NEWMONT mention Shore GoldNewmont’s Lassonde: Now might be the time to get into gold stocks
By: Dorothy Kosich
Posted: '23-FEB-07 11:33' GMT © Mineweb 1997-2006
RENO, NV (Mineweb.com) -- Newmont Mining Vice Chairman Pierre Lassonde Thursday advised that there may be a great opportunity for investors to get back into gold stocks, which he suggested will have a “much greater appreciation and value” than even the highly successful gold ETF.
During a conference call with analysts to discuss Newmont’s year-end results, Lassonde said more stable and lower oil prices could help mining costs, which, in turn, could see an appreciation in mining share value.
“We are in a hard asset, gold cycle,” he declared. Lassonde maintains that the bull market for hard assets will continue, noting that the last bull market for gold lasted 14 years from 1966-1980. He estimated that the current 6 ½ year bull market has an excellent chance of continuing given China and India’s 10% growth rate and the fact that 40% of the world’s population lives in a region with a rising standard of living.
Newmont Chairman and CEO Wayne Murdy told analysts that the first half of 2007 will remain challenging due to a 46% decrease in ore grade and a 33% in tons mined at the Yanacocha gold mine in Peru and at Australian mines, combined with the continued ramp-up of new mines.
Lassonde said Newmont’s efforts to arrest the decline in gold grades is the foremost of the challenges, adding that exploration successes are slowing the decline. Newmont added 52.5 million ounces of gold reserves—including 7.9 million ounces through exploration and 3.7 million ounces through acquisition, offsetting 7.4 million ounces of depletion, 1.5 million ounces expropriated in Uzbekistan and 2 million ounces of revisions.
The company’s $175 million 2007 exploration program is expected to focus on near-mine programs on the Carlin Trend, Yanacocha, the Sefwi Belt in Ghana, as well as Australia. The company also noted encouraging greenfields projects in regions such as the Guyana Shield in South America, the Andes in Peru, and the Greenstone Belts in West Africa. For the first time, Newmont will spend 9% of its exploration budget for diamond exploration. Newmont invested $152 million in Shore Gold’s diamond exploration program in Saskatchewan, and will spend $18 million to determine if the diamond project should go underground.
2007 GUIDANCE
However, the company said it expected equity gold sales to decline to between 5.2 million and 5.6 million ounces as a result of lower production from Yanacocha and Australia, as well as the closure of two mines in Nevada and Canada. Lost production from the expropriation of the company’s 50% interest in the Zarafshan-Newmont Joint Venture in Uzbekistan will also lower gold production this year.
Costs applicable to sales this year are expected to be 25% higher. Future possible power interruptions in Ghana may also impact Newmont’s mining costs. After this year, the company hopes to realize cost efficiencies and benefits from several investments, completion of the new Boddington mine, construction of a power plant in Nevada (which will lower operating costs $25/oz), and completion of the Yanacocha gold mill.
The company has budgeted $1.8 billion to $2 billion in capital expenditures this year with one-third invested in Nevada, one third in Australia/New Zealand and the remaining one third allocated to other locations.
FINANCIAL RESULTS
Newmont announced that net income for 2006 increase 146% to $791 million ($1.76 per share) compared to $322 million (72-cents per share) for 2005. Net income for the fourth quarter increased by 260% to $223 million (50-cents per share), compared with $62 million (14-cents per share) for the fourth quarter of 2005.
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