Newmont to become unhedged gold 'giant'
theage.com.au
July 6, 2007 - 11:14AM
Newmont Mining Corporation has scrapped its entire 1.85 million ounce gold hedge book, making it the largest unhedged gold producer in the world and also plans to also close down its merchant banking business.
Newmont, which is US-based but also has an Australian listing, spent $US578 million ($A676.5 million) to eliminate its forward sales contracts, and will report a pretax loss of around $US531 million ($A621.5 million) on the early settlements.
The group also plans to close its merchant banking business, resulting in a non-cash impairment charge of $US1.7 billion ($A2 billion) in the second quarter of calendar 2007, but is still examining a possible sale or spin-off.
The renewed focus on its core gold production business comes after Newmont was last year overtaken as the world's biggest gold producer by Barrick Gold, when it took over fellow Canadian miner Placer Dome.
"Looking forward, we intend to maximise gold price leverage for our shareholders, establish a sustainable and reliable production base at competitive operating and capital costs, maintain our financial strength and flexibility and capitalise on our exploration portfolio and land position," Newmont chief executive Richard O'Brien said.
While Newmont plans to sell parts of the merchant banking equity and royalty portfolio, it has also hired advisers to look at alternatives to maximise the value in the business, including a public offering or private sale.
"We intend to realise the value from a significant portion of our non-core merchant banking portfolio and use the proceeds to fund the development and growth of our core gold business," Mr O'Brien said.
After buying out its hedge book, Newmont will be able to further leverage positive gold prices, for which it has a positive outlook.
"With the elimination of our gold hedge book, we have renewed our commitment to maximising gold price leverage for our shareholders," Mr O'Brien said.
"In addition, we are focused on delivering improvements in our operating performance and cost structure going forward."
The hedge book development comes after rival gold miner Newcrest Mining Ltd said just last month that it planned to buy out all or part of its gold-hedge book so it could take advantage of possible takeover opportunities.
Newcrest chief executive Ian Smith said Australia's biggest independent gold miner was looking at its capital structure and that closing off the hedge book was one option it was considering.
But on Friday a Newcrest spokesman backed away from those comments, saying it is not something Newcrest is contemplating at this time.
In 2006, Newmont more than doubled its net profit to $US791 million ($A925.7 million), from $US322 million ($A376.9 million) in 2005, as the higher price of gold pushed the value of its gold sales up to $US4.3 billion ($A5.1 billion), from $US1.2 billion ($A1.4 billion) the previous year.
It also increased its gold reserves for the fifth straight year, this time by 52.5 million ounces. |
