High gold prices weren’t enough to save Denver’s Newmont Mining Corp. from a 67 percent drop in profits during the first quarter caused by rising costs.
The company reported net income Thursday for the first quarter of $68 million, or 15 cents per share, compared with $209 million, or 47 cents per share, for the first quarter of 2006.
Investors pummeled Newmont’s stock, driving it down 2.3 percent to close at $43.18. It fell further in after-hours trading.
The earnings hit resulted from unexpected startup costs at a Nevada mine; high production costs at several large mines, including Yanacocha in Peru; and exchange-rate problems in Australia, where Newmont has major operations, company executives said.
“This is the bottom of the trough, and we expect to see growth in our sales and production,” Newmont chief executive Wayne Murdy said, though he warned that the second quarter also would be challenging. “We are addressing operational cost challenges. While the first quarter was clearly disappointing from an earnings standpoint, we feel confident the second half of the year will see strong improvements.”
Newmont experienced lower ore grade and harder ore than expected, among other problems, at its new Phoenix mine in north-central Nevada, which started production last year. Production costs in Nevada, where Newmont mines more than 40 percent of its gold, rose 25 percent on a per-ounce basis.
Costs rose elsewhere, too.
At Yanacocha, long Newmont’s largest and most profitable gold mine, production costs for each ounce of gold nearly doubled. Gold sales fell 40 percent as ore grades at the maturing mine declined.
Production costs rose 72 percent at Newmont’s massive Batu Hijau copper mine in Indonesia.
On Tuesday, an Indonesian court found Newmont and a company executive not guilty of criminal charges of polluting a fishing bay.
Murdy said Thursday the company was cheered by the verdict and plans to proceed with expansion plans at Batu Hijau as a result.
“There was a lot of joy around the company,” he said. “The judges took every issue and allegation that was raised there and dealt with it. We were nervous about how this would be handled, but we were very pleased. They put in all the evidence we wanted.”
Gold prices, trading near 30-year highs, fell more than $10 Thursday to $673 in New York as the dollar rallied against the euro.
Staff writer Greg Griffin can be reached at 303-954-1241 or ggriffin@denverpost.com.
