparison as commercial production began at the Phoenix and Leeville mines in October. Costs applicable to those sales rose 25 percent to $493 an ounce from $395 an ounce in the 2006 first quarter.
Production obstacles attributed to the Phoenix operation included lower-than-expected ore grade, restrictions in tailings lines and less mill availability.
“Ongoing challenges at Phoenix could result in costs applicable to sales per ounce above the expected range for the year,” the company said.
For the year, Newmont maintained its guidance of sales of between 5.2 million and 5.6 million equity gold ounces. Costs applicable to sales were forecast between $375 an ounce and $400 an ounce if improvements can be made in Phoenix operations, the company said.
In a related announcement, Murdy said Richard O’Brien was appointed president and chief financial officer, replacing Pierre Lassonde, who retired as president in December.
Shares of Newmont closed down $1.05, or 2.4 percent, to $43.18 a share on the New York Stock Exchange. In the past year, the stock has traded between $39.84 and $59.70 a share.
On Tuesday, a court in Manado, Indonesia, acquitted Newmont and one of its executives of charges of dumping dangerous amounts of toxic waste into a bay off Sulawesi Island.
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