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Newmont Mining Corp. (NEM), the largest U.S. gold producer, reported a fourth-quarter loss because of a $1.61 billion writedown of its Hope Bay project in Canada.
The net loss was $1.03 billion, which compared with net income of $812 million a year earlier, Greenwood Village, Colorado-based Newmont said yesterday in a statement. Earnings excluding the non-cash asset-impairment charge and other one- time items were $1.17 a share, trailing the $1.28 average of 12 analysts’ estimates compiled by Bloomberg.
“We’ve seen writedowns across the space here,” Adam Graf, a New York-based analyst at Dahlman Rose & Co., said in a telephone interview today. Accounting rules require companies to use current cost estimates with three-year trailing average gold prices when evaluating assets, he said.
Kinross Gold Corp., Canada’s third-largest gold producer by sales, last week recorded a $2.49 billion goodwill writedown on its Tasiast mine in Mauritania. Agnico-Eagle Mines Ltd., another Canadian miner, posted a fourth-quarter loss on Feb. 15 after taking a writedown on its Meadowbank project in northern Canada.
Newmont, which has mines in the Americas, the Asia-Pacific region and Africa, said in January it would put the Hope Bay project on hold and that the net book value of the asset would be subject to impairment testing. The project, in the Canadian Arctic, is expensive to operate because of its location, said Randy Engel, Newmont’s executive vice-president for strategic development.
“We’ve got to look at capital rationing for 2012 because we’ve got three big projects going simultaneously,” Engel said yesterday in a telephone interview. “We had to step back and put a few things on hold.”
The company had a fourth-quarter loss of $2.02 a diluted share, compared with net income of $1.61 reported a year earlier, the company said. Revenue rose 8.5 percent to $2.77 billion.
Newmont fell 2 percent to $62.51 in New York. The shares have gained 4.2 percent this year.
Newmont said last month it produced 5.2 million ounces of gold and 206 million pounds of copper in 2011. Output this year is forecast at 5 million to 5.2 million ounces of gold and copper production will decline to 150 million to 170 million pounds.
The company’s cost to produce and sell an ounce of gold may rise as much as 14 percent this year, to as much as $675. Copper costs are forecast at as much as $2.20 a pound, compared with $1.26 in 2011.
Production will be lower this year and costs will rise because the company expects to process lower-grade ore at its Batu Hijau mine in Indonesia, Graf said.
“That has been telegraphed for a long time, that this was going to be a weak year for Batu,” Graf said. “Anybody who has been paying attention to the story should not be surprised by the guidance.”
Newmont said in November it suspended development of its $4.8 billion Minas Conga project in Peru after weeks of clashes between police and opponents of the mine.
The company is also developing the Akyem mine in Ghana and expanding its Tanami operations in Australia. Capital spending in 2012 is forecast at $3 billion to $3.3 billion, Newmont said in the statement.
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