April 30, 2009 / 1:01 PM / 9 years ago

UPDATE 3-Gold miner Newmont's profit down, but tops estimates

* Q1 EPS of 44 cts ex-items tops forecast

* Revenue drops 20 pct to $1.55 bln

* Sees potential margin improvement

* Stock down 2.3 pct (Recasts first paragraph; adds CEO comments from call, stock activity)

By Steve James

NEW YORK, April 30 (Reuters) - Newmont Mining Corp (NEM.N), the world’s No. 2 gold producer, said on Thursday its quarterly profit fell 48 percent, but margins are expected to widen this year as its new Australian mine ramps-up production.

Although the results topped Wall Street estimates, the big drop in profit, combined with 20-percent revenue slump, sent Newmont’s stock down 2.3 percent to $39.79 in early afternoon trade on the New York Stock Exchange.

“A critical driver for us in 2009 is completing Boddington and ramping toward commercial production,” President and Chief Executive Officer Richard O’Brien told industry analysts on a conference call. “We expect start-up in mid-2009.”

Boddington, in Western Australia, is one of the biggest gold mines in the country and is 95 percent complete, he said. It should be producing 300,000 to 500,000 ounces of gold this year and climb to a rate of one million ounces per year sometime next year.

In addition, O’Brien said the gold price is expected to rise again once government stimulus packages to stem the global economic downturn take effect.

“Since last fall we have seen a decoupling of the traditional relationship between a weaker U.S. dollar and stronger gold prices,” he said. “U.S. dollar strength is benefiting from deflationary pressures, distressed credit markets and massive retrenchment of energy prices.

“We do expect gold prices and the U.S. dollar to recouple in the near future as fiscal and monetary policies begin to work. As this occurs we expect inflation risks to return with U.S. dollar weakening and lifting of gold prices.”

First-quarter net earnings fell to $189 million, or 40 cents per share, from $365 million, or 81 cents per share, a year earlier, the Denver-based company said. Revenue fell 20 percent to $1.55 billion.

Excluding costs for job cuts, the acquisition of AngloGold Ashanti’s 33-percent stake in Boddington and a write-down of securities, Newmont posted earnings of 44 cents per share, topping analysts’ average forecast of 41 cents per share, according to Reuters Estimates.

“Lower commodity prices relative to last year both hurt and helped our performance in the first quarter,” O’Brien said in a statement. “Lower copper prices, in particular, negatively impacted our earnings and cash flow.

“On the positive side, lower than expected diesel costs and Australian dollar exchange rates resulted in lower than expected costs applicable to sales,” he said.

If commodity prices remain at forecast levels and gold stays in the current trading range, Newmont expects expanding margins for the rest of the year, he said.

Newmont, whose primary production is gold, said its average realized price was $906 per ounce in the first quarter. For copper, which it mines mainly as a byproduct of its gold operations, had an average realized price of $1.69 per pound.

The copper price rose during the first quarter to $1.84, but still less than half what it was fetching in 2008. Gold touched $1,000 per ounce in February but has since slipped, and on Thursday was trading around $897.

Newmont. which operates mines in Indonesia, Australia, Ghana and North and South America, maintained its estimate for 2009 equity sales — the portion it owns of joint operations — of between 5.2 million and 5.5 million ounces of gold.

Consolidated capital expenditures were $330 million during the first quarter, with over 50 percent attributable to the Boddington project.

Newmont said it is maintaining its 2009 consolidated capital expenditure outlook at between $1.4 billion and $1.6 billion. (Reporting by Matt Daily and Steve James; Editing by Lisa Von Ahn, Dave Zimmerman and Tim Dobbyn)

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