UPDATE 4-Newmont profit soars, but costs also rise

* Q3 EPS $1.09 vs Wall Street view 95 cents

* Sales rise to $2.6 bln from $2.0 bln

* Cuts Aussie mine production target, ups cost estimate

* Stock down 2.3 percent
(Adds executive comments, updates stock move)

By Steve James

NEW YORK, Nov 2 (BestGrowthStock) – Newmont Mining Corp (NEM.N: )
beat Wall Street estimates with a 38 percent increase in
quarterly profit, but the world’s No. 2 gold producer cut the
2010 production target at its flagship Australian mine for the
second time this year, sending its stock down.

Newmont also raised its estimate for costs applicable to
sales this year after they climbed 18 percent in the third
quarter. It cited higher waste mining and royalty costs, a
stronger Australian dollar, and lower production in South
America, partially offset by higher output in Africa.

The company’s stock was down 2.3 percent at $59.80 in
afternoon trading on the New York Stock Exchange.

Newmont lowered the full-year production target at the
Boddington mine in Western Australia to a range of 700,000 to
750,000 ounces from 750,000 to 825,000 ounces. Boddington costs
applicable to sales were raised to $575 to $595 per ounce from
$475 to $550.

The company cited unplanned mill maintenance in July and
August. As a result, third-quarter gold production at the mine
decreased 2 percent from the second quarter, and copper output
fell 12 percent.

On a conference call, Chief Executive Richard O’Brien
assured Wall Street analysts the mine would be the bumper gold
producer the company has promised.

“As a 20-year-plus asset with compelling exploration
potential, our expectations for Boddington continue to be
high,” he said, adding that the mine was still transitioning to
full capacity.

Brian Hill, Newmont’s vice president of operations,
stressed that Boddington’s production in October was “pretty
much in line with the forecast that we had expected.”

He said Newmont was “refining our modeling assumptions and
the methodology that we have been using to generate our
production planning model.” He said the company would give its
updated 2011 outlook for the mine in February.

In its earnings release on Tuesday, Newmont said
third-quarter net profit rose to $537 million, or $1.09 per
share, from $388 million, or 79 cents per share, a year
earlier. Sales increased to $2.6 billion from $2.0 billion. The
price of gold hit highs above $1,350 per ounce in recent
months.

Analysts on average were expecting earnings of 95 cents per
share on revenue of $2.37 billion, according to Thomson Reuters
I/B/E/S.

Newmont, which operates mines in North and South America,
Australia, Indonesia and Africa, narrowed its full-year gold
production forecast to a range of 5.3 million ounces to 5.4
million ounces, from 5.3 million to 5.5 million.

The Denver-based company increased its costs applicable to
sales for the year to a range of $485 to $500 per ounce from
$460 to $480.

During the third quarter, Newmont’s equity gold production
totaled 1.4 million ounces, while equity copper production was
83 million pounds. Equity production represents the proportion
of production owned by Newmont in joint operations with other
mining companies.

With prices soaring, Newmont’s average realized gold price
in the quarter was $1,221 per ounce, around the spot average.
It sold copper at an average of $3.67 per pound, considerably
higher than the spot average of $3.29.

“The main reason for the higher earnings per share is due
to the higher realized copper price impacting the revenue
line,” analyst Tanya Jakusconek, of National Bank Financial,
wrote in a research note.

Noting that Newmont had tightened its gold production
forecast and raised cost estimates, she concluded the company
would have a weaker fourth quarter operationally.

Michael Dudas, of Jefferies & Co, said a combination of
factors should push gold prices higher in the next 12 to 18
months, “and we anticipate Newmont shares to better reflect
pricing.”
(Reporting by Steve James; Editing by Lisa Von Ahn, Dave
Zimmerman and John Wallace)

UPDATE 4-Newmont profit soars, but costs also rise