2 major gold miners report robust earnings

0 Comments | Deseret News (Salt Lake City), Feb 23, 2007 | by Sandy Shore Associated Press

DENVER -- Two of the world's largest gold miners reported robust fourth-quarter earnings Thursday due to higher selling prices but said production will slow in the year ahead because of rising operating costs.

The production forecast likely will translate into higher gold prices in the year ahead for both Newmont Mining Corp. and Barrick Gold Corp., speculated analyst Patrick Chidley, with Barnard Jacobs Mellet.

He noted that higher production costs have proven significant for the industry as a whole. "The gold price isn't really high enough and probably will move higher," he said.

Newmont said net income jumped more than threefold in the fourth quarter ending Dec. 31 to $223 million, or 49 cents per share, compared with $62 million, or 14 cents per share, in the prior-year quarter. Revenue rose to $1.46 billion from $1.29 billion in the comparable period of the previous year.

Analysts polled by Thomson Financial forecast earnings of 40 cents per share on sales of $1.31 billion.

While the Denver-based company's gold sales dipped to 2 million ounces in the fourth quarter from 2.4 million ounces a year ago, Newmont said its average realized selling price rose 31 percent to $619 per ounce from $472 per ounce.

However, the cost of sales rose to $322 per ounce from $232 a year ago and likely will rise about 25 percent this year because of lower production and higher costs for labor and energy, among other factors, the company said.

"We finished 2006 on a high note, generating record earnings of $791 million, despite facing a challenging industry landscape," Wayne Murdy, chairman and chief executive officer, said in a statement.

The full-year earnings, equivalent to $1.75 per share, were up from $322 million, or 72 cents per share, in 2005. Revenue rose to $4.99 billion from $4.35 billion.

JP Morgan Securities Inc. analyst John Bridges said in a research note that he expects Newmont to see significant savings in 2008 as the company starts up a power plant in Nevada to reduce utility bills.

Toronto-based Barrick Gold said its fourth-quarter earnings more than doubled to $418 million, or 48 cents per share, from $175 million, or 32 cents per share, in the year-ago period. The recent quarter included $28 million, or 3 cents per share, in one-time charges.

Analysts surveyed by Thomson Financial expected earnings of 48 cents per share.

The company also benefited from a 58 percent increase in gold production and a 23 percent higher realized gold price in the past year.

Greg Wilkins, president and chief executive officer, called 2006 a "banner year," noting that the mining company benefited from the acquisition of Canada-based Placer Dome.

In the most recent quarter, Barrick sold 2.3 million ounces of gold, up from 1.65 million ounces in the fourth quarter of 2005. The average price dipped to $461 per ounce, compared with $467 per ounce in the previous year's fourth quarter.

For the year, Barrick sold 8.4 million ounces of gold, up from 5.3 million ounces in 2005. Revenue climbed to $1.35 billion from $776 million a year ago.

The total cash cost of producing the gold was $287 per ounce in the most recent quarter, up from $221 per ounce for the prior-year quarter.

Newmont's stock rose 93 cents, or 2 percent, to close at $47.91 a share on the New York Stock Exchange. In the past year, the price has ranged from $39.84 a share to $59.70 a share.

Barrick's stock dipped 51 cents, or 1.6 percent, to close at $31.60 a share on the New York exchange. It has ranged from $25.10 a share to $36.03 a share in the past year.