I've writtenseveraltimes about changes at Newmont Gold
Though they look meager compared to today's near-$800 spot price, gold price realizations were 11% higher for the quarter. Equity gold sales (precious-metal parlance for sales volume) were off a bit, and cash costs lifted 22%. Despite the disappointment at Phoenix and the Midas mine moratorium, quarterly cash flow soared nearly 160%. Net income, which included some very large non-operating gains, doubled. Not to nitpick or anything, but this is a 100% increase, not a 200% increase, as stated in the press release.
Semantics aside, I am impressed with O'Brien's quick overhaul of this company. I've already discussed the strategic disposal of gold price hedges, the planned monetization of non-core assets, and the new approach to exploration and development, as exemplified by Newmont's friendly bid for Miramar Mining
With the intense investor focus on annual production, running at full tilt in the fourth quarter is an all-too-common practice. In O'Brien's words, this creates an "incentive to make this year look good by stealing from next year." To ease out of this back-weighted trend, Newmont's various mine operators will be asked to implement three-year plans, which should smooth out the production profile.Newmont is scrapping a lot of silly practices. For now, it's holding an oil sands investment, which might seem completely non-core, but cash distributions from that company actually act as a hedge on fuel costs. There's a lot of equity tied up here, and I would expect Newmont to free up that cash sometime in the not-too-distant future.