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Newmont reports 2Q18 Results

Published by
Global Mining Review,


Colorado-based mining company Newmont Mining Corporation has released its results for 2Q18.

President and CEO of Newmont, Gary J. Goldberg, commented: “Newmont delivered US$545 million in adjusted EBITDA and US$143 million in free cash flow in the second quarter, as strong operational performance helped offset the impacts of geotechnical challenges and back-half weighted results.”

“We continued to add lower cost production by completing our Twin Underground and Northwest Exodus projects safely, on budget and ahead of schedule. And we invested in future value-creation by forging a partnership with Teck to advance pre-feasibility studies on Galore Creek in British Colombia, one of the world’s largest undeveloped copper-gold deposits, and with Sumitomo to develop Yanacocha Sulfides in Peru.”

According to Newmont, the company achieved net income from continuing operations attributable to Newmont stockholders of US$274 million or US$0.51 per diluted share, an increase of US$84 million from the prior year quarter. This was reportedly primarily due to lower income taxes, a gain from the sale of the company’s royalty portfolio in June 2018 and higher average realised prices, partially offset by lower production at CC&V, Boddington, Akyem and Twin Creeks.

However, the company’s revenue decreased 11% to US$1662 million for the quarter. This can be primarily attributed to lower production, which was partially offset by higher average realised gold prices.

Average realised price for gold was US$1292, an improvement of US$42/oz over the prior year quarter; average realised price for copper was US$2.99/lb, an improvement of US$0.53 over the prior year quarter.

Attributable gold production decreased by 14% to 1.16 million oz. This was due to lower grades at Carlin, Twin Creeks, Boddington and Akyem and a build of CC&V concentrate inventory to be processed in Nevada.

Gold CAS rose 13% to US$751/oz for the quarter due to lower production, higher stockpile and leach pad inventory adjustments, the impact of KCGM rock falls, and higher oil prices.

Gold AISC rose 16% to US$1024/oz for the quarter on higher CAS, sustaining capital and advanced project and exploration expense.

Projects update

Funding for Subika Underground, Ahafo Mill Expansion, Quecher Main and Tanami Power projects has been approved and these projects are in execution. Additional projects represent incremental improvements to production and cost guidance. Internal rates of return (IRR) on these projects are calculated at a US$1200 gold price.

Subika Underground (Africa) leverages existing infrastructure and an optimised approach to develop Ahafo’s most promising underground resource. First production was achieved in June 2017 with commercial production expected in the fourth quarter of 2018. The project is expected to increase average annual gold production by between 150 000 and 200 000 oz/yr for the first five years beginning in 2019 with an initial mine life of approximately 11 years. Capital costs for the project are estimated at between US$160 and US$200 million with expenditure of between US$85 and US$95 million in 2018. The project has an IRR of more than 20%.

Ahafo Mill Expansion (Africa) is designed to maximise resource value by improving production margins and accelerating stockpile processing. The project also supports profitable development of Ahafo’s highly prospective underground resources. First production is expected in the second half of 2019 with commercial production also expected in the second half of 2019. The expansion is expected to increase average annual gold production by between 75 000 and 100 000 oz/yr for the first five years beginning in 2020. Capital costs for the project are estimated at between US$140 and US$180 million with expenditure of approximately US$75 - US$85 million in 2018. The project has an IRR of more than 20%.

Together the Ahafo expansion projects (Ahafo Mill Expansion and Subika Underground) improve Ahafo’s production to between 550 000 and 650 000 oz/yr for the first five full years of production (2020 to 2024). During this period Ahafo’s CAS is expected to be between US$650 and US$750/oz and AISC is expected to be between US$800 and US$900/oz. This represents average production improvement of between 200 000 - 300 000 oz at CAS improvement of between US$150 - US$250/oz and AISC improvement of US$250 - US$350/oz, compared to 2016 actuals.

 

Quecher Main (South America) will add oxide production at Yanacocha, leverage existing infrastructure and enable potential future growth at Yanacocha. First production is expected in late 2018 with commercial production in the second half of 2019. Quecher Main extends the life of the Yanacocha operation to 2027 with average annual gold production of approximately 200 000 oz/yr between 2020 and 2025 (100% basis). During the same period incremental CAS is expected to be between US$750 and US$850/oz and AISC between US$900 and US$1000/oz. Capital costs for the project are expected to be between US$250 - US$300 million with expenditure of US$80 - US$90 million in 2018. The project IRR is expected to be greater than 10%.

Tanami Power (Australia) will lower Tanami power costs by approximately 20% beginning in 2019, mitigate fuel supply risk and reduce carbon emissions by 20%. The project includes a 450 km natural gas pipeline to be constructed connecting the Tanami site to the Amadeus Gas Pipeline, and construction and operation of two on-site power stations. The gas supply, gas transmission and power purchase agreements are for a 10 year term with options to extend. The project is expected to result in net cash savings of approximately US$34/oz beginning in 2019. Capital costs are estimated at between US$225 and US$275 million with annual cash lease payments over a 10 year term beginning in 2019 with approximately US$10 million of owner’s costs paid in 2018.

Outlook

The company’s outlook reflects stable gold production and ongoing investment in its operating assets and most promising growth prospects. Newmont does not include development projects that have not yet been funded or reached execution stage in its outlook, which represents upside to production and cost guidance.

Attributable gold production remains unchanged at between 4.9 - 5.4 million oz in 2018 and 2019. Longer term production is expected to remain stable at between 4.6 and 5.1 million oz/yr through 2022 excluding development projects which have yet to be approved.

 

North America production remains unchanged at 2.0 - 2.2 million oz in 2018. Production is expected to decline slightly in 2019 to between 1.8 - 2.0 million oz due to planned stripping at Carlin and then increases to between 1.9 - 2.1 million oz in 2020 due to higher grades at Twin Creeks, Cripple Creek & Victor and Long Canyon. The company continues to pursue profitable growth opportunities at Carlin and Long Canyon.

South America production remains unchanged at between 615 000 and 675 000 oz in 2018. Production is expected to be between 590 000 and 690 000 oz in 2019 with the addition of Quecher Main and between 475 000 and 575 000 oz/yr in 2020 as Yanacocha laybacks are mined out and Merian transitions from saprolite to hard rock. The company continues to advance near-mine growth opportunities at Merian and both oxide and sulfide potential at Yanacocha.

Australia production decreases to between 1.4 and 1.6 million oz in 2018 driven by the East wall slip at KCGM. Production in 2019 and 2020 may be impacted by the KCGM rock falls and life of mine plans are being assessed. The company continues to advance studies for a second expansion at Tanami.

Africa production remains unchanged at between 815 000 - 875 000 oz in 2018. Production is expected to be between 1.1 and 1.2 million oz in 2019 as the Ahafo Mill expansion reaches commercial production and between 880 000 - 980 000 oz in 2020 as both Ahafo and Akyem reach lower opencast grade. The company continues to advance the Ahafo North project and other prospective surface and underground opportunities. Gold cost outlook – CAS remains unchanged at between US$700 and US$750/oz in 2018. CAS is expected to be between US$620 and US$720/oz for 2019 and between US$650 and US$750/oz longer term through 2022. AISC remains unchanged at between US$965 and $1025/oz in 2018. AISC is expected to be between US$870 - US$970/oz in 2019 and longer-term through 2022. Further Full Potential savings and profitable ounces from projects that are not yet approved represent additional upside not currently captured in guidance.

North America CAS remains unchanged at between US$730 and US$780/oz in 2018. CAS is expected to be between US$680 and US$780/oz in 2019 and between US$655 and US$755/oz in 2020 on higher production at Twin Creeks, Cripple Creek & Victor and Long Canyon. AISC has improved to be between US$920 and US$955/oz in 2018 on improved unit CAS. AISC is expected to be between US$870 and US$970 per ounce in 2019 and between US$825 - US$925 in 2020.

South America CAS remains unchanged at between US$675 - US$735/oz in 2018. CAS is expected to be between $560 and $660 per ounce in 2019 as Quecher Main reaches commercial production and be between US$690 and US$790/oz in 2020. AISC improved to be between US$925 - US$1025/oz in 2018 on lower unit CAS. AISC is expected to be between US$810 - US$910/oz in 2019 on improved unit CAS and be between US$970 - US$1070/oz in 2020.

Australia CAS increases to between US$695 - US$745/oz in 2018 driven by the East wall slip at KCGM. CAS and AISC in 2019 and 2020 may be impacted by the KCGM rock falls and life of mine plans are being assessed.

Africa CAS increases to between US$715 - US$765/oz in 2018 due to higher inventory costs from lower grade mined and higher surface mining costs. CAS is expected to be between US$520 - US$620/oz in 2019 and between US$610 and US$710/oz in 2020. AISC increases to between US$880 and US$940/oz in 2018. AISC is expected to be between US$700 and US$800/oz in 2019 as the Ahafo Mill expansion reaches commercial production and between US$775 and US$875/oz in 2020.

Copper

Attributable production remains unchanged at between 40 000 and 60 000 t in 2018 and 2019, increasing to between 45 000 and 65 000 t longer term through 2022 as Phoenix moves into higher copper zones. CAS remains unchanged at between US$1.65 and US$1.85/lb in 2018. CAS is expected to be between US$1.80 and US$2.20/lb in 2019 before falling to between US$1.40 and US$1.80/lb longer term as Phoenix moves into higher copper zones. AISC remains unchanged at between US$2.00 and US$2.20/lb in 2018. AISC is expected to be between US$2.25 - US$2.55/lb in 2019 and between US$1.80 - US$2.10/lb longer term.

Capital

 

Total capital remains unchanged at between US$1200 and US$1300 million for 2018 and is expected to remain between US$730 - US$830 million for 2019. Primary development capital includes expenditure on the Ahafo Mill and Subika Underground expansions in Africa, Twin Underground in North America and Quecher Main in South America and Tanami Power Project. Sustaining capital remains unchanged at between US$600 - US$700 million in 2018, between US$600 -US$700 million for 2019 and between US$550 - US$650 million per year longer term to cover infrastructure, equipment and ongoing mine development.

Read the article online at: https://www.globalminingreview.com/finance-business/27072018/newmont-reports-2q18-results/

 

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