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Gold/Mining/Energy : Newmont Mining(NEM) & Newmont Gold(NGC) -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (187)	5/22/1999 2:43:00 AM
From: Sean	Read Replies (1) \| Respond to of 587

NEM: NEWMONT HOLDS THE LINE ON CASH COSTS Salomon Smith Barney Friday, May 07, 1999 -------------------------------------------------------------------------------- --SUMMARY:--Newmont Mining Corp.--Precious Metals * Newmont Mining reported a first-quarter EPS of $0.08, exceeding expectations by two cents. * The better-than-anticipated performance reflected Newmont's ability to hold the line on cash costs. * Gold production fell 7% to 956,100 equity ounces, while cash costs declined to $181 per ounce. * Batu Hijau, Newmont's 45%-owned copper/gold project in Indonesia, is 90% complete, under budget and on track for a fourth-quarter start up. * Year-end reserve replacement appears likely, with Yanacocha as the largest contributor. * The highly-leveraged shares offer great value, even after climbing more than 50% in the past month. --EARNINGS:----------------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/98 EPS $0.20A $0.16A $0.04A $0.03A $0.43E Previous 12/99 EPS $0.06E $0.13E $0.23E $0.36E $0.78E Current 12/99 EPS $0.08A $0.13E $0.23E $0.34E $0.78E Previous 12/00 EPS $N/A $N/A $N/A $N/A $1.20E Current 12/00 EPS $N/A $N/A $N/A $N/A $1.20E Previous 12/01 EPS $N/A $N/A $N/A $N/A $N/A Current 12/01 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: EPS are fully diluted. --FUNDAMENTALS:------------------------------------------------------------- Current Rank........:1-H Price 05/06/99......:$26.06 Prior Rank..........: Target Price........:$40.00 P/E 12/99...........:33.4X 52 Wk Price Range...:30.50 - 13.68 P/E 12/00...........:21.7X Proj. 5yr EPS Grth..:N/A% Return on Equity 98.:3.40% BookValue...........:$8.68 LT Debt-to-Capital..:46.61% Dividend............:$.12 Revenue 1999........:$1429.60 mil Yield...............:.4% Shares Outstanding..:166.50 mil Convertible.........:No Mkt. Capitalization.:$4338.99 mil Hedge Clause(s).....: Comments............: --OPINION:------------------------------------------------------------------ Newmont Mining reported a first-quarter EPS of $0.08, exceeding expectations by two cents. The better-than-anticipated performance reflected Newmont's ability to hold the line on cash costs, which declined slightly to $181 per ounce. Gold production fell 7% in the quarter to 956,100 equity ounces as an effort to maximize cash flow from the flagship Nevada operations called for a reduction in mining rates. Full-year gold production is currently expected to hit the high end of management's target range of 3.6-4.0 million ounces, with cash costs under $180 per ounce. Newmont's primary development project, the $1.85 billion copper/gold Batu Hijau operation in Indonesia, is 90% complete and on track for a fourth-quarter start up. North American Operating Results. Nevada production of 606,700 ounces reflects a planned reduction in mining rates at the operation, designed to optimize cash flow. Improved operating performance resulted in higher-than-projected cash flow, despite a slight increase in cash costs to $209 per ounce. The increased cash costs reflect the higher proportion of refractory ore processed and a slight decline in overall grades. The Mesquite mine in California had a good quarter, generating 41,700 ounces at a cash cost 28% lower than a year ago of $142 per ounce. Overseas Operating Results. Increased production from overseas operations partially offset the decline in Nevada. The 51%-owned Yanacocha mine in Peru, 80%-owned Minahasa mine in Indonesia and 50%-owned Zarafshan operation in Uzbekistan generated 15% more ounces in the quarter for a total of 301,000 ounces to Newmont's account. Overall cash costs declined slightly to $130 per ounce. The 51%-owned Yanacocha mine in Peru produced 173,900 equity ounces at a cash cost of $114 per ounce. Full-year production is now expected to hit 1.5 million ounces (765,000 ounces to NEM), at cash costs of approximately $110 per ounce. Minahasa production jumped 24% in the quarter to 72,200 equity ounces with 7% lower cash costs of $130 per ounce, while Zarafshan production climbed 10% to 54,900 equity ounces at cash costs of $183 per ounce. Progress at Batu Hijau. Newmont's Batu Hijau gold/copper project in Indonesia is now 90% complete and on schedule for an October commissioning of the first SAG line, with commercial production expected in early 2000. Last week, we visited the project and came away with confidence that the construction phase is proceeding better than target and that the transition from construction to operations is set to proceed smoothly, with a number of Newmont expatriates already having assumed key site management roles. The project looks as if it could come in $100 million under budget (of $1.85 million) and will have lower unit cash costs than the company's recently reduced estimates. Cash costs initially estimated at $0.65 per pound of copper (net of gold credits) are now expected to be below $0.50 per pound. Mining has reached 200,000 tonnes per day, in line with the projected ramp up. From a financial standpoint, at $285 per ounce gold, management believes the Batu Hijau project should breakeven from a income perspective at a $0.60 copper price, or at $0.70 including the pay down of principle. Exploration Success and Potential Reserve Additions. In an analyst/investor conference call with management, Newmont outlined the status of exploration targets and areas of likely reserve additions. It appears reserves will be replaced at year end, with Yanacocha standing out as the most significant contributor. Cerro Quilish is sizing up to be a good-sized deposit with potential to add 2 to 3 million ounces to proven and probable reserves by year end. The La Quinua and Chaquicocha deposits also appear to have good growth potential, with the former likely to add more than a million ounces to reserves by year end. Development of the Deep Post deposit in Nevada began in the quarter, and is anticipated to be another source for reserve additions. The high- grade, 2.35 million ounce gold deposit is being accessed through a decline from the Betze/Post pit, in accordance with the previously announced land-swap agreement with Barrick Gold. The decline and a drift from the nearby Deep Star deposit to Deep Post will offer an inside look to potentially high-grade ground - hopefully resulting in an eventual addition to reserves. By using the decline to access the ore body, as opposed to a shaft, production can begin 2 years earlier than originally planned - now scheduled for late 2001. Production from Deep Post is expected to reach 400,000 ounces per year in 2003 with cash costs of $150 per year. Great Vaue in the Shares; Highly Leveraged to the Gold Price. We continue to view Newmont as our favorite large-cap gold producer. It has one of the best exploration track records in the industry, a low-cost structure and world-class assets. With very little hedging in place, Newmont is highly leveraged to the gold price - as evidenced by a one month, 51.8% run up in the shares to a Thursday close of 26 1/16 for a 10 point (3.4%) rise in spot gold per ounce to $289.55. We continue to rate the shares 1H (Buy, High Risk) and maintain a price target of $40.

To: ahhaha who wrote (187)	5/22/1999 2:52:00 AM
From: Sean	Read Replies (1) \| Respond to of 587

GOLD - UK SALES TO HIT SENTIMENT MORE THAN REALITY Salomon Smith Barney Monday, May 10, 1999 ---------- --SUMMARY:-------------------------------------------------------------- * Friday's announcement that the United Kingdom Treasury plans to sell 125 metric tons (mt) of gold in 1999-2000, eventually cutting its 715-mt hoard to 300 mt, came as a complete surprise to the gold market and pulled prices sharply lower. * The timing of the announcement, ahead of proposed (but not approved) sales by the IMF and Switzerland, is also perplexing. * We expect the sale to hurt near-term sentiment, but not the metal's physical supply/demand balance. The sale will fill only about one-sixth of the 800-mt commodity deficit for 1999. * In light of emerging concerns about reflation, speculators likely will be less aggressive in adding to short positions. * We recommend purchase of selected gold shares. --OPINION:------------------------------------------------------------------ The United Kingdom, which is not yet a member of the new European Economic and Monetary Union (EMU), shocked the gold market Friday when it disclosed plans to sell 125 mt of its gold reserves in five bimonthly auctions beginning in July. Over the next several years, it will divest 415 mt of its current holdings of 715 mt. The announcement came as a surprise for several reasons: (1) The UK, home to the world's leading market for physical gold, has not been thought of as a likely seller of the metal. The country was the first to establish the gold standard in 1717, and gold bears will certainly view the sale as a watershed event, signaling the likely capitulation of other central banks in ensuing months. (2) The timing of the announcement suggests that the UK intends to front-run potential sales of gold by the International Monetary Fund (IMF) and Switzerland. The IMF has been considering the sale of some of its gold to help fund relief for highly indebted nations for several years, and the UK has been a vocal proponent of the sales. After several years of opposition by key members Germany and Japan, it appears that most finance ministers now support the sales. A go-ahead decision could come later this year to sell between 150 and 300 mt of metal over a multiyear period. The U.S. Congress may yet derail the IMF sales, as its approval is needed before the U.S. can officially sanction the sale, and the U.S. accounts for 18% of the 85% weighted average vote required for the sales to take place. In Switzerland, the link between gold and the Swiss franc was severed in a recent national referendum, with another public vote required before any gold sales could take place. The Swiss Government is recommending the sale of 1,300 mt of its gold over several years. (3) It is highly unusual for a central bank to announce plans to sell gold ahead of the event. Instead, sales in recent years have been announced after their completion, even for forward sales that take one or more years to achieve. (Indeed, we are still awaiting announcements of central bank sales that apparently were conducted in 1997-98 but have not yet been disclosed.) We expect that the UK announcement will have an adverse impact on gold market sentiment in the near term - perhaps over the next several months. Nonetheless, we believe that investors will be better served to view near-term weakness as a buying opportunity, not a time to join the central banks in capitulation. Our supply/demand estimates for 1999 conservatively project that gold's supply/demand deficit will approximate 800 mt - all of which will have to be filled by central bank sales or lending (the latter providing liquidity for producers to hedge and for speculators to take short positions). The effect of the UK sale will be somewhat diminished, in any case, by the fact that its central bank already is a lender of gold into the market - which means that the country effectively has monetized a portion of its gold holdings. Our view has been that it is increased central bank gold lending, rather than outright gold sales, that have kept the gold price mired below $300 per ounce. There is increasing evidence that total central bank gold loans outstanding may exceed 10,000 mt - more than twice the amount recently estimated by Gold Fields Minerals Services Ltd. in its latest gold update. (This equates to almost one-third of all central bank gold holdings.) While not much comfort in the near term to those of us who have maintained a positive outlook toward the metal, such levels of lending raise the likelihood that when the price of gold eventually climbs out of the cellar, the ensuing rally may be much more dramatic than our published price estimates suggest. The high-risk deri vatives-based hedging strategies in place by many gold producers only add to the upside potential. To date, the recent rotation of investor interest into cyclical names has buoyed the gold shares but not the gold price. Typically, gold prices change direction ahead of other metals, but that obviously has not been the case in the current rotation. While the UK announcement has brought the metal back toward its cycle lows reached last August, we would not be too complacent about gold's ability to rally from these depressed levels. It is possible that producers may be more likely to add to hedging positions in the aftermath of the UK announcement, particularly if they buy into the premise that it will be followed by further wholesale divestiture of gold by other central banks. However, we doubt that speculators will be as aggressive in building substantial short positions as they were in the last two years, simply because of the strength of the interest in cyclicals generally. Gold's supply/demand fundamentals are positive, even with our conservative assumption that fabricated demand will weaken this year. We will revise our demand estimate higher if the first-quarter demand numbers released by the World Gold Council (within the next two weeks) show the same degree of strength as the fourth quarter did. Our favorite names in the gold sector remain Newmont Mining, Freeport-McMoRan Copper & Gold, and Agnico-Eagle Mines - all of which we rate Buy. Our outperform recommendations include Barrick Gold, Homestake Mining, Placer Dome, and Kinross Gold