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Newmont profit climbs, beats expectations

Newmont Mining's Yanacocha mine in Peru

Newmont Mining Corp.'s first-quarter profit beat Wall Street estimates on Thursday as a 10 per cent sales boost offset higher mining costs.

The world's No. 2 gold producer also approved a second-quarter dividend of 20 cents per share linked to the gold price, based on the net average realized price of $1,382 per ounce in the first quarter.

The increase was 33 per cent above the regular first-quarter dividend and double the second-quarter 2010 dividend. The new gold price-linked dividend is an effort by Newmont to encourage investors to buy stock as well as physical gold or exchange traded funds.

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Newmont maintained its production targets for the full year 2011, of 5.1 million to 5.3 million ounces of gold and 190 million to 220 million pounds of copper.

"Newmont reported a solid earnings beat as costs remained at the low end of guidance range," said analyst Stephen Walker of RBC Dominion Securities.

He noted production at Newmont's flagship Boddington mine in Australia was 165,000 ounces, down from 206,000 in the fourth quarter, but that costs there improved to $596 per ounce from $624 in the fourth quarter.

However, he said he expected overall production to remain flat and costs to increase throughout 2011 "due to Newmont's portfolio of large open pit mines and substantial Australian operations with high leverage to fuel, wage, and foreign exchange pressures."

First-quarter earnings, adjusted for certain items, were $513-million, or $1.04 per share, compared with $408-million, or 83 cents per share, a year earlier, the Denver-based company said.

Sales rose 10 per cent to $2.5-billion, said the company, which operates mines in North and South America, Africa, Australia and Indonesia.

Analysts on average were expecting adjusted earnings of 99 cents per share and revenue of $2.4-billion, according to Thomson Reuters I/B/E/S.

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Spot gold prices rose during the first quarter from $1,380 per ounce on Jan. 3 to $1,430 on March 31. Gold hit an all-time high above $1,500 on Wednesday.

During the quarter, Newmont produced 1.3 million ounces of gold and 57 million pounds of copper, Newmont said.

Gold production was essentially the same as the year-ago quarter. Lower production from South America and lower grade stockpile production at Batu Hijau in Indonesia were offset by higher grade production in Africa and Australia/New Zealand.

But costs applicable to sales increased 17 per cent for gold due to lower production from Yanacocha, in Peru, and Batu Hijau.

Copper production decreased 37 per cent due to lower grade stockpile production at Batu Hijau, while copper costs applicable to sales increased 42 per cent.

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