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Newmont Records 2Q Profit, Obtains 50% Of Galore Creek Project

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(Kitco News) - Newmont Mining Corp. (NYSE: NEM) reported a profit in the second quarter Thursday and also announced that the company has acquired a 50% interest in the Galore Creek project in British Columbia.

Net income from continuing operations was $274 million, or 51 cents per share, an increase of $84 million from the prior-year quarter. The increase was mainly due to lower income taxes, a gain from the sale of the company’s royalty portfolio and higher average realized prices, partially offset by lower production at a number of mines, Newmont said.

Excluding special items, adjusted net income was $144 million, or 26 cents per share, down from $248 million, or 46 cents, in the second quarter of 2017. The decline was blamed on lower production, as revenue fell 11% to $1.7 billion for the quarter.

Newmont acquired the 50% interest in the Galore Creek partnership from NOVAGOLD Resources Inc. (NYSE American, TSX: NG) and will form a partnership with Teck Resources Ltd. (NYSE, TSX: TECK), which owns the remaining stake. Galore Creek was described as one of the largest undeveloped copper-gold projects with resources previously reported by Teck of 8 million gold ounces and 9 billion pounds of copper.

Newmont said the deal with NOVAGOLD includes staged and contingent payments totaling $275 million. This includes an initial payment of $100 million; a payment of $75 million to be made based on the earlier of prefeasibility study completion or three years from closing; and a payment of $25 million on the earlier of completing a feasibility study or five years from closing. The last $75 million would be contingent on a final decision to develop the project.

Galore Creek “holds the potential to support decades of profitable copper and gold production in a favorable mining jurisdiction,” said Gary Goldberg, president and chief executive officer of Newmont.

Newmont and Teck will decide on the scope, budget and timeline for prefeasibility studies over the next several months, with expectations that the prefeasibility studies will be completed over three to four years with an annual budget of $10 million to $15 million.

Second-quarter gold production declines

In its second-quarter results, Newmont said gold production decreased 14% year-on-year to 1.16 million ounces primarily due to lower grades at Carlin, Twin Creeks, Boddington and Akyem and a build of CC&V concentrate inventory to be processed in Nevada. All-in sustaining costs rose 16% to $1,024 an ounce.

Copper output from Newmont’s Phoenix and Boddington mines fell 7% to 14,000 tonnes, while copper AISC increased 21% to $2.05 per pound.

Newmont reported that the average realized gold price improved year-on-year by $42 an ounce to $1,292, while the average copper price climbed 53 cents to $2.99 per pound.

“We continued to add lower-cost production by completing our Twin Underground and Northwest Exodus projects safely, on budget and ahead of schedule,” said Goldberg said.

Meanwhile, full-year 2018 and 2019 guidance for gold production remains at between 4.9 million and 5.4 million ounces. AISC was unchanged at between $965 and $1,025 per ounce in 2018, and then is expected to be between $870 and $970 per ounce in 2019.

Guidance for copper output was left at between 40,000 and 60,000 tonnes in 2018 and 2019. AISC remains between $2 and $2.20 per pound in 2018 and between $2.25 and $2.55 per pound in 2019.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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