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Why Newmont Revised Its Production Guidance Upward

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Jul. 31 2015, Updated 3:05 p.m. ET

Production guidance upgrade

Newmont Mining (NEM) revised its production guidance upward. This is mainly to reflect the continuing strong performance and the impact of recent acquisitions. In this part of the series, we’ll look at the impact of these moves on the company’s production outlook for 2015.

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Drivers for production upgrade

Newmont has revised its 2015 production guidance for gold from 4.6–4.9 million ounces to 4.7–5.1 million ounces. This is mainly to reflect the inclusion of the Cripple Creek & Victor Gold Mine (or CC&V), the sale of its Waihi operations in New Zealand, and the building of Long Canyon Phase 1.

The long-term production outlook for Newmont has also been revised higher, mainly driven by the following:

  • South America – In Newmont’s South American segment, production is expected to decline in 2015 and 2016 before increasing in 2017. That’s when the Merian mine will offset the declines at the maturing Yanacocha mine.
  • Africa – Going forward three years, production from Africa is expected to decline. This is mainly due to lower grades at Ahafo.
  • Asia Pacific – Batu Hijau’s higher grades are expected to contribute significantly to the increased gold and copper production for the next three years.
  • North America – This segment’s production is expected to get favorably impacted from Newmont’s recent CC&V acquisition, higher grades at Carlin, and Long Canyon Phase 1.

Batu Hijau drives copper production

Newmont also increased its copper production guidance for 2015 by almost 10% from its previous guidance. This is due to the improved grades and face position at Batu Hijau.

Newmont’s production profile going forward seems to be strong due to growth projects and acquisitions. But some of its peers, including Kinross Gold (KGC) and Iamgold (IAG), are also seeing reserves decline. Goldcorp (GG) and Barrick Gold (ABX) have also seen reserves decline in 2014 compared to 2013.

KGC and IAG form 2.8% and 0.8%, respectively, of the VanEck Vectors Gold Miners ETF (GDX). The SPDR Gold Shares (GLD) gives exposure to gold prices.

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