February 21, 2008 / 4:41 PM / in 10 years

UPDATE 3-Gold miner Newmont reports loss on write-down

(Recasts; adds company, analyst comments; updates stock price)

By Steve James

NEW YORK, Feb 21 (Reuters) - Newmont Mining Corp NEM.N, the world’s No. 2 gold producer, reported quarterly results roughly in line with Wall St expectations on Thursday but some industry analysts worried the company was not getting more of a boost from soaring gold prices, now nearing $1,000 per ounce.

Newmont reported a fourth-quarter loss but the results were comparable to analysts’ expectations if a write-down on exploration and other items were excluded.

Soaring mining costs and dwindling production and gold reserves are offsetting gold price increases, experts say.

Denver-based Newmont’s results came as Canada’s Barrick Gold Corp ABX.TO, the world’s top producer, reported a 28-percent rise in fourth-quarter profit and Canada’s No. 2, Goldcorp Inc G.TO GG.N nearly quadrupled earnings.

“The gold price may give them a bit of a bump, but the management challenge remains the same,” said HSBC analyst Victor Flores. “The future is a tough slog, costs are up and they’re not replacing reserves.”

Frank Holmes, chief executive of U.S. Global Investors in San Antonio, Texas, said fuel is a big mining cost and the price of oil is rising faster than the price of gold.

“Newmont still can’t make money and it’s the high cost of operations,” said Holmes.

On a day the price of gold set a record of $950 per ounce in premarket trading in New York, Newmont reported a net loss of $289 million, or 63 cents per share, compared with a profit of $223 million, or 50 cents per share, a year earlier.

Revenue slipped to $1.41 billion from $1.42 billion, with a sharp drop in Nevada gold sales.

It recognized a $1.1 billion non-cash exploration segment goodwill impairment, primarily due to recent reserve replacement results, required changes to the company’s valuation model assumptions and new industry-developed interpretation of accounting rules.

Factoring in this item, as well as $39 million for the write-down of marketable securities, and a $597 million gain on the sale of its royalty portfolio and other asset gains, Newmont’s normalized operating number comes out at $228 million, or a positive 50 cents.

This compares with Reuters Estimates’ average analyst estimate of 38 cents for the fourth quarter.

“2007 was a year of transition, momentum and re-investment, while substantially meeting our guidance and delivering a strong fourth quarter,” said Newmont spokesman Omar Jabara.

“This was accomplished through a number of decisive actions and strategic initiatives to refocus on our core gold business in order to position the company to take advantage of a rising gold price.”

Under new Chief Executive Officer Richard O‘Brien, Newmont has eliminated its hedge book and merchant banking business and is addressing the issue of reserves by boosting its exploration budget by approximately 10 percent to 15 percent this year.

Newmont reported proven and probable reserves at the end of 2007 of 86.5 million equity ounces compared with 93.9 million equity ounces a year earlier. Equity ounces are the portion owned by Newmont as opposed to project partners.

Earlier this month, it forecast 2008 sales would be in line with 2007, when equity gold sales totaled 5.3 million ounces, down from 5.9 million ounces in 2006.

During the fourth quarter, the price of gold rose more than 12 percent from $740 per ounce to $833. Newmont said its average realized gold price in the quarter was $785 per ounce -- up from $612 a year earlier. But costs applicable to sales rose to $384 per ounce from $324.

Equity gold sales in Nevada decreased in the fourth quarter to 667,000 ounces from 887,000 ounces in the year-ago quarter. They also decreased at Batu Hijau in Indonesia and at Ahafo, in Ghana, Newmont said.

Newmont shares, which had been in both positive and negative territory Thursday, were 19 cents higher to $51.34 in afternoon trading on the New York Stock Exchange. (Reporting by Steve James, editing by Derek Caney and Tim Dobbyn)

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