Newmont Mining (NEM, Financial) released decent results for the second quarter. The earnings came out to be decent and in line with analysts’ estimates. However, Newmont’s top line saw a decline, missing Zack’s estimates. The main reason behind the decline in the revenue was weakness in the commodity segment. However, the company thinks this will be a short-term hit and is now expecting improvement in the coming quarters. It has also raised the outlook for gold and copper production. Newmont is seeing improvements and its investment in a gold mine in Suriname is expected to add meaningfully to company’s top line.
Weak results but a better outlook
Newmont’s quarterly revenue fell around 12.5% on a year over year basis to $1,765 million in the quarter missing consensus estimates of $1,839 million. On earnings, it posted EPS of $0.20 which is more than $0.18 per share it posted in the same quarter last year meeting the consensus estimates.
Newmont did suffer in the past due to weak commodity prices. The company was making losses but Newmont posted decent results in the recently reported quarter showing that the market is improving. The impact of the improving market is evident by the slight improvement in the earnings. The company is seeing increase in the production of gold and copper which is benefiting Newmont. Following such positive signs, Newmont has raised gold production forecast by 2% to 4.7 million to 5 million ounces for 2014.
This is a good sign for the company. The improvement in the commodity prices will be an added advantage to it and will help it to post better numbers on the board in future.
This resolution indicates better times
Moving forward, Newmont had been struggling with a dispute regarding copper exports. It has also signed a Memorandum of Understanding with the government in Indonesian and will resume copper exports.
But, as per the latest updates, Newmont has withdrawn the international arbitration filing against the Indonesian government as the senior government officials are now open to formal negotiations to conclude a Memorandum of Understanding previously signed. Though the government has yet to receive an official letter, Newmont is confident of a safe rampup of copper concentrate production and exports from Batu Hijau in future. This is a positive sign for it as it will contribute much adding better numbers to the revenue.
Mine developments
The Merian gold mine is expected to start production late in 2016. Though the company is still waiting for government approvals, it thinks it to be functional by 2016.
If it happens, it will enhance gold production which will drive profitability to Newmont in future.
Besides these initiatives, Newmont is focusing on achieving better cost structure. It is also shutting down its non-core assets. It recently ended up with the sale of Jundee for $94 million bringing its total proceeds from the sale of non-core assets to nearly $800 million.
Conclusion
Newmont has many strong points such the restart in copper exports from the mine in Indonesia and the new gold mine in Suriname. Thus, investors can definitely consider investing in this stock for the long run.
