DENVER, October 25, 2018 – Newmont Mining Corporation (NYSE: NEM) (Newmont or the Company) announced third quarter 2018 results.
• Net income (loss): Delivered GAAP net income (loss) from continuing operations attributable to stockholders of $(161) million or $(0.31) per diluted share; delivered adjusted net income1 of $175 million or $0.33 per diluted share, down $0.01 compared to the prior year quarter
• EBITDA: Generated $636 million in adjusted EBITDA2, down $20 million from the prior year quarter
• Cash flow: Reported consolidated cash flow from continuing operations of $428 million and free cash flow3 of $154 million
• Gold costs applicable to sales (CAS)4: Reported CAS of $691 per ounce, lower than the Company’s full year guidance
• Gold all-in sustaining costs (AISC)5: Reported AISC of $927 per ounce, lower than the Company’s full year guidance
• Attributable gold production: Produced 1.29 million ounces of gold, in line with the Company’s full year guidance
• Portfolio improvements: Completed the CC&V concentrates project in North America; commissioned the primary crusher at Merian in South America; advanced the Tanami Expansion 2 project to definitive feasibility study in Australia; formed a strategic partnership with Evrim Resources in the Cuale gold project in Mexico; expanded regional exploration activities with an investment in Orosur Mining and an opportunity to participate in Miranda Gold’s Lyra project in Colombia
• Financial strength: Ended the quarter with $3.1 billion cash on hand and net debt of $1.1 billion; an industry-leading balance sheet with investment-grade credit profile; and a quarterly dividend declared of $0.14 per share, an increase of 87 percent over the prior year quarter
• Outlook: Improved 2018 corporate-level AISC per ounce and narrowed production outlook
“Newmont delivered $636 million in adjusted EBITDA and $154 million in free cash flow in the third quarter on the back of ongoing productivity improvements across the portfolio and higher grades in Africa and South America,” said Gary J. Goldberg, President and Chief Executive Officer. “We continued to advance profitable projects as we completed the CC&V concentrates project and commissioned the primary crusher at Merian; safely, on budget and on schedule. And we increased investment in Quecher Main, Subika Underground and the Ahafo Mill expansion during the period while increasing our dividend for the third quarter by 87 percent.”
Third Quarter 2018 Summary Results
Net income (loss) from continuing operations attributable to Newmont stockholders of $(161) million or $(0.31) per diluted share, a decrease of $374 million from the prior year quarter primarily due to the impairment of exploration and long-lived assets in North America and lower metal prices, partially offset by lower income tax expense.
Adjusted net income was $175 million or $0.33 per diluted share, compared to $184 million or $0.34 per diluted share in the prior year quarter resulting from lower metal prices. Primary adjustments to net income include $0.74 per diluted share related to impairments and a write-down in North America, $(0.14) per diluted share related to net tax adjustments and valuation allowances, and $0.04 per diluted share related to the change in fair value of marketable equity securities and a gain on asset and investment sales.
1 Non-GAAP measure. See pages 10-11 for reconciliation to Net income (loss) attributable to Newmont stockholders.
2 Non-GAAP measure. See page 12 for reconciliation to Net income (loss) attributable to Newmont stockholders.
3 Non-GAAP measure. See page 13 for reconciliation to Net cash provided by operating activities.
4 Non-GAAP measure. See page 13-14 for reconciliation to Costs applicable to sales.
5 Non-GAAP measure. See pages 14-19 for reconciliation to Costs applicable to sales.
Revenue decreased eight percent to $1,726 million for the quarter primarily due to lower average realized gold prices and lower production at various sites.
Average realized price6 for gold was $1,201, a reduction of $75 per ounce over the prior year quarter; average realized price for copper was $2.50 per pound, a reduction of $0.56 over the prior year quarter.
Attributable gold production decreased four percent to 1.29 million ounces primarily due to lower mill throughput at Carlin, lower leach production at CC&V, and lower grades at KCGM. These impacts were partially offset by higher grades at Ahafo, Yanacocha and Tanami.
Gold CAS decreased four percent to $691 per ounce for the quarter due to a lower co-product allocation of costs to gold based on a lower relative gold sales value and a favorable Australian dollar foreign currency exchange rate, partially offset by lower ounces sold.
Gold AISC decreased one percent to $927 per ounce for the quarter as lower CAS was offset by higher sustaining capital spend.
Attributable copper production from Phoenix and Boddington was 12,000 tonnes for the quarter, in line with the prior year period. Copper CAS increased 12 percent to $1.54 per pound for the quarter primarily due to a higher co-product allocation of costs to copper. Copper AISC increased 13 percent to $1.87 per pound for the quarter primarily due to higher CAS.
Capital expenditures7 increased by 41 percent from the prior year quarter to $274 million with increased investment in Quecher Main, Subika Underground, and the Ahafo Mill expansion.
Consolidated operating cash flow from continuing operations decreased 12 percent from the prior year quarter to $428 million primarily due to lower metal prices, coupled with unfavorable changes in working capital which were partially offset by higher payments attributable to interest in 2017 related to the repayment of convertible debt. Free cash flow decreased 48 percent from the prior year quarter to $154 million from lower operating cash flow and higher investment in growth projects.
Balance sheet ended the quarter with $3.1 billion cash on hand, a leverage ratio of 0.4x net debt to adjusted EBITDA and one of the best credit ratings in the mining sector. The Company is committed to maintaining an investment-grade credit profile.
Newmont’s capital-efficient project pipeline supports stable production with improving margins and mine life. Near-term development capital projects are presented below. 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 $1,200 gold price.
• Subika Underground (Africa) leverages existing infrastructure and an optimized 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 ounces per year for the first five years beginning in 2019 with an initial mine life of approximately 11 years. Capital costs for the project are estimated between $160 and $200 million with expenditure of between $100 and $110 million in 2018. The project has an IRR of more than 20 percent.
• Ahafo Mill Expansion (Africa) is designed to maximize 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 ounces per year for the first five years beginning in 2020. Capital costs for the project are estimated between $140 and $180 million with expenditure of approximately $75 to $85 million in 2018. The project has an IRR of more than 20 percent.
6 Non-GAAP measure. See page 21 for reconciliation to Sales.
7 Capital expenditures refers to Additions to property plant and mine development from the Condensed Consolidated Statements of Cash Flows.
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