Newmont Mining (NEM) Tops Q1 EPS by 2c

Newmont Mining (NYSE: NEM) reported Q1 EPS of $0.25, $0.02 better than the analyst estimate of $0.23. Revenue for the quarter came in at $1.7 billion versus the consensus estimate of $1.74 billion.

Outlook

Newmont’s outlook reflects steady gold production and ongoing investment in its current assets and best growth prospects. Newmont does not include potential cost and efficiency improvements in its outlook beyond 2017, nor does it include development projects that have not yet been funded or reached the execution stage – both of which represent upside to guidance. Economic assumptions include $1,200 per ounce gold, $2.25 per pound copper, $55 per barrel WTI and $0.75 Australian dollar exchange rate. Outlook has been updated to include the Ahafo expansion projects. Newmont continues to review 2017 performance and will re-assess outlook with second quarter results.

Attributable gold production guidance is improved — Outlook for 2017 remains at between 4.9 and 5.4 million ounces as full year production at Merian and Long Canyon more than offsets declines at Twin Creeks and Yanacocha. Production guidance for 2018 and longer-term guidance improves to between 4.7 and 5.2 million ounces with production from the Ahafo expansions offsetting declines at maturing assets. Expansion projects at Yanacocha and Twin Creeks represent upside to both production and cost guidance.

• North America guidance is unchanged. Production guidance remains at between 2.0 and 2.2 million ounces in 2017 with a full year of operation at Long Canyon offsetting the impact of higher planned stripping at Twin Creeks. Guidance is unchanged at between 1.9 and 2.1 million ounces in 2018 and between 1.8 and 2.0 million ounces in 2019 due to planned stripping at Carlin and continued stripping at Twin Creeks. Both sites are expected to return to higher production levels in 2020.
• South America guidance is unchanged. Production guidance remains between 630,000 and 690,000 ounces in 2017 and between 625,000 and 725,000 ounces in 2018 as Merian increases production. Guidance remains at between 500,000 and 600,000 ounces in 2019 due to declining production at Yanacocha and higher stripping at Merian. Quecher Main at Yanacocha represents additional upside currently not captured in guidance. The Company continues to advance oxide and sulfide potential at Yanacocha.
• Australia guidance is unchanged. Production guidance for 2017 and 2018 remains at between 1.5 and 1.7 million ounces and between 1.4 and 1.6 million ounces for 2019 as Boddington stripping results in lower grades before returning to higher production levels in 2020. The Company is studying a further expansion at Tanami which represents additional upside not currently captured in guidance.
• Africa guidance is improved following the inclusion of the Subika Underground and Mill Expansion projects. Production guidance improves to between 725,000 and 785,000 ounces in 2017 and improves to between 750,000 and 850,000 ounces in 2018 as Subika Underground offsets depletion of softer ores and higher grade stockpiles at Akyem. Production is expected to further improve in 2019 to between 1.0 and 1.1 million ounces as Ahafo reaches higher grade ore in the Subika pit and the Ahafo Mill Expansion achieves commercial production.

Gold cost outlook is improved for 2019-2021 – CAS guidance remains unchanged at between $700 and $750 per ounce for 2017, between $700 and $800 per ounce for 2018 and between $650 and $750 per ounce for 2019-2021, before any portfolio improvements expected through the Full Potential program. AISC guidance for 2017 and 2018 is unchanged at between $940 and $1,000 per ounce and between $950 and $1,050 per ounce, respectively, excluding further cost and efficiency improvements. Longer-term AISC guidance is improved to between $870 and $970 per ounce as increased production from Ahafo – combined with ongoing productivity, cost and capital improvements – is expected to more than offset inflation and partially counter the effects of lower grades.

• North America cost guidance is unchanged. CAS per ounce guidance remains at between $705 and $755 in 2017 and between $750 and $850 in both 2018 and 2019. AISC per ounce guidance remains at between $905 and $980 in 2017, between $950 and $1,050 in 2018 and between $930 and $1,030 in 2019, as a result of planned stripping at Carlin combined with lower grades at Twin Creeks and CC&V.
• South America cost guidance is unchanged. CAS per ounce guidance remains at between $675 and $725 in 2017, between $650 and $750 in 2018 and between $575 and $675 in 2019. AISC per ounce guidance is unchanged at between $880 and $980 in 2017, between $850 and $950 in 2018 and between $810 and $910 in 2019. Costs decrease as lower cost production from Merian replaces higher cost production from Yanacocha. Yanacocha reaches higher grade ore in Tapado Oeste in 2019.
• Australia cost guidance is unchanged. CAS per ounce guidance remains at between $660 and $710 in 2017 and at between $675 and $775 in both 2018 and 2019. AISC per ounce guidance is unchanged at between $820 and $880 in 2017 and between $850 and $950 in both 2018 and 2019. Higher costs are due to lower grades as a result of stripping at Boddington, lower grades at Tanami, and treatment of additional lower grade stockpile ore at Kalgoorlie in 2019.
• Africa cost guidance for 2018 is improved following the inclusion of the Subika Underground and Mill Expansion projects. CAS per ounce guidance is unchanged at between $780 and $830 in 2017, between $800 and $900 in 2018 and between $475 and $575 in 2019. AISC per ounce guidance is unchanged in 2017 at between $950 and $1,010, improved in 2018 to between $960 and $1,060 and remains unchanged in 2019 at between $680 and $780 in 2019. Medium term costs increase due to Akyem processing harder, lower-grade ore, which is more than offset as the Subika Underground mine achieves production in 2018, and higher-grade ore is reached in the Subika open pit in 2019.

Copper — Together, Boddington and Phoenix are expected to produce between 40,000 and 60,000 tonnes of copper per year, unchanged from previous guidance. Overall cost guidance remains unchanged; CAS guidance remains at between $1.45 and $1.65 per pound and AISC guidance remains at between $1.85 and $2.05 per pound. Longer term cost guidance is unchanged; CAS guidance remains at between $1.50 and $1.90 per pound and AISC guidance remains at between $1.85 and $2.15 per pound.

Capital — Capital guidance for 2017 is increased to between $900 million and $1.1 billion, covering the remaining capital for the Northwest Exodus and Tanami Expansion projects and the initial capital for Subika Underground and the Ahafo Mill Expansion. Capital guidance for 2018 is increased to between $900 million and $1.0 billion and 2019 guidance is increased to between $630 million and $730 million. 2017 and longer-term sustaining capital outlook of between $600 and $700 million is unchanged from prior guidance. Newmont expects to reach development decisions on the Quecher Main and Twin Underground projects in the second half of this year. These projects are currently excluded from outlook.

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