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« Germany: On Your Deutsche Marks! | Main | Yamana Gold Incorporated: Underwhelming »

Newmont Mining Corporation hits the skids

NEM Chart 24 Feb 2011.JPG

Newmont Mining Corporation (NEM) have released an update including a dividend payment which was not well received by the investment community as the stock price fell 7.36% on massive turnover of 19.1 million shares, which is twice the daily volume.

We'll start with the chart where we can see the golden crossover of the 50dama crossing over the 200dma in a downward direction, this is usually a rather negative sign for stocks. The technical indicators have also turned negative and are heading south.

The latest news release from Newmont hit the shares like a lead balloon. Gold prices also took a bit of a pounding after hours which didnt help the situation, however, this doesn't look good.

Newmont Mining Corporation (NYSE: NEM) today announced that net income increased 76% to $2.3 billion ($4.63 per share) in 2010, compared to $1.3 billion ($2.66 per share) in the prior year. Operating cash flow was a record $3.2 billion for 2010, compared to $2.9 billion in 2009. Adjusted net income(1) rose 39% to a record $1.9 billion ($3.85 per share) from $1.4 billion($2.79 per share) in 2009, while the Company's gold operating margin(2) increased by 30% to $737 per ounce in 2010, from $566 per ounce in 2009.

2010 Highlights:

Attributable gold and copper production of 5.4 million ounces and 327 million pounds, respectively, with gold production slightly higher and copper production approximately 44% higher than in 2009;

Record revenue of $9.5 billion, an increase of 24% from 2009;

Average realized gold and copper price of $1,222 per ounce and $3.43 per pound, respectively;
Gold operating margin increase(3) of 30%, compared with an average realized gold price increase of 25%;

Consolidated costs applicable to sales for gold and copper of $485 per ounce and $0.80 per pound, respectively; and Cash and cash equivalents of more than $4 billion on December 31, 2010.

Q4 2010 Highlights:

Attributable gold and copper production of 1.4 million ounces and 74 million pounds, respectively;
Average realized gold and copper price of $1,366 per ounce and $4.52 per pound, respectively; and Costs applicable to sales for gold and copper of $512 per ounce and $0.95 per pound, respectively.

"I am pleased to report that we generated record operating cash flow for the second year in a row, with our gold operating margin growing by 30% to $737 per ounce on an average realized gold price of$1,222 in 2010," stated Richard O'Brien, President and CEO.

"As a whole, our operations performed according to our plans, producing 5.4 million attributable ounces of gold in 2010. We continue to advance our Conga Project in Peru, which contains over 6 million attributable ounces of gold and 1.6 billion attributable pounds of copper reserves. Similarly, we continued to advance with our Akyem Project inGhana, which contains over 7 million attributable ounces of gold reserves. Advancing these two world-class mining projects, as well as continuing our drilling programs at Hope Bay in Canada, remain some of our top priorities in 2011."

NEM 5 Year table 24 Feb 2011.JPG

We can only conclude that after five years of rising gold prices this stock has gone nowhere and is still sub $60.00. The management need to explain such a poor performance along with the tiny dividend, which at $0.60 per year is a return of 1% and no growth in the price of the stock.

This one is not for us.

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sk chart 25 Feb 2011.JPG

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Reader Comments (1)

It's interesting that the stock price took a dive, despite increasing margins by 3%. I can understand investors being less responsive to revenue growth since this was simply the result of higher world gold prices. What has been the change in actual ? It says they are going ahead in Peru and Canada - how has this moved production overall?

March 9, 2011 | Unregistered CommenterTerri Sterner

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