Newmont Mining Corporation Announces 2nd Quarter
Results: Positive Earnings, Strong Cash Flow Denver (PROTEXT)
Newmont Mining Corporation (NYSE: NEM) earned $7.1 million, or 4 cents per share, and generated operating cash flow of $110.9 million, or 66 cents per share, in the second quarter of 1999 reflecting the operating strength and flexibility of its portfolio of properties. Net income for the first six months of the year was $17.0 million, or 10 cents per share. Six-month cash flow from operations of $166.1 million, or 99 cents per share, was in line with last year's $170.6 million, or $1.09 per share, despite a decline of more than $100 million in revenue to $663.2 million as the realized gold price fell $35 to $287 an ounce. Equity gold production of 1.91 million ounces for the first half of 1999 compared with 2.07 million ounces in the 1998 period. Total cash costs were $182 per equity ounce versus $183 a year earlier, while total production costs, including depreciation, depletion and amortization declined $10 to $238 an ounce, one of the lowest in the industry. "These results reflect our ability to achieve increased operating efficiencies and reduce costs. As these efforts, which we call our Gold Medal Performance Program, gain momentum, we expect to see significant on-going improvements in four principal measures of shareholder value: production, costs, cash flow and debt reduction," said Ronald C. Cambre, Newmont's chairman and chief executive officer. Earnings in the 1999 periods included an after-tax gain of $8.4 million from the sale of the True North property in Alaska and after-tax charges of $4.9 million in the quarter and $8 million in the six months for start-up costs at the Batu Hijau project in Indonesia. In the second quarter of 1998, Newmont earned $24.6 million, or 16 cents per share, after inclusion of start-up costs of $2.2 million. In the January-through-June period of 1998, net income of $22.0 million, or 14 cents per share, included a charge of $36.2 million to adopt a new accounting principle expensing previously capitalized start-up costs at Batu Hijau and other projects. Revenue in this year's second quarter of $333 million compared with $376 million a year earlier, reflecting a $39 decline in the realized gold price to $281 per ounce. Equity gold production was 952,300 ounces versus 1,037,700 ounces in the 1998 quarter. Total cash cost per equity ounce of production of $183 was essentially unchanged from the 1998 period. North American operations produced 634,200 ounces of gold during the 1999-quarter at a total cash cost of $211 an ounce. This compared with 773,200 ounces produced at a total cash cost of $199 an ounce in the second quarter of 1998. Reduced mining rates at higher-cost pits in Nevada, lower grades due to mine sequencing and the processing of transition ores (ores with a moderate refractory content) in oxide mills with subsequently lower recovery rates reduced output and increased unit costs. Partially offsetting was a 14 percent cost reduction at the Mesquite heap-leach operation in California. Overseas operations had another excellent quarter with a 20 percent increase in gold production to 318,100 equity ounces and a $6 decrease in total cash costs to $127 per equity ounce. -- The Zarafashan-Newmont joint venture in Uzbekistan produced a record 133,800 ounces of gold (66,900 equity ounces) at a total cash cost of $172 per ounce as the project benefited from higher ore grades placed on the leach pad. A year ago, production of 85,600 ounces (42,800 equity ounces) carried a total cash cost of $258 an ounce reflecting a one-time cost adjustment. -- Minera Yanacocha in Peru increased production 26 percent to 363,700 ounces (186,700 equity ounces) at a total cash cost of $111 per equity ounce, from 287,900 ounces (147,800 equity ounces) and a total cash cost of $109 per equity ounce in the 1998 quarter, reflecting the continuing growth of this outstanding property. -- Minahasa in Indonesia produced 64,500 ounces at a total cash cost of $124 per ounce, compared with 73,900 ounces at a total cash cost of $108 in the 1998 period. Harder ore reduced mill throughput in the most recent quarter, while the year-ago quarter benefited from devaluation of the Indonesian currency. For the first six months of 1999, North American operations produced 1.29 million ounces compared with 1.54 million ounces in the 1998 half. Total cash costs of $208 per ounce compared with $202 a year earlier. With initial production from the Deep Post surface deposit in Nevada, Newmont expects North American production to increase 10 percent in the second half of the year compared with the first half, with total cash costs declining to approximately $200 an ounce. Overseas production during the first half of 1999 totaled 619,200 equity ounces of gold versus 527,200 equity ounces in 1998. Total cash costs per equity ounce were unchanged at $128. With increased production from Minera Yanacocha and the commencement of heap leaching at Minahasa during the second half, total overseas production is expected to increase 20 percent from the first half of 1999, with total cash costs falling by approximately $10 an ounce. Investments of $137.8 million during the first half included capital expenditures of $77.3 million, primarily for mine development in Nevada and leach pad expansion in Peru, and $92 million to fund the company's equity portion of the Batu Hijau project, offset in part by $28 million from the sale of the True North property. This was nearly $100 million less than the $235.5 million invested in the first half of 1998, which included the acquisition of an additional 13 percent interest in Yanacocha. The company ended the quarter with $81.9 million in cash and total long-term debt, including the current portion, of $1,233.8 million. This compares with cash of $79.1 million and long-term debt of $1,248.7 million on December 31, 1998. Additionally, on July 26, the company termed out one third of its revolving credit debt on favorable terms through the execution of a prepaid forward gold sales contract netting proceeds of $137.2 million for the delivery of a specified number of ounces of gold through 2007. Comprehensive income for the half of $22.3 million reflects an unrealized gain of $5.3 million on marketable securities. In looking forward, Mr. Cambre concluded: -- Batu Hijau is more than 95 percent complete and on schedule for a fourth quarter start-up. The port, power plant, crusher and conveyor system and two SAG mills are scheduled for completion during the third quarter, with the concentrator commencing operations in the fourth quarter. Mining has reached 300,000 tonnes per day, a 50 percent increase during the second quarter. Demobilization of the construction workforce is going smoothly with 8,000 workers currently on site, down from 12,000 at the end of last year. Anticipated total cash costs for the project are estimated at 48 cents per pound of copper after gold credits. -- Development has begun on Nevada's first combination bioleaching biomilling operation at Carlin. The $8 million project, which will take a year to complete, will extract 645,000 ounces of gold from 11.7 million tons of low-grade refractory ore stockpiles. The ore will undergo crushing, a 100-day bioleach cycle and then processing in Mill 5. The project requires less capital, less leach time and yields greater recoveries than the company's originally proposed heap leach bio-oxidation process. Thus it offers excellent economics, and will generate more than $40 million in free cash flow between 2000 and 2003 at a $250 gold price. -- The fall in the gold price has been deeper and lasted longer than expected. The destabilization caused by the U.K. and proposed IMF gold sales is vastly out of proportion with the actual amount of bullion involved. But, coupled with continued heavy short selling, negative sentiment toward the metal is overshadowing strong demand fundamentals. We are convinced that current conditions are unsustainable and that shareholders will be rewarded for their patience. -- Newmont expects to produce approximately 2.2 million ounces of gold in the second half of the year at a total cash cost of under $175 an ounce and total production costs of approximately $230 an ounce. This level of performance would match the record production of 1998 at lower costs and sets the stage for continued improvement. We expect to be profitable in the second half of the year and generate operating cash flow for the full year in excess of $2 per share. Achieving these goals will be a testimony to the strength and flexibility of our operations as well as the determination and resourcefulness of our people. Detailed operating statistics are available on the press release section of www.newmont.com or via facsimile at 1-800-758- 5804 (PIN 615675). This press release contains "forward-looking statements" within the meaning of U.S. federal securities laws. The company's performance is subject to risks, uncertainties and other factors that could cause actual results to differ materially from these statements. Such risks include, but are not limited to, gold price volatility, increased production costs, variances in ore grade or recovery rates from those assumed in mining plans, non- realization of estimated synergies, failure to receive on a timely basis necessary permits or other governmental approvals, changes in U.S. or foreign laws or regulations, and delays in the receipt of or failure to obtain any necessary financing. For a more detailed discussion of such risks and other factors, see Page 15 of the 1998 Annual Report on Form 10-K for Newmont Mining. ots Original Text Service: Newmont Mining Corporation Internet: http://www.newsaktuell.de Contact: Doug Hock, (USA) 303-837-5812, or Investor Relations: Terry Terens, (USA) 303-837- 6141, both of Newmont Mining Corporation Web site: http://www.newmont.com
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